The audit committee of Bharat Forge performs the following functions :

• Oversight of the company’s financial reporting process and the disclosure of its financial information to ensure that the financial statement is correct, sufficient and credible.
• Recommending to the Board the appointment, re-appointment and, if required the replacement or removal of the statutory auditor and the fixation of audit fees.
• Approval of payment to statutory auditors for any other services rendered by the statutory auditors
• Reviewing with management, the annual financial statements before submission to the Board for approval with particular reference to :
  a) Matters required to be included in the Director’s Responsibility Statement to be included in the Board’s report in terms of clause (2AA) of Section 217 of the Companies Act, 1956.
  b) Changes, if any, in accounting policies, practices and reasons for the same.
  c) Major accounting entries involving estimates based on the exercise of judgment by management.
  d) Significant adjustments made in the financial statements arising out of audit findings.
  e) Compliance with listing and other legal requirements relating to financial statements.
  f) Disclosure of any related party transactions.
  g) Qualifications in the draft audit report.
• Reviewing with the management, the quarterly financial statements before submission to the Board for approval.
• Reviewing with the management, performance of statutory and internal auditors, adequacy of the internal control systems.
• Reviewing the adequacy of internal audit functions, if any, including the structure of the internal audit department, staffing and seniority of the official heading the department, reporting structure coverage and frequency of internal audit.
• Discussion with internal auditors any significant findings and follow up thereon.
• Reviewing the findings of any internal investigations by the internal auditors into matters where there is suspected fraud or irregularity or a failure of internal control systems of a material nature and reporting the matter to the Board.
• Discussion with statutory auditors before the audit commences, about the nature and scope of audit as well as post-audit discussion to ascertain any area of concern.
• To look into the reasons for substantial defaults in the payment to the depositors, debenture holders, shareholders (in case of non payment of declared dividends) and creditors.
• Reviewing any changes in the accounting policies or practices as compared to the last completed financial year and commenting on any deviation from the Accounting Standards.

The Audit Committee is empowered, pursuant to its terms of reference to: Investigate any activity within its terms of reference and to seek any information it requires from any employees.

• Obtain legal or other independent professional advice and to secure the attendance of outsiders with relevant experience and expertise, when considered necessary.
• The Company has systems and procedures I place to ensure that the Audit Committee mandatorily reviews: Management discussion and analysis of financial condition and results of operations.
• Statement of significant related party transactions (as defined by the Audit Committee), submitted by management.
• Management letters / letters of internal control weaknesses issued by the statutory auditors.
• Internal Audit reports relating to internal control weaknesses. The appointment, removal and terms of remuneration of the chief internal auditors.
• Whenever applicable, the uses / application of funds raised through public issues, rights issues, preferential issues by major category (capital expenditure, sales and marketing, working capital, etc.) as part of the quarterly declaration of financial results.
• If applicable, on an annual basis, statement certified by the statutory auditors, detailing the use of funds raised through public issues, rights issues, preferential issues for purposes other than those stated in the offer document /prospectus / notice.

In addition, the Audit Committee of the Company is also empowered to review the financial statements, in particular, the investments made by the unlisted subsidiary companies in view of the requirements under Clause 49.

The Audit Committee is also informed with regard to related party transactions by being presented :

• A statement in summary from of transactions with related parties in the ordinary course of business.
• Details of material individual transactions with related parties, which are not in the normal course of business.
• Details of material individual transactions with related parties or others, which are not on an arm’s length basis along with management’s justification for the same.

As on 31 March 2008, the Audit Committee of Bharat Forge consisted of Mr. S.S. Marathe (Chairman), Mr. P.H. Ravikumar (nominee of ICICI Bank Ltd.), Mr. S.D. Kulkarni and Mr. P.G. Pawar, all 4 being Independent Directors. All members of the Audit Committee have accounting and financial management expertise. The Chairman of the Audit Committee attended the Annual General Meeting held on 24th July 2007 to answer shareholders, queries. The internal auditor is M/s Price Waterhouse Coopers. The Committee met six times during the course of the year on 4 April 2007, 5 May 20007, 22 May 2007, 24 July, 2007, 26 October 2007 and 21 January 2008. Table below gives attendance record :