(b) The audit work is now complete and the Group auditors report is due to be issued in the next few days. Materiality for the audit of the Group financial statements has continued to be determined to be GHC400,000. You have been tasked with reviewing the draft auditors report and the following supplementary information which has been prepared at the end of the audit: The audit partner has concluded that the fraud is immaterial and that all necessary work has been performed by the audit team. Further audit procedures were successfully performed on the development costs, and a conclusion was reached by the audit team that the recognition of the GHC600,000 as an intangible asset is appropriate. A letter was received from Hamlyn Cos administrators on 29 July 20X5, stating that Hamlyn Co is in liquidation, and that its creditors will receive a payment of 10% of outstanding balances. The audit team has concluded that GHC50,000 can remain recognised as a trade receivable, and that GHC450,000 should be written off as irrecoverable. However, the Group refuses to make any adjustment, and the full GHC500,000 remains recognised as a trade receivable in the final Group financial statements.

Draft auditors report Based on the above conclusions, the audit supervisor has drafted the auditors report which includes the following extract:

Basis for opinion and opinion Audit procedures indicate that trade receivables are overstated by GHC500,000. For this reason we consider that the Group financial statements are likely to be materially misstated and do not fairly present the financial position and performance of the Group for the year ended 31 December 20X4.

Emphasis of matter There are two matters to which we draw your attention: 1. A fraud was discovered, as a result of which we have determined that GHC40,000 was stolen from the Group. This does not impact the financial statements but we wish to highlight the illegal activity which took place during the year. 2. The Group finance director obstructed our audit by refusing to allow access to audit evidence. He has also refused to adjust the financial statements in relation to the material misstatement of trade receivables, which led to the qualified audit opinion being issued. For this reason, we wish to resign as auditor with immediate effect.

Required: Critically appraise the extract from the proposed auditors report of the Goodman Group for the year ended 31 December 20X4.