Morning Star Resources Limited

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Corporate Governance

Audit Committee

TERMS OF REFERENCE

1. Membership

The committee shall be appointed by the Board from amongst the Non-Executive Directors of the Company and shall consist of not less than 2 members. A quorum shall be two members.
The majority of the Committee members shall be Independent Non-Executive Directors.
The Chairman of the Committee shall be appointed by the Board.
If a member of the Committee resigns, dies or for any other reason, ceases to be a member with the result that the number of members is reduced to below two, the Board shall, within three months of that event, appoint such number of new members as may be required to make up the minimum number of two numbers.
The term of office of the members of the Committee should be reviewed by the Board every two years.

2. Frequency of meetings

Meetings shall be held not less than twice a year. The external auditors may request a meeting if they consider that one is necessary.

3. Authority

The Committee is authorised by the Board to investigate any activity within its term of reference. It is authorized to seek any information it requires from any employee and all employees are directed to co-operate with any request made by the Committee.
The Committee is authorised by the Board to obtain legal or either independent professional advice and to secure the attendance of outsiders with relevant experience and expertise if it considers this necessary.

4. Duties

The duties of the Committee shall be:-

(a)

to consider the appointment of the external auditor, the audit fee, and any questions of resignation or dismissal;

(b)

to discuss with the external auditor before the audit commences, the nature and scope of the audit, and ensure co-ordination where more than one audit firm is involved;

(c)

to review the half-year and annual financial statements before submission to the Board, focusing particularly on:-

i.		any changes in accounting policies and practices;
ii.		major judgmental areas;
iii.		significant adjustments resulting from the audit;
iv.		the going concern assumptions;
v.		compliance with accounting standards; and
vi.		compliance with stock exchange and legal requirements.

(d)

to discuss problems and reservations arising from the interim and final audits, and any matters the auditors may wish to discuss (in the absence of management where necessary);

(e)

to review the external auditor's management letter and management's response;

(f)

to monitor management's strategy for ensuring that appropriate controls are in place and that these controls are functioning properly; and

(g)

to consider other topics, as defined by the Board.

5. Reporting procedures

The minutes of meetings of the Committee shall be circulated to all members of the Board.

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