Yeah, convert whatever kind of MPEG file you're using to something like Quicktime's PNG or animation codecs -- with audio, of course -- and try again. MPEG files can contain multiplexed, or muxed, audio: the audio is embedded in the video, there's no separate audio track, so AE can't see it.
Astounded by the large size of the file after conversion? Get used to it.
Thanks so much, i used a different audio format for the clip and it works fine now.
There is a complete section in the AE help system all about audio and the limitations of AE. The larger issue, which LaRonde is pointing out, is that AE is not an audio editing platform; not every audio codec is accessible in a comp. ONe of the easiest ways for me to deal with audio in After Effects is to bring it in as a separate resource and put it in a comp as a separate layer. Lock it so you don't drag it around.