You are an Audit Manager at Audit$4$Us Incorporated $($Audit$4$Us$).$ The client you are

auditing is Personification $($Pty$)$ Ltd $($Person$)$ for the financial year ending $31$ July $2024.$

Person is part of a franchise group of retail stores across South Africa.

During the audit of Person, you inspected the annual financial statements $($AFS$)$

prepared by the Chief Financial Officer $($CFO$),$ Brian Macay. You noted that all of

Person's assets and liabilities were fairly valued, and that Person had become factually insolvent. You met with Brian Macay and the other directors of Person to discuss their plan of action regarding resolving the issue of being factually insolvent.

The following notes were made during the discussions held, and Brian Macay

prepared a cash flow projection as follows:

Notes per the discussion

$$ Directors are aware that a plan of action is required to improve the current

situation of Person to avoid a modification to the audit opinion due to possible

going concern issues.

$$ The directors believe that Person will be able to continue as a going concern

due to the following plan together with the cash flow projection:

o The holding company of Person is named High Fly Limited $($High Fly$).$

Audit$4$Us also audits High Fly. You are aware of the subordination

agreement entered into between Person and High Fly of a loan amount

payable by Person in the amount of R$11500000.$ The Financial Director

of High Fly, James Bind, has agreed to subordinate the loan of R$11500$

$000$ until Person has restored its financial position from a net liability

position to a net asset situation.

REQUIRED:

$1\mathrm{.}1$ Describe the audit procedures that you will perform on the subordination

agreement signed between Personification $($Pty$)$ Ltd and High Fly Limited.

$(10$ marks$)$