256 / 284
Axiata Group Berhad | Annual Report 2016
FINANCIAL STATEMENTS
254
REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS (CONTINUED)
Key audit matter
How our audit addressed the key audit matter
Accuracy of telecommunication service revenue recorded given the
complexity of systems
Refer to Note 3(s) – Significant Accounting Policies – Revenue recognition
and Note 6 - Operating revenue
Telecommunication service revenue amounting to RM18.6 billion represents
a significant component of the Group’s revenue.
We focused on the accuracy of this area as telecommunication services
revenue is an inherent risk because it involves multiple element arrangements,
the revenue is processed by billing systems that are complex, it involves
large volumes of data with a combination of different products sold and
there were price changes during the financial year.
We performed the following audit procedures:
•
We evaluated the relevant IT systems and the design of controls, and
tested the operating effectiveness of controls over the:
– capture and recording of revenue transactions;
– authorisation of rate changes and the input of this information
to the billing systems; and
– accuracy of calculation of amounts billed to customers;
•
We read and understood the key terms and conditions of significant
new revenue agreements entered into during the financial year to
check the accuracy of revenue recognition;
•
We checked the accounting treatment for significant new products
and promotions launched with multiple element arrangements and
tested that they are appropriately incorporated in the billing system
for new products and products changes; and
•
We examined material non-standard journal entries and other
adjustments posted to revenue accounts.
Based on the procedures performed above, we did not find any material
exceptions in the accuracy of telecommunication services revenue
recorded during the year.
Capitalisation policy and useful lives of property, plant and equipment
(“PPE”)
Refer to Note 3(c) – Significant Accounting Policies – Property, plant and
equipment, Note 4(b)(iii) Critical accounting estimates and assumptions –
Estimated useful lives of PPE and Note 26 - Property, plant and equipment
As at 31 December 2016, the Group recorded PPE of RM27.5 billion which
comprised mainly telecommunication equipment.
We focused on this area due to the following:
•
certain costs capitalised involve estimates and significant judgement
in determining whether the capitalisation criteria under MFRS 116 –
Property, Plant and Equipment are met; and
•
the useful lives assigned to telecommunication equipment are
areas of significant judgement by management, and management
regularly reviews the useful lives due to the network and information
technology (“IT”) modernisation being undertaken by the Group. The
network and IT modernisation involves estimating when the assets
will be upgraded based on the approved modernisation plans and
the useful lives of the network and IT assets are revised accordingly.
The estimated useful lives of PPE are reviewed annually by management as
disclosed in Note 3(c)(ii) and Note 4(b)(iii) to the financial statements.
We performed the following audit procedures:
•
We evaluated the design and tested the operating effectiveness of
controls around the property, plant and equipment cycle, including
the controls over whether engineering (labour) activity is capital or
operating in nature. We determined that the operation of the controls
provided us with audit evidence in respect of the capitalisation
practices.
•
We assessed the nature of costs incurred in capital projects through
testing of amounts recorded and assessing whether the nature of the
expenditure met capitalisation criteria.
•
We tested whether the Directors’ decisions on asset lives are
appropriate by considering our knowledge of the business and
practice in the wider telecommunication industry. We also tested
whether approved asset life changes were appropriately applied
prospectively to the fixed asset register.
Based on the procedures performed above, we did not find any material
exceptions in the capitalisation policy and management’s assessment of
useful lives for PPE.
INDEPENDENT AUDITORS’ REPORT
TO THE MEMBERS OF AXIATA GROUP BERHAD
(INCORPORATED IN MALAYSIA)
(COMPANY NO. 242188-H)