Accounting Ethical Issues of American International Group Case Study

Accounting Ethical Issues of American International Group - Case Study Example AIG is a company with strong financials, respected the world over for its financial might, but this controversy resulted in a lot of its energy and resources being diverted towards undoing the charges. What began as an investigation into two reinsurance transactions later mushroomed into a growing scandal that tarnished the reputation of one of America's premier corporations. On Mar. 30, AIG acknowledged that it had improperly accounted for the reinsurance transaction to bolster reserves, and detailed numerous other examples of problematic accounting. Subsequently the company took corrective measures and fortunately for investors, employees and other stakeholders in many countries, continues to conduct all its operations smoothly, unlike ENRON, WorldCom and some other companies. While these companies appeared to have had flawed business models and hid the real and rapidly deteriorating financial conditions, at AIG it appears to have taken place on account of some wrong practices. AIG is once again on course to have an important impact on social and economic development issues, infrastructure investment, education, and training etc.  In fact, this is not the first time that AIG is stuck up in controversies. Nature and scale might be smaller but AIG has had a taste of controversies earlier as well. In 2004, the insurer paid $126 million in fines to the Securities & Exchange Commission and Justice Dept. for deals it structured for outside clients that allegedly violated insurance accounting rules, although AIG admitted no wrongdoing. The company also came under the glare of New York Attorney General Eliot Spitzer for its role in bid-rigging with broker Marsh & McLennan Cos., which led to the ouster of Hanks son Jeffrey as CEO there. AIG admitted no wrongdoing, but two of its executives pleaded guilty and had to leave the company. In this era of cut-throat competition, such issues keep cropping up involving many big names.