Vodafone 2016 Annual Report Download - page 85

Overview Strategy review Performance Governance Financials Additional information
Vodafone Group Plc
Annual Report 2016
83
Area of focus How our audit addressed the area of focus
Capitalisation and asset lives
There are a number of areas where management
judgement impacts the carrying value of property, plant
and equipment, software intangible assets and their
respective depreciation proles. These include:
a the decision to capitalise or expense costs;
a the annual asset life review including the impact
of changes in the Group’s strategy; and
a the timeliness of the transfer from assets in the
course of construction.
Refer to the Audit and Risk Committee Report, note1
– Critical accounting judgements and key sources of
estimation uncertainty, note 10 – Intangible assets and
note 11 – Property, plant and equipment.
We tested controls in place over the xed asset cycle, evaluated the appropriateness of
capitalisation policies, performed tests of details on costs capitalised and assessed the
timeliness of the transfer of assets in the course of construction. There were no exceptions
noted from our testing.
Our detailed testing on the application of the asset life review identied no
issues. Inperforming these procedures, we challenged the judgements made by
managementincluding:
a the nature of underlying costs capitalised as part of the cost of the network rollout;
a the appropriateness of asset lives applied in the calculation of depreciation; and
a in assessing the need for accelerated depreciation given the network modernisation
programme in place across Europe under Project Spring.
No issues were noted from our testing.
IT systems and controls
We place a high level of reliance on the Group’s
IT systems and key internal controls. As a result a
signicant proportion of our audit effort was conducted
in this area at local, regional and Group levels and at the
Group’s shared service centres.
Our focus, in this our second year as auditors, was
on understanding and validating the impacts of key
changes being made to the control environment having
established an extensive understanding and baseline
last year.
The Group has continued to devote considerable
resources to the development of key business and
related IT controls to ensure a robust system of internal
control as described in the Audit and Risk Committee
Report on pages 47 to 52.
We conducted detailed end-to-end walkthroughs of the nance processes, utilising our
understanding from the prior year to reassess the design effectiveness of the key internal
controls and to identify changes. We then conducted testing of the operating effectiveness
of these controls to obtain evidence that they operated throughout the year.
In response to the changes and control enhancements made during the year,
weperformed the following:
a reviewed the design of the standard controls to ensure they mitigated the relevant
nancial reporting risks and testing samples from the periods immediately prior to and
post implementation;
a where systems changed during the year, tested IT general controls and data
migration processes;
a tested the enhanced user access management controls;
a following issues with the implementation of a new billing platform in the UK,
we amended our planned audit approach and performed additional substantive
testing; and
a tested controls and performed additional substantive procedures of key general ledger
account reconciliations and manual journals.
We did not regard any of the control issues identied in 2016 as signicant in the context
of the Group nancial statements. No control matters identied represented a material
weakness in internal control.