Vodafone 2015 Annual Report Download - page 103

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
– Basis of preparation (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 roll-out;
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 signicant issues were noted from our testing.
IT systems and controls
As our audit sought to place a high level of reliance on
the Group’s IT systems and key internal controls upon
which management rely, during our rst year as the
Group’s auditors a high proportion of the overall audit
effort was in this area. A large proportion of this work
was conducted at the Group’s Shared Service Centres
where nance transactions are processed.
Our work focused on key changes to systems during
the year including the ongoing consolidation of the
key nancial ledgers onto a common ERP system and
replacements to underlying billing systems in several
local markets.
In the prior year, weaknesses in certain privileged user
access controls at the IT infrastructure level and balance
sheet controls had been identied; our work included
an evaluation of enhancements made by management
in these areas.
Our work also focused on other control enhancements
undertaken by management during the current year:
a General ledger accounts – enhancements
were made to controls over general ledger
accounts including central reconciliation tracking,
quality control measures and rened policies
and procedures.
a Controls over user access – a detailed review
of access rights to the Group’s common ERP system
was conducted by management during the year, with
enhancements being made to both ongoing controls
and certain compliance focused tools being utilised.
Refer to the Audit and Risk Committee Report.
We conducted detailed end-to-end walkthroughs of the nance processes, identifying
applicable nance systems and assessing the design effectiveness of the key internal
controls. As part of this, we evaluated the consistency of the key internal controls across
in-scope local operations. We then conducted testing of the operating effectiveness of
these controls to obtain evidence that they operated throughout the full year.
Where systems changed during the year, we tested IT general controls in both the legacy
and new applications and the completeness and accuracy of any data migration.
In response to both the prior year issues, and control enhancements made during the
year, we performed the following:
a General ledger accounts
a evaluated the enhancements to policies and procedures;
a tested the operating effectiveness of balance sheet review controls;
a performed substantive testing of key balance sheet reconciliations; and
a utilised our data technology to extract and analyse the population of journals across
the Group, and tested manual journals as part of our work on possible management
override of controls.
a Controls over user access
a evaluated user access controls;
a tested segregation of duties including assessment of alternative controls and
substantive procedures; and
a tested user access rights in relation to the Group’s common nance ledger
application ERP solution and at the infrastructure level.
While we identied a number of areas for improvement in controls which we discussed
with the Audit and Risk Committee, we did not regard any of these as signicant in the
context of the Group nancial statements. No control matters identied represented a
material weakness in internal control.
As a result of our work on controls we updated our planned audit approach as follows:
a we extended our controls testing to provide assurance over alternative controls and the
completeness and accuracy of management information used in other key controls; and
a where the enhanced controls did not operate effectively for the whole year,
we updated our planned year end audit approach to include a greater level of detailed
testing of transactions, particularly in relation to balance sheet reconciliations.
Overview Strategy review Performance Governance Financials Additional information Vodafone Group Plc
Annual Report 2015
101