Recent Accounting Scandal

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 wrong statements to the SEC, and the investigations uncovered the fraudulent activities over time as it became clear that there were other questionable transactions that had been sanctioned.
After the fraudulent activities in AIG were detected, the executives resigned from their positions, as the case went to court. Christian Milton, the CEO at the time the scandal was uncovered was given a four-year prison sentence as well as a $ 200, 000 fines (Nytimes.com, 2009). The other executives were also fined having been found guilty resulting in fines of millions as the settlement. The punishment either in fines or prison terms showed that investigators proved that they were compl...