From coverage of Congressional hearings in the New York Times (hat tip reader Tom):
[Former AIG CEO Martin} Sullivan also came under fire for reassuring shareholders about the health of the company last December, just days after its auditor, Pricewaterhouse Cooper, warned of him that AIG was displaying ''material weakness'' in its huge exposure to potential losses from insuring mortgage-related securities....Waxman unveiled documents showing AIG executives hid the full extent of the firm's risky financial products from auditors, both outside and inside the firm, as losses mounted.
For instance, Federal regulators at the Office of Thrift Supervision warned in March that ''corporate oversight of AIG Financial Products ... lack critical elements of independence.''
At the same time, Pricewaterhouse Cooper confidentially warned the company that the ''root cause'' of its mounting problems was denying internal overseers in charge of limiting AIG's exposure access to what was going on in its highly leveraged financial products branch.
[House Oversight Committee Chairman Henry] Waxman also released testimony from former AIG auditor Joseph St. Denis, who resigned after being blocked from giving his input on how the firm estimated its liabilities.
Richard Kline 
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And I recall Yves’ essential recent post about AIG demonstrating that they played a critical role in helping European banks evade capital requirements.
To quote from the key AIG article she linked to:
“But the AIG case shows the importance of another link across financial markets, namely massive regulatory arbitrage. The K-10 annex of AIG’s last annual report reveals that AIG had written coverage for over US$ 300 billion of credit insurance for European banks. The comment by AIG itself on these positions is: “…. for the purpose of providing them with regulatory capital relief rather than risk mitigation in exchange for a minimum guaranteed fee”. AIG thus helped to organise regulatory arbitrage on a gigantic scale. A formal default of AIG would have had a devastating impact on banks in Europe. This explains why AIG’s problems had sent shock waves through the share prices of European banks. For the time being the US Treasury has saved, inter alia, the European banking system, but given that AIG is to be liquidated European banks now have to scramble to find other ways of obtaining the ‘regulatory capital relief’ they appear to need urgently.”
This link provided by Yves was a word to the wise that continental banking troubles would soon follow.
And indeed they did.
Matt Dubuque