Business Case Studies,Corporate Governance & Business Ethics Case Study, Flour Corp's Business Ethics Practices: Creating Six Sigma Standards in Staying Corruption-Free

Code : GOV0027C

Year : 2005

Industry :Banking, Insurance and Financial Services

Region : US

Teaching Note: Available

Structured Assignment : Available

Abstract: American International Group (AIG) was one of the world’s largest international insurance and financial services companies with operations in more than 130 countries. After the announcement of its financial results for 2004-05, AIG was charged by the US regulators for indulging in manipulative accounting from the year 2001. It was alleged that AIG along with its subsidiaries, had resorted to creative accounting to give a false picture of its clients’ earnings as well as that of its own. After the complaints, AIG conducted an internal review of its accounts and came up with a restatement on May 31, 2005. The case discusses the important manipulative deals of AIG with its clients and its own subsidiaries, highlighting the aberrations from the US GAAP in each arrangement.

The case provides room for discussion on the role of regulators in identifying the accounting frauds and the effectiveness of penalties imposed on those involved.