With a background of former executives seen entering courthouses, called to account for corporate scandals of previous years, and indictments announced against individuals and KPMG partners, corporate accounting issues surfaced in a less dramatic way in 2005, through restatements of financials, at giants like American International Group (AIG) and mortgage companies, Fannie Mae and Freddie Mac. In fact, 2005 could become the Year of the Restatement, as numerous US companies restated their results for previous years, to be in compliance with the Sarbanes Oxley (SOX) Act of 2002, or as a result of audits by the Public Company Auditing Oversight Board (PCAOB).
When AIG, the giant insurance company, finally announced its annual report in June, restating five years of results and lowering the company's net worth by $2.26 billion, as a result of a series of small accounting errors, the question of materiality, who defines it, and when does new information affect materiality, became a focal point of the story, according to a Wall Street Journal report. AIG announced additional restatements in August, related to a surplus held by its general insurance company subsidiaries, and a third restatement in November, related to how it accounted for derivatives, balance sheet reconciliation and income tax accounting, the New York Times reported. Maurice Greenberg, the former CEO, avoided prosecution on criminal charges for fraud, but may still face civil charges.
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