AIG 2005 Annual Report Download - page 122

Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of Organizations of the Treadway Commission (COSO). AIG’s
American International Group, Inc.: management is responsible for maintaining effective internal
control over financial reporting and for its assessment of the
effectiveness of internal control over financial reporting. Our
We have completed integrated audits of American Interna-
responsibility is to express opinions on management’s assess-
tional Group, Inc.’s 2005 and 2004 consolidated financial
ment and on the effectiveness of AIG’s internal control over
statements and of its internal control over financial reporting
financial reporting based on our audit.
as of December 31, 2005, and an audit of its 2003 consolidated
We conducted our audit of internal control over financial
financial statements in accordance with the standards of the
reporting in accordance with the standards of the Public
Public Company Accounting Oversight Board (United States).
Company Accounting Oversight Board (United States). Those
Our opinions, based on our audits, are presented below.
standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control
Consolidated financial statements and
over financial reporting was maintained in all material respects.
financial statement schedules An audit of internal control over financial reporting includes
In our opinion, the consolidated financial statements listed in obtaining an understanding of internal control over financial
the accompanying index present fairly, in all material respects, reporting, evaluating management’s assessment, testing and
the financial position of American International Group, Inc. evaluating the design and operating effectiveness of internal
and its subsidiaries (AIG) at December 31, 2005 and 2004, control, and performing such other procedures as we consider
and the results of their operations and their cash flows for each necessary in the circumstances. We believe that our audit
of the three years in the period ended December 31, 2005 in provides a reasonable basis for our opinions.
conformity with accounting principles generally accepted in A company’s internal control over financial reporting is a
the United States of America. In addition, in our opinion, the process designed to provide reasonable assurance regarding the
financial statement schedules listed in the accompanying index reliability of financial reporting and the preparation of financial
present fairly, in all material respects, the information set forth statements for external purposes in accordance with generally
therein when read in conjunction with the related consolidated accepted accounting principles. A company’s internal control
financial statements. These financial statements and financial over financial reporting includes those policies and procedures
statement schedules are the responsibility of AIG’s manage- that (i) pertain to the maintenance of records that, in
ment. Our responsibility is to express an opinion on these reasonable detail, accurately and fairly reflect the transactions
financial statements and financial statement schedules based on and dispositions of the assets of the company; (ii) provide
our audits. We conducted our audits of these statements in reasonable assurance that transactions are recorded as necessary
accordance with the standards of the Public Company Ac- to permit preparation of financial statements in accordance
counting Oversight Board (United States). Those standards with generally accepted accounting principles, and that receipts
require that we plan and perform the audit to obtain and expenditures of the company are being made only in
reasonable assurance about whether the financial statements accordance with authorizations of management and directors of
are free of material misstatement. An audit of financial the company; and (iii) provide reasonable assurance regarding
statements includes examining, on a test basis, evidence prevention or timely detection of unauthorized acquisition, use,
supporting the amounts and disclosures in the financial or disposition of the company’s assets that could have a
statements, assessing the accounting principles used and signifi- material effect on the financial statements.
cant estimates made by management, and evaluating the Because of its inherent limitations, internal control over
overall financial statement presentation. We believe that our financial reporting may not prevent or detect misstatements.
audits provide a reasonable basis for our opinion. Also, projections of any evaluation of effectiveness to future
As described in Note 21 to the consolidated financial periods are subject to the risk that controls may become
statements, AIG changed its accounting for certain non- inadequate because of changes in conditions, or that the degree
traditional long duration contracts and for separate accounts as of compliance with the policies or procedures may deteriorate.
of January 1, 2004. A material weakness is a control deficiency, or a combina-
tion of control deficiencies, that results in more than a remote
Internal control over financial reporting likelihood that a material misstatement of the annual or
interim financial statements will not be prevented or detected.
Also, we have audited management’s assessment, included in As of December 31, 2005, the following material weaknesses
Management’s Report on Internal Control Over Financial have been identified and included in management’s assessment.
Reporting appearing under Item 9A, that AIG did not Controls over certain balance sheet reconciliations: AIG did not
maintain effective internal control over financial reporting as maintain effective controls to ensure the accuracy of certain
of December 31, 2005 because of the effect of the material balance sheet accounts in certain key segments of AIG’s
weaknesses relating to (1) controls over certain balance sheet operations, principally in the Domestic Brokerage Group.
reconciliations, (2) controls over the accounting for certain Specifically, accounting personnel did not perform timely
derivative transactions and (3) controls over income tax reconciliations and did not properly resolve reconciling items
accounting, based on criteria established in Internal Control — for premium receivables, reinsurance recoverables and in-
Integrated Framework issued by the Committee of Sponsoring
70 AIG m Form 10-K