Fraud Committed by American International Group, Inc

Introduction3

Questionable Accounting Practices3

Sarbanes Oxley Act of 20024

Types of Fraud6

External Auditor (PricewaterhouseCoopers, Ltd)7

Punishments8

Other Impacts9

Future precautionary measures10

Additional recommendations10

Conclusion11

References12

Fraud Committed by American International Group, Inc

Introduction

AIG (American International Group, Inc), having a clientele in more than 130 countries and employing over 63,000 professional personnel is one of the biggest insurance corporation around the globe. AIG provides a wide range of insurance services such as property casualty insurance, retirement services, life insurance and mortgage insurance. The company's main headquarter is located in New York City, its British head office is in London, continental Europe headquarters are situated in La Défense, Paris while the corporation's Asian headquarter is located in Hong Kong. AIG was named as the 62nd biggest public company globally in Forbes Global 2000 record released in 2013 (Forbes, 2013).

Questionable Accounting Practices

Figures as former U.S trade envoy Carla A. Hills were included in 2001, and 2002 to form a five member director board. In 2002, previous National Association of Securities Dealers chairperson and chief executive Frank G. Zarb said in a yearly corporate filing that AIG was unable to comply to accounting standards and financial reporting principles. The committee even said, it was not sure if the audit had been made taken into consideration the normal standards.

Ohio's attorney filed a 224 page lawsuit on AIG's audit committee's blaming AIG for fraud in securities and blaming PWC for disregarding key red flags which resulted in issuing false and misleading audit reports.

The claim blamed PWC of knowing "recklessly disregarded" numerous "illegal" and "improper" accounting practices, including the participation of AIG in inflating it's revenue by $500 million. In the first quarter of 2001 and the last quarter 2000, the claim alleges former executives assisted AIG form two fake reinsurance packages that aided AIG's loss revenues to increase by $500 million. By the help of two deceptive transactions whose aim was to suppress analyst criticism regarding AIG's tumbling loss reserves. AIG even entered into several other transactions which impacted in misleading results in the financial statements. In the period of fraud, in connection with AIG's takeover of American General Corporation in August 29,2001, AIG distributed it's stocks to general shareholders (Washington Post, 2005)

Sarbanes Oxley Act of 2002

Every organization big, small Must comply to the Sarbanes-Oxley Act(of 2002). The law came into practice in 2002 which took control of corporate governance; Legislations altering the scrutiny of financial practices also came into being compliance deadlines were also set to make sure no one could escape the law. The law was articulated by Senator Sarbanes and representative Oxley and was thus named after these two personalities (Sarbanes Oxley Act, 2006).

Former CEO of AIG Maurice R, Greenberg was accused of several violations of laws one of them was that he was blamed for overseeing an accounting fraud at AIG. The SEC blamed Mr. Greenberg of making a false stronger image of AIG over the period of five years. The committee said that Mr. Greenberg was indirectly liable for the frauds as he was ...