Is this a helmet defect or not?

The jagged and uneven edges you are seeing around the straps are merely cosmetic. At best they are at the minimum tolerance for manufacturing quality and at worst are an isolated case of tolerances going wrong during production.

Either way, as long as the integrity of the foam in the helmet is not compromised (by virtue of crashing or the like), then it is safe to use. Happy riding!

I am not bothered with the cutting of the foam if it is just cosmetic but obviously I would need to know that the helmet is not compromised before I can use it.

Every single helmet built barely to spec is compromised.

If you consider the bicycle as a rod whose weight is evenly distributed, when the bicycle falls with tire contact point as the pivot point, the moment of inertia is

I = 1/3 * m * L^2

The rotational energy is

E = 1/2 * I * w^2 = 1/2 * I * v^2 / L^2 = 1/6 * m * v^2

When the bicycle falls, its energy comes from its center of mass at approximately height of L/2 converting its potential energy to rotational kinetic energy:

1/6 * m * v^2 = m * g * L/2

Calculating for v:

v^2 = 3 * g * L

Helmet spec (EN 1078) uses v = 5.5 m/s (about) so v^2 = 30.25 m^2/s^2.

In reality, when you fall, you get v^2 = 3 * 9.81 m / s^2 * 1.8 m for a rider with 1.8 meter height. So, in reality, v^2 = 53 m^2/s^2.

So, the speed squared of the head when falling is 75% greater than the speed squared in EN 1078 test. Energy is proportional to speed squared, so its kinetic energy is 75% greater too. For a rider with greater height than 1.8 meters, the problem of underspecced helmets is even more severe.

I wouldn't trust my life to a funny looking expanded polystyrene hat.

I think you'll find every bicycle component and accessory, helmet or otherwise, is built to be as lightweight as possible. The bicycle itself and its components are built to fail in an amount of time most riders consider acceptable. The helmet is constructed to barely pass the helmet tests, which severely underestimate the velocity of the head.