Case 3.7 Foamex International Inc.

1. Who has the final responsibility for the integrity of a SEC registrant's internal controls: its audit committee its management team or its independent auditors? Explain

The management has the final responsibility for the authenticity of internal controls. The client prepares the financial statements and the management makes certain claims or assertions about these numbers. The auditor's validate the management's assertions by identifying audit objectives, which are the auditor's version of assertions on the financial statements. The auditors are hired by the audit committee, which is comprised of key members with financial expertise and not the management. The audit committee relies on the management to run the daily operations of the business, and maintain quality and integrity of the accounting and reporting practices, internal controls, and financial statements. The management is also responsible for legal and regulatory compliance, the auditors’ qualifications and independence, and the performance of the company’s internal audit function and independent auditors. The audit committee is responsible for the oversight of all of the above management responsibilities. Other responsibilities of the audit committee include:
a) Monitoring choice of accounting policies and principles and internal control process.
b) Overseeing the financial reporting and disclosure process, the performance of the internal audit function and of the regulatory compliance, ethics, and whistleblower hotlines.
c) Overseeing hiring, performance and independence of the external auditors.
d) Discussing risk management policies and practices with management.

2. Under the current professional standard currently in effect, what responsibility do auditors have to identify internal control problems within their clients accounting systems? To whom