Foamex International Inc.

1. The final responsibility for the integrity of an SEC registrant’s internal controls lies on the management team. U.S. companies need to refer to a comprehensive framework of internal control when assessing the quality of financial reporting to determine that financial statements are being presented under General Accepted Accounting Principles, GAAP. The widely used framework is referred as COSO, Committee of Sponsoring Organizations of the Treadway Commission, sponsored by the following organizations American Accounting Association, the American Institute of CPA’s, Financial Executives International, the Institute of Internal Auditors, and the Institute of Management Accountants. COSO’s defines internal control as:

A process, effected by an entity’s board of directors, management, and other personnel, designed to provide reasonable assurance regarding the achievement of objectives in the following categories: (1) reliability of financial reporting, (2) compliance with applicable laws and regulations, and (3) effectiveness and efficiency of operations.

These objectives are designed to help an organization achieve a structured strategy to achieve returns for shareholders. There are five components to accomplish internal control that are derived from the way management runs a business and are integrated with the management process.

a. Risk Assessment. Identifying and assess the risks that affect the accomplishment of those objectives, e.g. the lack of upgrading the accounting system to improve inventory and international subsidiaries reporting for Foamex International Inc.
b. Control Environment. The overall governance of the organization starting by the tone from upper management of the organization. The company needed to conduct a comprehensive analysis of financial results on a quarterly basis.
c. Control Activities. An organization having a check and balance procedure to prevent or detect errors in their reporting standards. Foamex lacked