The long-time accounting firm for American International Group, PricewaterhouseCoopers LLP, reportedly ignored warnings from the audit committee for the AIG board of directors when that panel said in 2001 and 2002 that it could not vouch for the insurer’s accounting and internal financial controls, according to a story in the Washington Post.
The audit committee, whose responsibility is to oversee the work of the outside accounting firm PWC, reported in AIG’s annual corporate filings for those years that it could not independently confirm that AIG management “maintained appropriate accounting and financial reporting principles.”
According to the Washington Post, the committee also commented that it could not assure that PWC was truly acting in an independent role.
The story notes that it is not entirely unusual for audit committees to include language which casts doubt on the independence of the accounting firm, but it also quotes accounting experts that the language used by the AIG audit committee was unusually strong.
A spokesman for PWC told the Post that similar language has been used by other large companies and would not have been seen as a “red flag” by auditors.
The audit committee’s caution has been cited in a lawsuit brought by the attorney general of Ohio against AIG accusing the insurer of securities fraud and PWC of issuing “false and misleading” financial reports on AIG.
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