STEINWAY MUSICAL INSTRUMENTS, INC.
AUDIT COMMITTEE CHARTER

Objective
To assist the board in fulfilling its responsibility for oversight of the quality and integrity of the accounting, auditing and financial reporting practices of the Company by:

1) Monitoring the Company’s compliance with legal, financial and regulatory requirements.

2) Monitoring the independent auditor’s qualifications and independence.

3) Reviewing the procedures, performance and results of the Company’s internal audit function and independent auditors and acting, as necessary, on behalf of the board of directors between board meetings with respect to the Company's audited financial reports, accounting procedures, financial controls and ethical practices.

4) Providing a direct communication link to the board of directors from the Company’s independent auditing staffs and the chief financial officer, and assuring the quality of the Company's financial reporting and control systems.

5) Preparing the Audit Committee Report, as required by the rules of the Securities and Exchange Commission, for the Company’s annual proxy statement.

Duties and Powers
The Audit Committee shall have the following duties and powers:

1) Appoint, compensate and terminate the Company’s independent auditors, subject, if applicable, to shareholder ratification and shall pre-approve all audit engagement fees and terms and all significant, allowable non-audit engagements with the independent auditors, which shall be disclosed to investors in periodic reports. The Audit Committee shall consult with management but may not delegate these responsibilities.

2) Delegate one or more members of the Audit Committee the authority to grant pre-approvals on audit services and allowable non-audit services.

3) Establish a procedure for the receipt, retention and treatment of complaints received by the Company regarding accounting, internal accounting controls and auditing matters and create a practice allowing for the confidential and anonymous submission by the Company’s employees of concerns regarding questionable accounting or auditing matters.

4) Obtain and review, at least annually, a report by the independent auditors describing the firm’s internal quality-control procedures, any material issues raised by the most recent internal quality controls review or peer review, of the firm, or by any inquiry or investigation by governmental or professional authorities, within the preceding five years, respecting one or more independent audits carried out by the firm, and any steps taken to deal with such issues; and (to assess the auditors’ independence) all relationships between the independent auditor and the Company.

5) Ensure that the regular rotation of the lead audit partner occurs as required by law and consider whether there needs to be a rotation of the outside audit firm and report the findings to the board of directors.

6) Review management’s internal audit function and internal control procedures and practices for safeguarding assets, authorizing and recording transactions and complying with Company policies and ethical practices and the comments of the independent auditors' staff with respect to such policies and practices.

7) Review and discuss the Company’s annual audited financial statements and quarterly financial statements with management and the independent auditors, including the Company’s disclosures under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” before public distribution.

8) Discuss, generally, with management the Company’s earnings press releases, including the use of “pro forma” or “adjusted” non-GAAP information, as well as financial information and earnings guidance provided to analysts and rating agencies.

9) Engage, to the extent deemed necessary or appropriate, independent legal, accounting or other consultants to advise the Committee.

10) Discuss with management the Company’s major financial risk exposures and the steps management has taken to monitor and control such exposure, including the Company’s risk assessment and risk management guidelines.

11) Meet with management, internal auditors (or personnel responsible for internal audit function) and the independent auditors in separate executive sessions, periodically.

12) Regularly review with the independent auditors any difficulties the auditor encountered in the course of the audit work and management’s response.

13) Establish, for the board of directors, policies for the Company’s hiring of employees or former employees of the independent auditors who were engaged on the Company’s account.

14) Discuss with management and the independent auditors significant financial reporting issues and judgments made in connection with the preparation of the Company’s financial statements, including any significant changes in the Company’s selection or application of accounting principles, any major issues as to the adequacy of the Company’s internal controls, the development, selection and disclosure of critical accounting estimates, and analyses of the effect of alternative assumptions, estimates or GAAP methods on the Company’s financial statements.

15) Hold timely discussions with the independent auditor regarding: all critical accounting policies and practices; all alternative treatments of financial information within GAAP that have been discussed with management, ramifications of the use of such alternative disclosure and treatments, and the treatment preferred by the independent auditors; other material written communications between the independent auditors and management, including, but not limited to, the management letter and schedule of unadjusted differences.

16) Discuss with management and independent auditors the effect of regulatory and accounting initiatives as well as off-balance sheet structures on the Company’s financial statements.

17) Receive and review any disclosure from the Company’s CEO or CFO made in connection with the certification of the Company’s quarterly and annual reports filed with the SEC of: (a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize, and report financial data; or (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal controls.

18) Review the annual audit plan of the independent auditors. Ensure the receipt from the independent auditors of a formal written statement delineating all relationships between such auditors and the Company, consistent with Independence Standards Board Standard 1; actively engage in a dialogue with such auditors with respect to any disclosed relationships or services that may impact the objectivity and independence of such auditors; and take, or recommend that the full board take, appropriate action to ensure the independence of such independent auditors.

19) Insure that the independent auditors’ ultimate accountability remains to the board of directors and the Audit Committee as representatives of the shareholders.

20) Review the Company’s annual audit findings and management’s implementation of the independent auditors' recommendations.

21) Review the Company’s organization to accomplish management's financial reporting and control responsibilities.

22) Report regularly to the board of directors.

23) Meet quarterly, or more frequently as needed, to carry out the foregoing duties and responsibilities.

Membership
1) The Audit Committee shall be comprised of no less than three directors who are generally knowledgeable in financial and auditing matters, including at least one member with accounting or related financial management expertise. Each member shall be free of any relationship that, in the opinion of the board, would interfere with his or her individual exercise of independent judgment, and shall meet the director independence requirements for serving on audit committees as set forth in the corporate governance standards of the New York Stock Exchange.

2) The board of directors shall appoint one member of the Audit Committee as chairperson. He or she shall be responsible for leadership of the committee, including preparing the agenda, presiding over the meetings, making committee assignments and reporting to the board of directors. The chairperson will also maintain regular liaison with the CEO, CFO and the lead independent audit partner.

3) The Audit Committee shall recommend and the Board of Directors shall appoint one member of the Audit Committee as an “audit committee financial expert”.  The term “audit committee financial expert” means an audit committee member with the following attributes:  an understanding of GAAP and financial statements; an ability to assess the general application of GAAP in connection with the accounting for estimates, accruals and reserves; experience preparing, auditing, analyzing or evaluating financial statements that present a breadth and level of complexity of accounting issues that are generally comparable to the breadth and complexity of issues that can reasonably be expected to be raised in the Company’s financial  statements, or experience actively supervising one or more persons engaged in such activities; an understanding of internal controls and procedures for financial reporting; and an understanding of audit committee functions.  An “audit committee financial expert” must have acquired these attributes through: (a) education and experience as a principal financial officer, principal accounting officer, controller, public accountant or auditor or experience in one or more positions that involve the performance of similar functions; (b) experience actively supervising a principal financial officer, principal accounting officer, controller, public accountant, auditor or person performing similar functions; (c) experience overseeing or assessing the performance of companies or public accountants with respect to the preparation, auditing or evaluation of financial statements; or (d) other relevant experience.

4) The Audit Committee shall review annually the Audit Committee’s own performance and reassess the adequacy of this Charter.