AIG 2006 Annual Report Download - page 150

American International Group, Inc. and Subsidiaries
Report of Independent Registered Public Accounting Firm
To the Board of Directors and Shareholders of of the effectiveness of internal control over financial reporting.
American International Group, Inc.: Our responsibility is to express opinions on management’s
assessment and on the effectiveness of AIG’s internal control
over financial reporting based on our audit.
We have completed integrated audits of American International
We conducted our audit of internal control over financial
Group, Inc.’s consolidated financial statements and of its internal
reporting in accordance with the standards of the Public Company
control over financial reporting as of December 31, 2006, in
Accounting Oversight Board (United States). Those standards
accordance with the standards of the Public Company Accounting
require that we plan and per form the audit to obtain reasonable
Oversight Board (United States). Our opinions, based on our
assurance about whether effective internal control over financial
audits, are presented below.
reporting was maintained in all material respects. An audit of
internal control over financial reporting includes obtaining an
Consolidated Financial Statements and Financial Statement
understanding of internal control over financial reporting, evaluat-
Schedules
ing management’s assessment, testing and evaluating the design
In our opinion, the consolidated financial statements listed in the and operating effectiveness of internal control, and performing
accompanying index present fairly, in all material respects, the such other procedures as we consider necessary in the circum-
financial position of American International Group, Inc. and its stances. We believe that our audit provides a reasonable basis for
subsidiaries (AIG) at December 31, 2006 and 2005, and the our opinions.
results of their operations and their cash flows for each of the A company’s internal control over financial reporting is a
three years in the period ended December 31, 2006 in conformity process designed to provide reasonable assurance regarding the
with accounting principles generally accepted in the United States reliability of financial reporting and the preparation of financial
of America. In addition, in our opinion, the financial statement statements for external purposes in accordance with generally
schedules listed in the accompanying index present fairly, in all accepted accounting principles. A company’s internal control over
material respects, the information set forth therein when read in financial reporting includes those policies and procedures that
conjunction with the related consolidated financial statements. (i) pertain to the maintenance of records that, in reasonable
These financial statements and financial statement schedules are detail, accurately and fairly reflect the transactions and disposi-
the responsibility of AIG’s management. Our responsibility is to tions of the assets of the company; (ii) provide reasonable
express an opinion on these financial statements and financial assurance that transactions are recorded as necessary to permit
statement schedules based on our audits. We conducted our preparation of financial statements in accordance with generally
audits of these statements in accordance with the standards of accepted accounting principles, and that receipts and expendi-
the Public Company Accounting Oversight Board (United States). tures of the company are being made only in accordance with
Those standards require that we plan and perform the audit to authorizations of management and directors of the company; and
obtain reasonable assurance about whether the financial state- (iii) provide reasonable assurance regarding prevention or timely
ments are free of material misstatement. An audit of financial detection of unauthorized acquisition, use, or disposition of the
statements includes examining, on a test basis, evidence support- company’s assets that could have a material effect on the
ing the amounts and disclosures in the financial statements, financial statements.
assessing the accounting principles used and significant esti- Because of its inherent limitations, internal control over
mates made by management, and evaluating the overall financial financial reporting may not prevent or detect misstatements. Also,
statement presentation. We believe that our audits provide a projections of any evaluation of effectiveness to future periods are
reasonable basis for our opinion. subject to the risk that controls may become inadequate because
As described in Notes 1, 14 and 15 to the consolidated of changes in conditions, or that the degree of compliance with
financial statements, AIG changed its accounting for certain hybrid the policies or procedures may deteriorate.
financial instruments, life settlement contracts and share based A material weakness is a control deficiency, or a combination
compensation as of January 1, 2006, and certain employee of control deficiencies, that results in more than a remote
benefit plans as of December 31, 2006. likelihood that a material misstatement of the annual or interim
financial statements will not be prevented or detected. As of
Internal Control Over Financial Reporting December 31, 2006, a material weakness relating to the controls
over income tax accounting has been identified and included in
Also, we have audited management’s assessment, included in
management’s assessment.
Management’s Report on Internal Control Over Financial Reporting
Controls over income tax accounting: AIG did not maintain
appearing under Item 9A, that AIG did not maintain effective
effective controls over the determination and reporting of certain
internal control over financial reporting as of December 31, 2006
components of the provision for income taxes and related income
because of the effect of the material weakness relating to
tax balances. Specifically, AIG did not maintain effective controls
controls over income tax accounting, based on criteria established
to review and monitor the accuracy of the components of the
in Internal Control — Integrated Framework issued by the Commit-
income tax provision calculations and related income tax balances
tee of Sponsoring Organizations of the Treadway Commission
and to monitor the differences between the income tax basis and
(COSO). AIG’s management is responsible for maintaining effec-
the financial reporting basis of assets and liabilities to effectively
tive internal control over financial reporting and for its assessment
100 AIG 2006 Form 10-K