Company Policies and Procedures Manual

MODEL AUDIT COMMITTEE MANUAL

1. Function, Role and Duties of the Audit Committee

The Audit Committee will act as an independent and mandatory advisory service to Company Board of Directors and management to assist in the effective discharge of the responsibilities prescribed in the Companies Act, the Listing agreement with Stock Exchanges, Regulatory authorities and other relevant legislation and prescribed requirements. In doing so it will provide independent comment, advice and counsel to Board of Directors on matters considered by the Committee at its regular meetings.

The Committee does not replace or replicate established management responsibilities and delegations, the responsibilities of other executive management groups within the company, or the reporting lines and responsibilities of either the internal audit or external audit functions.

The Committee will provide prompt and constructive reports on its findings directly to Board of Directors, particularly when issues are identified that could present a material risk or threat to the company.

In the discharge of its responsibilities, a key duty of the Committee will be to provide reasonable assurance to the company and that those company’s core business goals and objectives are being achieved in an efficient and economical manner, within an appropriate framework of internal control and risk management. The discharge of this responsibility principally involves the consideration of audit and audit- related findings, including in respect of performance management.

In the assessment of audit findings, the Committee must take into account management’s responses and recommendations in relation to such matters.

The Audit Committee’s core duties are to:

• Assess and contribute to the audit planning processes relating to the risks and threats to the company, taking into account the financial and operational environment in which it operates and its performance management framework;
• Assess and enhance the company’s corporate governance, including its systems of internal control and the internal audit function;
• Evaluate the quality of, and facilitate the practical discharge of the internal audit function, particularly in respect of planning, monitoring and reporting; and
• Through the internal audit function, oversee and appraise the company’s financial and operational reporting processes

Other key responsibilities of the Committee, through the respective audit functions, are to assist the company discharge the responsibilities of ‘due care and diligence’ in relation to:

• The delivery of the company outputs efficiently, effectively and economically and so as to obtain optimal value for money;
• Optimizing the company performance in terms of quality, quantity, timeliness, cost and where appropriate, location.
• Reporting the company financial and operational information to the users of its reports in a relevant, reliable and timely manner;
• Correctly applying relevant Generally Acceptable Accounting Standards, Statements of Accounting Concepts, Accounting Policy Guidelines and Cost- Effective Internal Control Guidelines and like policy documents; and
• Ensuring the integrity and consistency of the company’s corporate culture relative to ethical conduct and probity, including in relation to its tendering, contracting and other procurement processes.

In the discharge of the foregoing responsibilities, the Committee must provide prompt and constructive advice to the company, particularly where issues are identified that could present a material risk or threat to the company.

2. Relationship with Internal Audit

The Audit Committee will act as a forum for internal audit and oversee its planning, monitoring and reporting processes. This process will form part of the governance processes that ensures that the company’s internal audit function operates effectively, efficiently and economically.

In its review of the internal audit function the Audit Committee must review:

• The adequacy of the internal audit charter;
• The structure, qualification requirements, professional, ethical practices and training needs of internal audit;
• Internal audit strategic and operational plans to ensure an optimum, cost- effective audit cover;
• The performance of internal audit relative to its annual audit plan; and
• The findings of internal audit and the actions proposed to be taken by management, including an assessment that the proposed solution is the most appropriate and cost-effective.

To the extent practicable, the Committee will ensure that there is no material overlap between the internal and external audit functions.

In relation to its assessment of the internal audit function, the Audit Committee will review and advise the company as to the adequacy of:

• The internal audit procedures;
• The internal audit strategic and operational audit plans;
• Organization and resourcing;
• Skills and training needs; and
• The satisfactory and timely performance against the operational plans of internal audit.

The Audit Committee will satisfy itself that internal audit has complied with the professional standards issued by the company, the relevant statutes and The Institute of Chartered Accountants of India, and shall ensure that an external peer review of the internal audit function is undertaken at least once in every five years.

3. Relationship with The Company Executive Management

The Committee will liaise closely with the other Committees and the company executive management to ensure, to the extent practicable, that there is no material overlaps between the respective functions of the groups. It also will ensure that there is a frank and meaningful exchange of information between the groups where this is necessary or desirable.

4. Relationship with Line Management

The role of the Audit Committee with respect to line management will focus on whether the actions proposed to address audit concerns are satisfactory and cost- effective and will enhance the effectiveness and efficiency with which the company delivers its outputs and contributes to whole of its objectives.

5. Relationship with External Audit

The company’s statutory auditor holds appointment as auditor of the entity and is responsible for reporting independently to shareholders on the discharge of that official’s statutory obligations.

The Statutory Auditor is empowered under the Companies Act, 1956 and the ICAI Charter to undertake the company audit in any way that he considers appropriate, taking into account the character of the relevant internal control systems of the company, including the internal audit function.

The Audit Committee has no power of direction over external audit or the manner in which the external audit is planned or undertaken but will act as a forum for the consideration of external audit findings and will ensure that they are balanced with the views of management.

The Committee will consult with external audit on that function’s proposed audit strategy and audit fees for each year and ensure that an integrated audit process occurs, to the extent practicable.

6. Membership of the Audit Committee

The company’s Board of Directors will determine membership of the Audit Committee from time to time.

It is highly desirable that at least two committee members be members of one of the professional accounting or audit bodies in India and has a professional accounting, management consultancy or audit background.

A majority of members must be present to provide a quorum. Collectively, the Committee shall possess:

The company’s Board of Directors may make appointments to the Committee for any period it considers fit. The desirability of occasional changes of membership to facilitate the periodic input of new ideas, while retaining some degree of continuity via a core of experience, is recognized.

7. Committee Chairman

The company shall appoint a chairman of the Committee, taking into account the qualifications and the leadership and communication skills of nominees.

8. Committee Secretary

The Company Secretary of the company shall be the Secretary of the committee.

The secretary will be responsible for the preparation and circulation of the meeting agenda and accurately minuting all decisions of the Committee in consultation with its chairman. The secretary also will be responsible for the timely tabling of all correspondence, reports and other information relevant to the Committee’s activities and operations.

9. Ethical Practices of Audit Committee members

Members of the Audit Committee will, at all times in the discharge of their duties and responsibilities, exercise honesty, objectivity and probity and not engage knowingly in acts or activities that have the potential to bring discredit to the company.

Members also must refrain from entering into any activity that may prejudice their ability to carry out their duties and responsibilities objectively and must at all times act in a proper and prudent manner in the use of information acquired in the course of their duties.

Members must not use the company information for any personal gain for themselves or their immediate families or in any manner that would be contrary to law or detrimental to the welfare and goodwill of the company.

Further, members must not publicly comment on matters relative to activities of the Committee other than as authorized by the company.

10. Agenda, conduct and minutes of committee meetings

Meetings shall be conducted on a formal basis and be effectively minuted by the secretary as to proceedings and decisions. Meeting agenda must be prepared and distributed to all members of the Committee at least five days prior to a meeting. Minutes of meetings must be prepared and distributed to Committee members as soon as possible after the conclusion of the meeting and must be confirmed as an accurate record of the meeting at the next subsequent meeting of the Committee.

In the setting of the Committee agenda there will be an emphasis on the most significant risks and threats to the company and the ongoing evaluation of what is being done to mitigate such risks.

11. Number of committee meeting annually

Meetings of the Committee must be held at least four times each year. In addition, the Committee chairman may call such additional meetings as may be necessary to address any matters referred to the Committee or in respect of matters that the Committee wishes to pursue.

12. Quorum and procedure regarding dissension between committee members

A quorum shall consist of a majority of members of the Committee. As far as practicable, decisions of the Committee shall be regarded as its collective decision or advice. However, where there is material dissension to a decision, a minority view may be placed before the company’s Board of Directors.

13. Other Attendees at Committee Meetings

The Committee chairman may request any employee of the company, including representation from internal audit to attend a meeting and such person(s) must attend. Further, the chairman may invite a representative of external audit to attend any meeting of the Committee and to present and comment on appropriate agenda items.

Where advice is required in relation to a matter subject to a Committee inquiry and it is considered sufficiently material to warrant the services of a specialist consultant external to the company, the Committee may request the Board of Directors of the company for such expert assistance.

14. Audit Committee Reports

The Audit Committee must prepare prompt and timely reports to the company’s Board of Directors outlining relevant matters that have been considered by it, as well as the Committee’s opinions and recommendations thereon.

At least annually, the Committee chairman will prepare a report to the company’s Board of Directors summarizing the performance and achievements of the Committee for the previous period. An interim program of the Committee’s activities for the coming period also will be provided.
A summary of the role and achievements of the Committee shall be included in the annual report of the company together with a statement that the Committee has observed the terms of its charter and had due regard to Audit Committee Guidelines.

15. Evaluation of Committee Activities

Annually, the Committee chairman shall assess the performance of the Committee and take appropriate action in respect of areas where there is a perceived need for enhancement of its role, operational processes or membership.

Annually, the Committee chairman also will provide each individual member of the Committee with feedback on that person’s work performance and professional contributions to the Committee’s activities for the year.

At least once in every three years the Committee shall arrange for a peer review of its operations and activities. The results of such review shall be provided directly to the company’s Board of Directors.

16. Cooperation with Committee

Each The company employee must provide full, frank and meaningful advice on any issue raised by the Audit Committee immediately of receiving such a request and shall cooperate fully with the activities of the Committee in all other respects. The annual report of the Committee will include a statement as to the extent of cooperation provided to the Committee during the year.