SecProbe.io

CORRESP
1
filename1.htm

Continental Materials Corporation

200 South Wacker Drive, Suite 4000

Chicago, Illinois 60606

  VIA EDGAR CORRESPONDENCE

  August 30, 2005

  Mr. Jeffrey Gordon

  Staff Accountant

  Securities And Exchange Commission

  450 Fifth Street N.W.

  Washington, D.C, 20549-0404

  Re:

  Continental Materials Corporation, File Number 0-03834

  Form 8-K Item 4.01 filed August 10, 2005

Dear Mr. Gordon,

We are updating our response to your letter dated August 15, 2005,
regarding Continental Materials Corporation’s Form 8-K filed on August 10,
2005.

To facilitate your review of our response, we are including your
request in boldface, followed by our response.

1.             Please provide us
with any letter or written communication to and from the former accountants,
regarding the material weaknesses, to management or the Audit Committee.

RESPONSE: The Company received the attached letter dated April 12, 2005
addressed to the Audit Committee from PricewaterhouseCoopers (PwC).

There were verbal discussions of the material weaknesses among
management, the Audit Committee and PwC, however, there were no other written
communications or letters.

The Company specifically acknowledges the following:

(1)  The Company is responsible
for the adequacy and accuracy of the disclosure in the filing;

(2)  Staff comments or changes to
disclosure in response to staff comments do not foreclose the Commission from
taking any action with respect to the filing; and

(3) The Company may not assert Staff comments as a defense in any
proceeding initiated by the Commission or any person under the federal
securities laws of the United States.

1

We hope that the above response, including attachment, adequately
addresses you question. Please feel free to call me at (312) 541-7222 if you
require additional information or clarification of our response.

Very truly yours,

Continental Materials Corporation

  /s/ Joseph J. Sum

  Joseph J. Sum

  Chief Financial Officer

  cc:

  James G. Gidwitz

  Mark S. Nichter

2

  PricewaterhouseCoopers LLP

  One
  North Wacker

  Chicago
  1L 60606

  Telephone
  (312) 298 2000

  Facsimile
  (312) 298 2001

April 12,
2005

Continental Materials Corporation

200 South Wacker Drive

Suite 4000

Chicago, IL 60606

Dear
Audit Committee Members:

In planning and performing our audit of the
financial statements of Continental Materials Corporation (the “Company”) for
the year ended January 1, 2005, we considered its internal control in order
to determine our auditing procedures for the purpose of expressing our opinion
on the financial statements and not to provide assurance on internal
control.  Our consideration of internal
control would not necessarily disclose all matters in internal control that
might be material weaknesses under standards established by the American
Institute of Certified Public Accountants. A material weakness is a reportable
condition in which the design or operation of one or more of the internal
control components does not reduce to a relatively low level the risk that
misstatements caused by error or fraud in amounts that would be material in
relation to the financial statements being audited may occur and not be
detected within a timely period by employees in the normal course of performing
their assigned functions. However, we noted the following matters involving
internal control and its operation that we consider to be material weaknesses
as defined above.

1.     Estimating the accrual for workers
compensation obligations: The accrual for workers compensation claims was based
on a claim by claim analysis. This analysis did not include any amounts for
incurred but not reported claims or the development of existing claims. As
such, the Company’s analysis was understated by approximately $600,000 as
determined based upon an actuarial analysis. We recommend that the Company
engage an actuary at least annually to assist in the determination of the
accrual for workers compensation claims.

3

2.     Accounting for income taxes: We noted that there were errors in the
income tax calculation, specifically related to non-recurring items. The errors
resulted in an audit adjustment totaling approximately $600,000. We recommend
that the Company implement controls requiring the completion of the income tax
calculation earlier in the financial reporting process. We also recommend that
management implement an additional level of review of the income tax entries.

This letter is intended solely for the information
and use of the audit committee, management, and others within the organization
and is not intended to be and should not be used by anyone other than these
specified parties.

  Very
  truly yours,

  /s/ PricewaterhouseCoopers
  LLP

  PricewaterhouseCoopers
  LLP

4