Finance, Accounting and Control Case Study

AIG: The Accounting Scandal Unfurls

OR

Abstract:
In February 2005, AIG, one of world’s leading insurance and financial services organization was accused of improper accounting and manipulation of financial statements. The case discusses the accounting frauds committed by AIG, and provides an insight into the ways by which AIG manipulated its financial statements. The role of the company’s top management in the scandal has also been discussed. Finally, the case explores the initiatives being taken by the company to change its management structure, restate its financial statements and restore investor confidence.

Pedagogical Objectives:

• To discuss the accounting scandal at AIG in 2005 and focus on issues of ‘transparency in disclosure of accounts’, ‘ethical conduct’; ‘ethical audit’ and ‘ethics in corporate governance’
• To discuss the 10/10 rule of risk transfer, side letters and their usage, the involvement of top management in the scandal and the effects of the scandal on the company’s market capitalisation and image.

Keywords : AIG, Finance Case Study, Accounting scandal, Financial services, Manipulation of financial statements, Involvement of top management, Accounting fraud, Insurance sector, Finite insurance, Reinsurance/reinsurers, Maurice Greenberg