Vodafone 2016 Annual Report Download - page 52

Other matters
The Committee also undertook a range of further activities in relation
to the Group’s accounting and external reporting in the year:
Adoption of recent accounting developments
The Committee received regular reporting from management
on the Group’s implementation of IFRS 15 “Revenue from contracts
with customers”, which will be adopted in the nancial year ending
31 March 2019, focusing on the key decision points relating to the
choice of IT system for generating the necessary accounting entries,
systems integration, the methodology in which the standard would
be adopted and programme resourcing. The Committee will also review
the Group’s implementation of IFRS 16 “Leases”, which will be adopted
in either the nancial years ending 31 March 2019 or 2020, once
management has more fully assessed the impact of the changes.
Fair, balanced and understandable
As part of the Committee’s assessment of whether the Annual
Report, taken as a whole, is fair, balanced and understandable and
provides the information necessary for shareholders to assess the
Company’s position and performance, business model and strategy,
it draws on the work of the Group’s Disclosure Committee and has
discussions with senior management. The processes and controls that
underpin our consideration include ensuring that:
a all contributors are fully briefed on the fair, balanced and
understandable requirement;
a a dedicated and experienced core team is responsible for the
coordination of content submissions, verication, detailed review
and challenge;
a senior management conrms that the content in respect
of their areas of responsibility is considered to be fair, balanced
and understandable;
a the Disclosure Committee reviews and assesses the Annual Report
as a whole; and
a the Committee receives an early draft of the Annual Report to enable
timely review and comment.
These processes allowed us to provide positive assurance to the
Board to assist them in making the statement required by the 2014
UK Corporate Governance Code.
Long-term viability statement
Following the adoption of the 2014 UK Corporate Governance Code
during the 2016 nancial year, the Committee’s terms of reference were
extended to include providing advice to the Board on the form and basis
underlying the long-term viability statement as set out on page 29.
The Committee reviewed the process and assessment of the
Group’s prospects made by management, including:
a the review period and alignment with the Group’s internal
long-term forecasts;
a the assessment of the capacity of the Group to remain viable
after consideration of future cash ows, expected debt service
requirements, undrawn facilities and access to capital markets; and
a the modelling of the nancial impact of certain of the Group’s
principal risks materialising using severe but plausible scenarios.
Management also sought independent external advice on best practice
to ensure appropriate compliance with the requirements of the 2014
UK Corporate Governance Code.
External audit
The Committee has primary responsibility for overseeing the
relationship with, and performance of, the external auditor. This includes
making the recommendation on the appointment, reappointment
and removal of the external auditor, assessing their independence
on an ongoing basis and for negotiating the audit fee.
Auditor appointment
PricewaterhouseCoopers LLP were appointed as the Group’s external
auditor in July 2014 following an audit tender and, in accordance with
the 2014 UK Corporate Governance Code, the Group will be required
to put the external audit contract out to tender by 2024. In addition,
PricewaterhouseCoopers LLP will be required to rotate the audit
partner responsible for the Group audit every ve years and, as a result,
the current lead audit partner will be required to change in 2019.
The Committee continues to review the auditor appointment and the
need to tender the audit, ensuring the Group’s compliance with the
2014 UK Corporate Governance Code and the reforms of the audit
market by the UK Competition and Markets Authority. Accordingly,
the Company conrms that it complied with the provisions of the
Competition and Markets Authority’s Order for the nancial year under
review. For the nancial year ending 31 March 2017, the Committee
hasrecommended to the Board that PricewaterhouseCoopers LLP be
reappointed under the current external audit contract and the Directors
will be proposing the reappointment of PricewaterhouseCoopers LLP
at the annual general meeting in July 2016.
Audit risk
At the start of the audit cycle for the new nancial year we received
from PricewaterhouseCoopers LLP a detailed audit plan identifying
their audit scope, planning materiality and their assessment of key risks.
The audit risk identication process is considered a key factor in the
overall effectiveness of the external audit process, and the key risks for
the 2016 nancial year, which were unchanged from the previous year,
were as follows:
a Taxation matters, including a provisioning claim for withholding tax
in India and the recognition and recoverability of deferred tax assets
in Luxembourg and Germany.
a Carrying value of goodwill.
a Provisions and contingent liabilities.
a Revenue recognition.
a Accounting for signicant one-off transactions.
a Capitalisation and asset lives.
a Management override of internal controls.
These risks are regularly reviewed by the Committee to ensure the
external auditor’s areas of audit focus remain appropriate.
Working with the auditor
We hold private meetings with the external auditor at each Committee
meeting to provide additional opportunity for open dialogue and
feedback from the Committee and the auditor without management
being present. Matters typically discussed include the external
auditor’s assessment of business risks, the transparency and
openness of interactions with management, conrmation that there
has been no restriction in scope placed on them by management,
the independence of their audit and how they have exercised
professional scepticism. I also meet with the external lead audit partner
outside the formal Committee process throughout the year.
Board committees (continued)
Vodafone Group Plc
Annual Report 2016
50