Vodafone 2016 Annual Report Download - page 86

Vodafone Group Plc
Annual Report 2016
84
Audit report on the consolidated and parent company nancial statements (continued)
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the nancial statements as a whole,
taking into account the geographic structure of the Group, the accounting processes and controls including those performed at the Group’s shared
service centres, and the industry in which the Group operates.
The Group operates in 24 countries across two regions; “Europe” and “AMAP”. In establishing the overall approach to the Group audit, we determined
the type of work that needed to be performed at the local operations by us, as the Group engagement team, or component auditors within PwC
UK and from other PwC network rms operating under our instruction. Where the work was performed by component auditors, we determined
the level of involvement we needed to have in the audit work at those local operations to be able to conclude whether sufcient appropriate audit
evidence had been obtained as a basis for our opinion on the Group nancial statements as a whole.
The Group’s local operations vary in size with the eight operations in Group scope (UK, Spain, Italy, India, Germany, Vodacom Group Limited, Ono and
KDG) representing 72% and 74% of the Group’s revenue and AOP. We identied these eight local operations as those that, in our view, required
an audit of their complete nancial information, due to their size or risk characteristics. The materiality applied by the component auditors in the
context of the Group audit ranged from £12 million to £100 million. These local operations are also subject to audits for local statutory purposes
where their local statutory materiality ranges from £12 million to £124 million.
Specic audit procedures over certain balances and transactions were performed to give appropriate coverage of all material balances at both
geographical division and Group levels. The Group engagement team visited all eight operations in scope for Group reporting during the audit cycle
and the lead audit partner attended the year-end audit clearance meetings.
Further specic audit procedures over central functions and areas of signicant judgement, including taxation, goodwill, treasury and material
provisions and contingent liabilities, were performed at the Group’s Head Ofce.
In addition, audits for local statutory purposes are performed at a further 15 locations. Where possible, the timing of local statutory audits was
accelerated to align to the Group audit timetable, with signicant ndings reported to the Group engagement team.
Materiality
The scope of our audit was inuenced by our application of materiality. We set certain quantitative thresholds for materiality. These, together with
qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual
nancial statement line items and disclosures and in evaluating the effect of misstatements, both individually and on the nancial statements
as a whole.
Based on our professional judgement, we determined materiality for the nancial statements as a whole as follows:
Overall Group materiality £180 million (2015: £220 million).
How we determined it 5% of AOP before tax averaged over three years.
Rationale for benchmark applied Consistent with the prior year, we consider this adjusted measure to be a key driver of business value and
a focus for members, and used a three year average given the impact of Project Spring (for denition of
Project Spring refer to pages 6 and 7 in the Annual Report) in the current year to ensure that the measure
is more durable over a period of time.
We agreed with the Audit and Risk Committee that we would report to them misstatements identied during our audit above £10 million
(2015: £10 million) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.
Going concern
Under the Listing Rules we are required to review the Directors’ statement, set out on pages 76 and 77, in relation to going concern. We have nothing
to report having performed our review.
Under ISAs (UK & Ireland) we are required to report to you if we have anything material to add or to draw attention to in relation to the Directors’
statement about whether they considered it appropriate to adopt the going concern basis in preparing the nancial statements. We have nothing
material to add or to draw attention to.
As noted in the Directors’ statement, the Directors have concluded that it is appropriate to adopt the going concern basis in preparing the nancial
statements. The going concern basis presumes that the Group and Company have adequate resources to remain in operation, and that the Directors
intend them to do so, for at least one year from the date the nancial statements were signed. As part of our audit we have concluded that the
Directors’ use of the going concern basis is appropriate. However, because not all future events or conditions can be predicted, these statements are
not a guarantee as to the Group’s and Company’s ability to continue as a going concern.