In one of the case studies in the textbook, ernie phillips was a cpa who had fallen on hard times both financially and personally. he eventually got a job as a controller for a friend who had just been named as the receiver for a financial services company. within a short period of time phillips began writing checks to himself that had nothing to do with payroll. how was the fraud discovered?
a. the president received a bank statement containing canceled checks that had been written to phillips.
b. the receiver received a call from the bank asking him to verify a check.
c. a vendor received a check in error reported it to the operations manager.
d. the operations manager found a check made payable to phillips while searching phillips' desk for some accounting records.

The fraud was discovered Option D: The operations manager found a check made payable to Phillips while searching Phillips' desk for some accounting records.

Explanation:

In the given case study, Ernie Phillips had got a job as a 'controller'. He had started writing checks to himself other than the payroll checks.

This fraud can be discovered when the operations manager found a check on Phillips desk which was payable to himself and it was other than the payroll check. Thus, Option D is the statement as an answer.

Cancelled checks do not have to do anything with the fraud, as per Option A, because cancelled checks are never cleared in the bank. The receiver doesn't usually receive a call before check clearance. So, Option B is also incorrect. No error was there in the check as stated in Option C.