By appropriate resolution of the Board of Directors of Wescast Industries Inc. (the "Board"), the Audit Committee (the "Committee") has been established as a standing committee of the Board with the terms of reference set forth below. Unless the context requires otherwise, the term "Company" refers to Wescast Industries Inc. and its subsidiaries and the term "internal auditor" refers to the Director of Audit Services of the Company.
1. PURPOSE
1.1 The Committee's purpose is to:
(a) assist Board oversight of:
(i) the integrity of the Company's financial statements, Management's Discussion and Analysis of Operating Performance ("MD&A") and other financial reporting;
(ii) the Company's compliance with legal and regulatory requirements;
(iii) the external auditor's qualifications, independence and performance;
(iv) the performance of the Company's internal audit function and internal auditor;
(v) the communication among the external auditor, the internal auditor, management and the Board;
(vi) the review and approval of any related party transactions; and
(vii) any other matters as defined by the Board; and
(b) prepare and/or approve any report that is required by law or regulation to be included in any of the Company's public disclosure documents relating to the Committee.
2. COMMITTEE MEMBERSHIP
2.1 Number of Members - The Committee shall consist of not fewer than three members.
2.2 Independence of Members - Each member of the Committee shall:
(a) be a member of the Board;
(b) not be an officer or employee of the Company or any of its affiliates;
(c) satisfy the independence requirements applicable to members of audit committees under Multilateral Instrument 52-110 - Audit Committees of the Canadian Securities Administrators ("MI 52-110"), and other applicable laws and regulations; and
(d) not have participated in the preparation of the financial statements of the Company or any current subsidiary at any time during the past three years.
2.3 Financial Literacy - Each member of the Committee shall satisfy the financial literacy requirements or definitions applicable to members of audit committees under MI 52-110 and other applicable laws and regulations.
2.4 Annual Appointment of Members - The Committee and its Chair shall be appointed annually by the Board and each member of the Committee shall serve at the pleasure of the Board until he or she resigns, is removed or ceases to be a Director of the Company.
3. COMMITTEE MEETINGS
3.1 Time and Place of Meetings - The time and place of the meetings of the Committee and the calling of meetings and the procedure in all things at such meetings shall be determined by the Committee; provided, however, that the Committee shall meet at least quarterly, a majority of the members of the Committee shall constitute a quorum, and the Committee shall maintain minutes or other records of its meetings and activities.
3.2 In Camera Meetings - As part of each quarterly meeting of the Committee, and at such other times as the Committee deems appropriate, the Committee shall meet separately with each of the persons set forth below to discuss and review specific issues as appropriate:
(a) management;
(b) the external auditor; and
(c) the internal auditor.
4. COMMITTEE AUTHORITY AND RESOURCES
4.1 Direct Channels of Communication - The Committee shall have direct channels of communication with the Company's internal and external auditors to discuss and review specific issues as appropriate.
4.2 Retaining and Compensating Advisors - The Committee, or any member of the Committee with the approval of the Committee, may retain at the expense of the Company such independent legal, accounting (other than the external auditor) or other advisors on such terms as the Committee may consider appropriate and shall not be required to obtain the approval of the Board in order to retain or compensate any such advisors.
4.3 Funding - The Company shall provide for appropriate funding, as determined by the Committee, for payment of compensation of the external auditor and any advisor retained by the Committee under Section 4.2 of this Charter and for ordinary administrative expenses of the Committee that are necessary or appropriate in carrying out its duties.
4.4 Investigations - The Committee shall have unrestricted access to Company personnel and documents and shall be provided with the resources necessary to carry out its responsibilities.
5. REMUNERATION OF COMMITTEE MEMBERS
5.1 Director Fees Only - No member of the Committee may accept, directly or indirectly, fees from the Company or any of its subsidiaries other than remuneration for acting as a member of the Committee, the Board, any other committee of the Board or a part-time chair or vice-chair of the Board or any committee of the Board.
5.2 Other Payments - For greater certainty, no member of the Committee shall accept any consulting, advisory or other compensatory fee from the Company (other than the receipt of fixed amounts of compensation under a retirement plan (including deferred compensation for prior service within the Company if the compensation is not contingent in any way on continued service). For purposes of Section5.1, the indirect acceptance by a member of the Committee of any fee includes acceptance of a fee by an individual's spouse, minor child or stepchild, or child or stepchild who shares the individual's home, or a partner of, member of, an officer such as a managing director occupying a comparable position or executive officer of, or a person who occupies a similar position with, an entity that provides accounting, consulting, legal, investment banking or financial advisory services to the Company or any of its subsidiaries, other than limited partners, non-managing members and those occupying similar positions who, in each case, have no active role in providing services to the entity.
6. DUTIES AND RESPONSIBILITIES OF THE COMMITTEE
6.1 Overview - The Committee's principal responsibility is one of oversight. The Company's management is responsible for preparing the Company's financial statements and the external auditor is responsible for auditing those financial statements.
The Committee's specific duties and responsibilities are as follows:
(a) Financial and Related Information -
(i) Annual Financial Statements - The Committee shall review and discuss with management and the external auditor the Company's annual financial statements and related MD&A and report thereon to the Board before the Board approves such statements and MD&A;
(ii) Interim Financial Statements - The Committee shall review and discuss with management and the external auditor the Company's interim financial statements and related MD&A and report thereon to the Board before the Board approves such statements and MD&A;
(iii) Prospectuses and Other Documents - The Committee shall review and discuss with management and the external auditor the financial information, financial statements and related MD&A appearing in any prospectus, annual report, annual information form, management information circular or any other public disclosure document prior to its public release or filing and, if requested by the Board, report thereon to the Board;
(iv) Accounting Treatment - The adequacy of the Company's internal controls and any special audit steps adopted in light of control deficiencies.
(v) Disclosure of Other Financial Information - The Committee shall satisfy itself that adequate procedures are in place for the review of the Company's disclosure of financial information extracted or derived from the Company's financial statements, other than the Company's financial statements, MD&A and earnings press releases, and shall periodically assess the adequacy of those procedures.
(b) External Auditor -
(i) Authority with Respect to External Auditor - As representative of the Company's shareholders and as a committee of the Board, the Committee shall be directly responsible for the appointment, compensation, retention, termination and oversight of the work of the external auditor (including, without limitation, resolution of disagreements between management and the auditor regarding financial reporting) for the purpose of preparing or issuing an audit report or performing other audit, review or attest services for the Company. In this capacity, the Committee shall have sole authority for recommending to the Board the person to be proposed to the Company's shareholders for appointment as external auditor, whether at any time the incumbent external auditor should be removed from office, and the compensation of the external auditor. The Committee shall require the external auditor to confirm in an engagement letter to the Committee each year that the external auditor is accountable to the Board and the Committee as representatives of shareholders and that it will report directly to the Committee.
(ii) Approval of Audit Plan - The Committee shall approve, prior to the external auditor's audit, the external auditor's audit plan (including, without limitation, staffing), the scope of the external auditor's review and all related fees.
(iii) Independence - The Committee shall satisfy itself as to the independence of the external auditor. As part of this process:
(A) The Committee shall require the external auditor to submit on a periodic basis to the Committee a formal written statement confirming its independence under applicable laws and regulations and delineating all relationships between the auditor and the Company.
(B) In accordance with applicable laws and regulations, the Committee shall pre-approve any non-audit services (including, without limitation, fees therefor) provided to the Company or its subsidiaries by the external auditor or any auditor of any such subsidiary and shall consider whether these services are compatible with the external auditor's independence. The Chair may approve additional non-audit services that arise between Committee meetings, provided that the chair reports any such approvals to the Committee at the next scheduled meeting.
(C) The Committee shall establish a policy setting out the restrictions on the Company hiring employees and former employees of the Company's external auditor or former external auditor.
(iv) Regulatory Matters - The Committee shall discuss with the external auditor the matters required to be discussed by Statement on Auditing Standards No. 61 and Section 5741 of the CICA Handbook - Assurance relating to the conduct of the audit.
(c) Internal Audit Function - Controls -
(i) Regular Reporting - The internal auditor shall report quarterly to the Committee.
(ii) Oversight of Internal Controls - The Committee shall oversee management's design and implementation of and reporting on the Company's internal controls and review the adequacy and effectiveness of management's financial information systems and internal controls. The Committee shall annually review and approve the mandate, plan, budget and staffing of the internal audit department. The Committee shall direct management to make any changes it deems advisable in respect of the internal audit function.
(iii) Review of Audit Problems - The Committee shall review with the internal auditor: any problem or difficulties the internal auditor may have encountered; and any significant reports to management prepared by the internal auditing department and management's responses thereto.
(iv) Review of Internal Auditor - The Committee shall review the appointment, performance and replacement of the senior internal auditing executives and the activities, organization structure and qualifications of the persons responsible for the internal audit function.
(d) Whistle Blowing - The Committee shall establish procedures for:
(i) the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls or auditing matters; and
(ii) the confidential, anonymous submission by employees of the Company of concerns regarding questionable accounting or auditing matters.
(e) Related Party Transactions - The Committee shall review and approve any transaction between the Company and a related party and any transaction involving the Company and another party in which the parties' relationship could enable the negotiation of terms on other than an independent, arms' length basis.
(f) Liaison - The Committee shall review and ensure that appropriate liaison and co-operation exist between the external auditor and the internal auditor and provide a direct channel of communication between the external and internal auditors and the Committee.
(g) Public Reports - The Committee shall prepare and/or approve any report that is required by law or regulation to be included in any of the Company's public disclosure documents relating to the Committee.
(h) Other Matters - The Committee may, in addition to the foregoing, perform such other functions as may be necessary or appropriate for the performance of its oversight function.
7. EVALUATION OF CHARTER
7.1 Amendments to Charter -
(a) Review by Audit Committee - On at least an annual basis, the Committee shall review and discuss the adequacy of this Charter and recommend any proposed changes to the Board of Directors.
(b) Review by Board - The Board will review and reassess the adequacy of the Charter on an annual basis and at such other times as it considers appropriate.
8. LEGISLATIVE AND REGULATORY REQUIREMENTS
8.1 Compliance - It is the Board's intention that this mandate shall reflect all legislative and regulatory requirements applicable to the Committee.
9. CURRENCY OF CHARTER
9.1 Currency of Charter
Adopted by the Audit Committee: __October 30, 2006
Approved by the Nominating & Corporate Governance Committee: October 30, 2006_
Approved by the Board of Directors: _____December 12, 2006____
