Governance (continued) 94 Vodafone Group Plc Annual Report 2024
Strategic report
Governance
Financials
Other information
Long-term viability statement and going concern assessment The Committee provides advice to the Board on the form and basis of conclusion underlying the long-term viability statement and the going concern assessment. At our meeting in May 2024, the Committee challenged management on its financial risk assessment as part of its consideration of the long-term viability statement. This included scrutiny of forecast liquidity, balance sheet stress tests, the availability of cash and cash equivalents through new or existing financing facilities and a review of counter-party risk to assess the likelihood of third parties not being able to meet contractual obligations. This comprehensive assessment of the Group’s prospects made by management included consideration of: – The review period and alignment with the Group’s internal long-term forecasts; – The assessment of the capacity of the Group to remain viable after consideration of future cash flows, expected debt service requirements, undrawn facilities and access to capital markets; – The modelling of the financial impact of severe but plausible risk scenarios materialising; including a sensitivity if expected M&A transactions fail to complete within the assessment period; – The inclusion of clear and enhanced disclosures in the Annual Report as to why the assessment period selected was appropriate to the Group, what qualifications and assumptions were made and how the underlying analysis was performed, consistent with FRC pronouncements; and Read more about the long-term viability statement on page 63 Read more about the going concern assessment on page 124 – Comprehensive disclosure in relation to the Group’s liquidity provided in the consolidated financial statements. See note 22 ‘Capital and financial risk management’ in the consolidated financial statements. External audit The Committee has primary responsibility for overseeing the relationship with the external auditor, EY. This includes making the recommendation on the appointment, reappointment and removal of the external auditor, assessing its independence on an ongoing basis, and approving the statutory audit fee, the scope of the statutory audit and the appointment of the lead audit engagement partner. Alison Duncan has held this role for five years since the appointment of EY as external auditor for the year ended 31 March 2020. The lead audit partner role will rotate to Michael Rudberg, an existing partner on the audit team, for the year ending 31 March 2025. EY presented to the Committee its detailed audit plan for the 2024 financial year, which outlined its audit scope, planning materiality and its assessment of key audit risks. The identification of key audit risks is critical in the overall effectiveness of the external audit process and these are outlined in the Auditor’s report. The Committee also received reports from EY on its assessment of the accounting and disclosures in the financial statements and financial controls. The last external audit tender took place in 2019, which resulted in the appointment of EY. The Committee will continue to review the auditor appointment and anticipates that the audit will be put out to tender at least every 10 years. In deciding when to conduct an external audit tender, the Committee considers a range of factors, including the potential cost and efficiency benefits of retaining the incumbent auditor. The Company has complied with the Statutory Audit Services Order 2014 for the financial year under review. Read the Auditor’s report on pages 125 to 134
Independence and objectivity In its assessment of the independence of the auditor, and in accordance with the US Public Company Accounting Oversight Board’s (‘PCAOB’) standard on independence, the Committee received details of all relationships between the Company and EY that may have a bearing on its independence and received confirmation from EY that it is independent of the Company in accordance with US federal securities law and the applicable rules and regulations of the SEC and the PCAOB. Effectiveness of the external audit process The Committee reviewed the quality of the external audit process throughout the year and considered the performance of EY. This comprised the Committee’s own assessment and the results of a detailed feedback survey of senior personnel across the Group. Based on these reviews, the Committee concluded that there had been appropriate focus and challenge by EY on the primary areas of the audit and that EY had applied robust challenge and scepticism throughout the audit. EY audit and non-audit fees Total fees payable to EY for audit and non-audit services in the year ended 31 March 2024 amounted to €36 million (FY23: €31 million). Audit fees The Committee reviewed and discussed the fee proposal, was engaged in agreeing audit scope changes and, following the receipt of formal assurance that its fees were appropriate for the scope of the work required, agreed an audit fee of €26 million for statutory audit services in the year (FY23: €28 million). Non-audit fees To protect the independence and objectivity of the external auditor, the Committee has a policy for the engagement of the external auditor to provide non-audit services. The policy prohibits EY from playing any part in management or decision-making, providing certain services such as valuation work and the provision of accounting services. The Group’s non-audit services policy incorporates the requirements of the FRC’s Ethical Standard, including a ‘whitelist’ of permitted non-audit services which mirrors the FRC’s Ethical Standard. The FRC published a revised Ethical Standard in January 2024. The Group’s non-audit services policy will be updated to incorporate the changes in the revised Ethical Standard and will be approved by the Committee ahead of the December 2024 effective date. The Committee has pre-approved that EY can be engaged by management, subject to the policies set out above, and subject to: – A €60,000 fee limit for individual engagements; – A €500,000 total fee limit for services where there is no legal alternative; and – A €500,000 total fee limit for services where there is no practical alternative supplier. For those permitted services that exceed these specified fee limits, the Committee Chair pre-approves the service. Non-audit fees were €10 million (FY23: €3 million). The level of non-audit fees in the year ended 31 March 2024 is significantly higher than recent years. This is primarily attributable to Reporting Accountant services that have been provided by EY in connection with the proposed merger of Vodafone UK with Three UK and other audit-related services associated with the disposal of Vodafone Spain. See note 3 ‘Operating profit’ in the consolidated financial statements.
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