131 Vodafone Group Plc Annual Report 2024
Strategic report
Governance
Financials
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Risk Revenue recognition
As more fully described in Note 2, Note 14 and Note 15 to the consolidated financial statements, the Group reported revenue of €36,717 million (FY23: €37,672 million, after re-presentation for IFRS 5, contract assets of €2,863 million (FY23: €3,557 million) and contract liabilities of €1,908 million (FY23: €2,543 million) for the year ended or as at 31 March 2024. Management records revenue according to the principles of IFRS 15, Revenue from Contracts with Customers, including following the 5-step model therein. We identified a risk of management override through inappropriate manual topside revenue journal entries, given revenue is a key performance indicator, both in external communication and for management incentives. We also consider auditing the revenue recorded by the Group to involve greater auditor effort and attention, due to the multiple IT systems and tools utilised in the initiation, processing and recording of transactions, which includes a high volume of individually low monetary value transactions. The involvement of IT professionals was required to determine the audit approach to test and evaluate the relevant data that was captured and aggregated, and to assess the sufficiency of the audit evidence obtained. Our response to the risk We performed full or specified audit procedures over this risk area in 7 full scope and 3 specified procedure components with significant revenue streams, which covered 79% of the Group’s revenue. Our audit procedures at full scope component locations included, among others obtaining an understanding of, evaluating the design and testing the operating effectiveness of controls over the Group’s revenue recognition process, which includes management’s determination of the timing of revenue recorded. With the support of our IT professionals, we also evaluated the design and tested the operating effectiveness of controls over the appropriate flow of transactional data through the IT systems and tools and the reconciliation of the transactional data to the accounting records. For specified procedures components, we obtained an understanding of the design of controls over the revenue recognition process. For significant revenue streams, our audit procedures included the following, on a sample basis: – We used data analytic tools to identify revenue related manual journals posted to the general ledger and traced these back to underlying source documentation, to evaluate the propriety, completeness and accuracy of the postings. We also performed analytical procedures to consider the completeness of journal postings. – Where it was deemed to be most effective, at certain components we extended the use of data analytics. These incremental procedures involved testing full populations of transactions, including performing a correlation analysis between invoiced revenue, receivables and cash. We performed targeted audit procedures over material items that did not correlate as expected. – At components where the above procedures were not used, for the significant revenue billing systems, we obtained the billing data to general ledger reconciliation, which included the relevant adjustments to deferred and accrued revenue balances. We reperformed these reconciliations, including assessing the accuracy of the data inputs to underlying source documentation, including contractual agreements where applicable. In addition, we tested the mathematical accuracy and completeness of the reconciliations and material reconciling items, including significant revenue postings outside of the billing systems. – We recalculated the revenue recognised to evaluate whether the processing of the revenue recognition by the Group’s IT systems was materially correct. We also assessed the adequacy of the Group’s disclosures in respect to the accounting policies on revenue recognition. Key observations communicated to the Audit and Risk Committee Based on the procedures performed, including those in respect of manual adjustments to revenue, we concluded that revenue has been appropriately recognised in accordance with IFRS 15, in the year ended 31 March 2024.
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