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auditing,governance and scandals - Coursework Example
Finance & Accounting
Pages 3 (753 words)
Name: Course: Date: Problem of governance of A.I.G. (American International Group) A.I.G is the global leader in the world insurance and financial services, with its branches and affiliate companies operating in over 130 countries globally. The company has dominated the insurance and financial services industry in the world for some decades now, owing to its large capital base and profit making trends…
The problems that faced A.I.G are not purely financial crises brought about by the tough global economic condition or any form of catastrophes. The problems, as evidenced by the Mutual fund scandals (2003), the Insurer bid rigging (2004) and AIG accounting scandal (2005) were purely caused by managerial twists and dysfunctions (Evans, 2012 p62). The management administration and governance failures saw the company plunge into a deep financial crisis, from which it has been trying to recover until present day (Markham, 2005 p510). The management and governance failure for this organization are traceable in several of the management deliberate misdeeds. First, the company took a huge amount of funds that were collected from securities lending, and invested them in the subprime bonds. Additionally, the company comingled its insurance subsidiaries to give it back some more money for that purpose (Boyd, 2011 p72). In so doing, the company ignored all the risks involved in operating liquidity subprime bonds and went on to commit huge amount of its customer’s funds to this risk. ...
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