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Pages:
2 pages/≈550 words
Sources:
2 Sources
Level:
APA
Subject:
Accounting, Finance, SPSS
Type:
Essay
Language:
English (U.S.)
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MS Word
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Topic:

Recent Accounting Scandal (Essay Sample)

Instructions:

Summarize the events of a recent accounting scandal. Identify how the illegal or unethical act was detected and describe the punishments that resulted (fines, prison terms, etc.). Consider what could have been done to detect this act earlier or to prevent it from happening in the first place.

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Content:


Recent Accounting scandal: AIG
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The management of American Internal Group (AIG) manipulated the books of accounts from 2001 to 2005 to hide losses in investment and altered the capital. As an international insurance corporation, the accounting fraud was not detected early on given the company’s scale of operations. The management stood accused of also manipulating number to represent a wrong financial position as though the company had a stronger balance sheet. Some of the insurance contracts records were false. The insurance company nearly collapsed at the height of the 2008/2009 global financial crisis, indicating that the scandal had dented the company’s ability to meet its financial obligations.
The scandal was uncovered by an investigation into the details of two insurance transactions related to General Re a unit of Berkshire Hathaway (Businessweek, 2005). Subsequent investigations showed that the management was complicit in fraudulently recording reinsurance transactions with the aim of improving their reserves. As such, investigators uncovered that the accounting records inflated the company’s net worth. The foreign subsidiaries carried out the transaction between AIG and Gen Re while relying on a fake paper trail to hide losses. The management sent w...
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