Vodafone 2006 Annual Report Download - page 59

Vodafone Group Plc Annual Report 2006 57
shareholder approval at the AGM in July 2005 to amend its Memorandum and Articles of
Association to give it authority to provide funding for directors’ defence costs. Following
that approval, the Company indemnified its directors and will indemnify new directors to
the extent permitted by legislation.
Auditors
Following a recommendation by the Audit Committee and, in accordance with section
384 of the Companies Act 1985, a resolution proposing the re-appointment of Deloitte
& Touche LLP as auditors to the Company will be put to the AGM.
In their assessment of the independence of the auditors and in accordance with the US
Independence Standards Board Standard No. 1, “Independence Discussions with Audit
Committees”, the Audit Committee receives in writing details of relationships between
Deloitte & Touche LLP and the Company that may have a bearing on their
independence and receives confirmation that they are independent of the Company
within the meaning of the securities laws administered by the SEC.
In addition, the Audit Committee pre-approves the audit fee after a review of both the
level of the audit fee against other comparable companies, including those in the
telecommunications industry, and the level and nature of non-audit fees, as part of its
review of the adequacy and objectivity of the audit process.
In a further measure to ensure auditor independence is not compromised, policies have
been adopted to provide for the pre-approval by the Audit Committee of all permitted
non-audit services by Deloitte & Touche LLP. Should there be an immediate requirement
for permitted non-audit services to be provided by Deloitte & Touche LLP which have
not been pre-approved by the Audit Committee, the policies provide that the Group
Audit Director will consult with the Chairman of the Audit Committee for pre-approval.
In addition to their statutory duties, Deloitte & Touche LLP are also employed where, as
a result of their position as auditors, they either must, or are best placed to, perform the
work in question. This is primarily work in relation to matters such as shareholder
circulars, Group borrowings, regulatory filings and business acquisitions and disposals.
Other work is awarded on the basis of competitive tender.
During the year, Deloitte & Touche LLP and its affiliates charged the Group’s subsidiary
undertakings £4 million (2005: £4 million) for audit services and a further £4 million
(2005: £3 million) for non-audit assignments. An analysis of these fees can be found in
note 4 to the Consolidated Financial Statements.
Governance
Report from the Audit Committee
The composition of the Audit Committee is shown in the table on page 54 and its terms
of reference are discussed under “Committees of the Board – The Audit Committee”.
During the year ended 31 March 2006, the principal activities of the Committee were as
follows:
Financial statements
The Committee considered reports from the Chief Financial Officer and the Group
Financial Controller on the half-year and annual financial statements. It also considered
reports from the external auditors, Deloitte & Touche LLP, on the scope and outcome of
the annual audit.
The financial statements were reviewed in the light of these reports and the results of
that review reported to the Board.
Risk management and internal control
The Committee reviewed the process by which the Group evaluated its control
environment, its risk assessment process and the way in which significant business risks
were managed. It also considered the Group Audit department’s reports on the
effectiveness of internal controls, significant frauds and any fraud that involved
management or employees with a significant role in internal controls.
The Committee also reviewed and approved arrangements by which staff could, in
confidence, raise concerns about possible improprieties in matters of financial reporting
or other matters. This was achieved through using existing reporting procedures and a
web site with a dedicated anonymous email feature.
External auditors
The Committee reviewed the letter from Deloitte & Touche LLP confirming their
independence and objectivity. It also reviewed and pre-approved the scope of non-audit
services provided by Deloitte & Touche LLP to ensure that there was no impairment of
independence.
The Committee pre-approved the scope and fees for audit services provided by Deloitte
& Touche LLP and confirmed the wording of the recommendations put by the Board to
the shareholders on the appointment and retention of the external auditors.
Private meetings were held with Deloitte & Touche LLP to ensure that there were no
restrictions on the scope of their audit and to discuss any items the auditors did not wish
to raise with management present.
Internal audit
The Committee engaged in discussion and review of the Group Audit Department’s audit
plan for the year, together with its resource requirements. Private meetings were held
with the Group Audit Director.
Audit Committee effectiveness
The Audit Committee conducts a formal review of its effectiveness annually and
concluded this year that it was effective and able to fulfil its terms of reference.
Dr Michael Boskin
On behalf of the Audit Committee