Detecting Account Fraud.
Read extracts from the SEC Complaint filed September 25, 2012, against TierOne Bank.
Examine extracts from TierOne's Financial Statements (10-K) for 2005-2008. According to the December 31, 2007, 10-K "TierOne Corporation ('Company') is a Wisconsin corporation headquartered in Lincoln, Nebraska. TierOne Corporation is the holding company for TierOne Bank.
Respond to the following case study questions.
a. Underestimation of allowance for loan losses: In the text, Signal not growing in Proportion tot eh increase in troubled loans. Read the extracts from TierOne's financial statements and notes to its financial statements for the years 2005-2008. Explain whether you can identify the signal that TierOne's allowance for loan losses may alllegedly have been understated. Show supporting caluclations for your answer.
b. Underestimation of allowance for loan losses: In the text, Signal #3 is "Allowance for Loan losses not incereasing significantly as House Prces Fall." Reread the discussion of Signal #3 in the text , as well as extracts from teh SEC complaint against TierOne. Search online for articles published in late 2008 about falling house prices. Explain how signal #3 could have alerted users of TierOne's finanical statements that its allowance for loan losses at December 2008 may allegedly have been understated.