Lucas McKay, CPA, is the manager of the audit of Healthy Living, a new health food company headquartered here in Virginia Beach, Virginia, that has been expanding in the last few years. Lucas is preparing for a meeting with Douglas Sullivan, the partner in charge of the audit engagement. The meeting on Monday concerns several controversial decisions by the auditors. Here is the information below:

Why are we allowing the client to record $2 million of revenue in 2020 for a January 10, 2021, scheduled transaction?

Why didn't we insist the client write down $200,000 in fixed assets as being impaired based on calculations at the end of 2020?

Why was Anna Dickson removed from the position of audit senior on the engagement?

Lucas was a little concerned about these matters because he made these decisions as the manager. Lucas went back through his personal audit notes and the workpapers for each of these decisions. The January transaction was recorded in 2020 because the client said to do it. Lucas was concerned the client might pull the engagement if he did not go along because, without this transaction, the company will report a loss. The impairment issue was one where Lucas reasoned that the impairment was temporary. Lucas accepted the client's position not to write down the fixed assets and wait to record any losses until next year, 2021. The Anna Dickson matter was a little different. Lucas dated Anna for nine months and during the audit of Healthy Living, but their relationship did not end amicably.

Questions

Use GVV and the 4 steps to evaluate the case.

What should the partner in charge Douglas Sullivan do once he learns about these issues?

Describe the leadership style of Lucas McKay? Please include in your explanation the nature of the relationship he had with Anna Dickson.

Do you consider the decisions made by Lucas appropriate audit behavior? Please explain.

What would you do if you were Lucas in this situation?

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