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1.1 These rules shall ensue :
1.1.1 The implementation of and strict adherence to the Royal Commands contained in the 'Kasho' quoted herein ; and
1.1.2 The audit of all transaction/functions of government agencies in accordance with laws, rules and regulations and generally accepted auditing standards, where applicable.
1.2 The Royal Audit Authority shall ascertain and evaluate whether Government resources are handled properly and in compliance with laws, rules and regulations; and assess whether the Government agencies, within its audit jurisdiction, achieve the purposes for which they were established and for which Government resources have been made available to them. The Royal Audit Authority shall conduct comprehensive audit, financial and compliance audit, performance audit and/or any other form of audit as it may deem proper.
1.3 Audit shall be primarily directed towards enhancing Government accountability which comprises:
1.3.1 Accountability for the resources of the Government;
1.3.2 Accountability of agency heads and administrators to higher levels of Government for compliance with or adherence to laws, policies, rules and regulations;
1.3.3 Accountability for economical and efficient operations, avoiding excessive, extravagant, irregular and unnecessary expenditures and uses of funds and property; and
1.3.4 Accountability for programme results or the
effectiveness of operations for the ultimate attainment of goals set by the Government.
The Royal Audit Authority shall provide information to decision-makers in the Government
and create awareness of agency heads and administrators in obtaining value for money in
expenditures, in utilizing resources, and in ensuring that all Government revenues
due are collected. Through its reports, the Royal Audit Authority shall recommend measures
to improve economy, efficiency and effectiveness in Government operations.
1.4 The Royal Audit Authority shall issue supplementary rules and regulations or manuals to facilitate the exercise of its audit functions to enhance the information value of Government accounts and to ensure compliance with provisions of approved contracts.
1.5 Detailed instructions on the principles, rules of audit, and the procedures to be followed by auditors in the audit of accounts and operations of agencies shall be issued by the Auditor General as required from time to time.
1.6 Heads of the Agencies shall furnish replies to all memos and queries within the time limits prescribed by the Royal Audit Authority.
2.1 The scope of audit is stated in the First Command of the "Kasho", quoted hereunder:
"Not only are all kinds of revenue receipts, whether domestic or external in the form of foreign aid and all kind of expenditures incurred by various departments of the Royal government of Bhutan, subject to scrutiny by the Royal Audit, but the Royal auditors are also vested with the power to audit accounts of any department of the Royal government irrespective of their size, as and when neccessary. The royal Audit is further empowered with the physical verification of cash of various departments and the stores.
2.2 The Royal Audit Authority shall, accordingly examine, audit and scale in accordance with laws, rules and regulations, all accounts pertaining to the revenue and receipts of and expenditures or uses of funds and property, owned or held in trust by, or pertaining to the:
2.2.1Government or any of its instrumentalists;
2.2.2 Government-owned and/or controlled corporations, government financial institutions, and their subsidiaries;
2.2.3 Non-Government entities subsidized by the Government, funded by donations or grants through the Government, those for which the Government has putt up a counterpart fund or those partly funded by the Government, those required to pay levy, and those whose loans are approved and/or guaranteed by the Government ; and
2.2.4 Any other organization upon Command of His Majesty, the King.
2.3 The Royal Audit Authority shall determine the scope and frequency of audit. However audit of each agency shall, to the extent possible, be carried out annualy but not later than two years from the previous audit.
2.4 The Royal Audit Authority shall, for each audit lay emphasis on any one or more of the objectives of audit and adopt techniques and methods required thereof. The specific objective(s) shall be in conformity to the Authority's primary objectives.
2.5 The audit of revenue accounts shall include, inter-alia, ascertaining whether all revenues of the Government have been correctly assessed, realised and brought into account. The collectibility of the revenue accounts and the efficiency of collection system shall also be determined.
2.6 The audit of all expenditures shall include, inter-alia, ascertaining whether die expenditures actually incurred arc:
2.6.1 In accordance with laws, rules and regulations;
2.6.2 Duly authorised under either a special or general sanction accorded by competent authority,
2.6.3 Adequately funded with budgetary provisions and allocations. supported with proper evidence; and
2.6.4 Properly classified and recorded.
2.7 The audit of assets shall include, inter-alia, ascertaining their physical existence, condition, technical specifications and quality, ownership and valuation, and the classification of items comprising the asset accounts; determining their agreement with and the accuracy of relevant records (such as cash records, equipment registers, stock cards, etc.): and ascertaining whether the assets are utilized economically, efficiently and effectively, and adequately safeguarded against loss or wastage through illegal or improper disposition.
2.8 The audit of liabilities shall include, inter-alia, ascertaining whether all claims against the agency under audit have been properly authorised, accurately recorded, promptly reported and included in the annual accounts of the agency; whether payment of liabilities of prior years out of current appropriation, if authorised, impair or adversely affect the operations and planned targets of an agency; and whether all trust and loan agreements, mortgages, encumbrances, and loans guaranteed by the government are complied with and/or fully disclosed.
2.9 The audit of surplus, retained earnings and equity shall include, inter-alia, ascertaining the nature and composition of such accounts, the amount available to cover appropriations for the operational expenses and the capital expenditure of the Government or the agency under audit, and the changes in capital structure during the audit period, as well as the sanctions thereof.
2.10 Audit shall also ascertain whether a
government-owned and/or controlled corporations or government financial institution has
placed its investible funds for the purpose of further attaining its objectives and
strengthening its financial position and viability, and declared and paid dividends out of
its net earnings backed up by cash generated from its operations and not
from loans and grants.
3.1 The focus of audit in procurement of purchases, shall be as stated in the Second Command of the "Kasho", quoted hereunder:
"The Royal Audit must also ensure that all Government purchases, whether made internally or from abroad, have been made in the most economical manner and made only after competitive quotations had been called for".
3.2 The Royal Audit Authority shall accordingly ascertain whether purchases are made in the most advantageous manner in terms of economy, price or cost, quality, quantity and other specifications.
3.3In ascertaining whether value for money is obtained and economy observed, the Royal Audit Authority shall evaluate the procurement system to:
3.3.1 Ensure that quality, quantity and time standards are met and are commensurate to expenditures incurred and the requirements of an agency, and
3.3.2 Prevent irregularities, such as overpricing, overstocking, short deliveries, health hazards, possible losses due to force majeure, obsolescence, deterioration, and other causes etc.
3.4 The Royal Audit Authority shall also ascertain whether agencies observe Government policies, laws, rules and regulations on procurement , especially where competetive quotations are required. In no case shall advance information on agency requirements be given to suppliers to to preclude any instance that will render the tenders non-competetive ineffective and disadvantageous to the Government.
4.1 The general requirement in Government contracts, for the purpose of audit, is briefly stated in the Third command of the "Kasho" quoted hereunder.
"All kinds of government contracts, except in the case of a Royal Command, must be awarded to the deserving parties on the basis of their capability and without favouritism.
4.2 The Royal Audit Authority shall, except in case of Royal Commands, ascertain whether contracts through public bidding, or negotiations are awarded to complying bidders or deserving parties/contractors on the basis of their capability to meet the conditions, terms, specifications, etc. therein; and without any favouritism whatsoever.
4.3 The Royal Audit Authority shall require the submission of the original contracts and supporting documents to determine whether they have been duly sanctioned and approved by competent authority(ies), reasonably priced, executed within the prescribed period and on agreed term.
4.4 The review of contract shall be on a post-audit basis, generally in connection with the post-audit of expenditures. The audit of contract shall not be a condition precedent to the execution, implementation and payment unless so required by the laws, rules and regulations, or ordered by competent authority(ies).
4.5 In the audit of contracts for project works, the Royal Audit Authority shall ascertain whether:
4.5.1 The conditions, terms and specifications of the contracts have been complied with;
4.5.2 Proper and adequate quality control measures have been adopted;
4.5.3 Technical supervision has been satisfactorily exercised; and
4.5.4 Labour has been duly and fully compensated,
5.1 The perspective of propriety and compliance audit is stated in the Fourth
Command, of the "Kasho", quoted hereunder.
"The Royal Audit is also entrusted with the power to check the monthly pay bills, T.A and D.A bills and also check whether gifts, presents and allowances received or made by officials within or to outside are in keeping, with their rank and status. The Royal Audit is also required to check whether cash advances drawn by members of the Royal Family and other officials as travel allowances while on tour for Government/official duties within Bhutan or abroad have been utilized appropriately or not".
5.2 The Royal Audit Authority shall accordingly audit the monthly accounts of agencies and their underlying transactions, including monthly pay bills, TA/DA and other bills to determine whether they are in order with respect to laws, rules and regulations.
5.3 The Royal Audit Authority shall bring up cases of improper expenditures; wastage of Government funds and property; excessive and long outstanding cash advances; expenditures on gifts, presents and allowances beyond authorised limit of rank and status, etc.
5.4 The concerned agency shall immediately take action on audit observations and see that any fund or property misspent, misused or wasted is recovered without undue delay. It shall be the responsibility of the proper agency or authority to file the corresponding cases promptly with the proper administrative body, duly informing the Royal Audit Authority in each case.
6.1 The requirement for submission of audit reports and pertinent documents covering the work done by auditors, is stated in the Fifth Command of the "Kasho" quoted hereunder:
"All audit reports and such other documents with respect to accounts are to be submitted only to His Majesty, the King, or the National Assembly and to no other authority. Also, the type of work and the strength of the auditors with their pay and entitlements must be submitted to me and will be provided for as per my command".
6.2 The Royal Audit Authority shall submit, as provided in the Fifth Command and the Government financial management system. Annual Audit Reports and such audit reports covering the audits conducted by the auditors.
6.3 The Annual Audit Report shall contain the result of the audit of the annual accounts of the Government, the overall financial condition and results of operations of the government, and recommendations to improve the efficiency and effectiveness of the government. The report shall asses whether the administration as a whole has been economical, efficient and effective, in achieving the goals of development plans.
6.4 Auditors shall prepare an audit report for each work complete. The report shall be submitted immediately upon completion of the audit. Timeless of the report shall be strictly observed. In addition, the report shall confirm to specific standards of report content, presentation, language and style.
6.5 The report shall be balanced and constructive presentation of the result of audit. Facts and conditions, including the result of the evaluation of internal control system, shall be accurately, completely and objectively presented. Finding must be adequately supported by evidence and facts.
6.6 The report shall include noteworthy accomplishments of the agency. Matters or issues needing further study and consideration by the agency and other authorities concerned shall be identified and explained.
6.7 The report shall invite attention to the presence of fraud or illegal acts or indications thereof. Such should normally be covered in a separate report and submitted immediately by the auditor to the Auditor General, who shall, in the form of a management letter, take up the matter with the agency heads and officials concerned for action or referral to the appropriate administrative and/or law enforcement authorities, as circumstances may warrant.
6.8 The pan of the report covering the financial operation of the agency shall contain the auditor's opinion on the financial statements, especially whether the statements have been fairly presented in accordance with applicable laws, rules and regulations and whether the generally accepted accounting principles have been applied on a consistent basis. Substantial changes in accounting principles and practices, and exceptions made by the auditor, as well as the effects thereof, should be disclosed.
6.9 The auditors shall also disclose appropriate supplementary explanation and information about the financial statements, monthly and annual accounts, as well as violation of legal or other regulatory requirements, including instance of non-compliance. The materiality and extent of violation or non-compliance should be stated to ensure proper Judgement and prompt action.
6.10 Confidential information may be covered in a separate report. Such information shall not be divulged or released prior to its authorised release, or revealed to other parties not concerned, without the prior clearance and/or approval of the Auditor General or his duly designated representative.
6.11 The audit supervisor shall review the report and the audit working papers. He shall ensure that the auditor has observed the audit standards herein prescribed. He shall identify and resolve with the auditor, parts of the report in which he has some reservations, doubts or exceptions. Thereafter, upon completion of his review and finalization of the report, the auditor and the audit supervisor shall sign on the auditor's memorandum transmitting the report to the Auditor General through his designated representative.
6.12 Audit conferences organised to consider the results of the audit shall be attended by the auditor, the Head of the Division/Department, the Auditor General or his designated representative, depending upon the level of management represented or concerned in the audit conferences.
6.13 Agency management's comments/explanations/evidences obtained in audit replies and audit conferences shall be evaluated and the audit findings revised/settled and dropped at the levels indicated hereunder:
6.13.1 The team leaders during audit and the finalization of the draft report shall have the power to revise, settle and drop any finding. Such action shall be properly documented and submitted to the division head for review and concurrence.
6.13.2 The division head/the designated representative during audit conference and while reviewing the draft report shall have the power to revise, settle and drop any audit finding, and in addition may concur the actions initiated by the team leader.
6.13.3 The department head/the designated representative during audit conference and while reviewing the draft reports submitted by the division head shall have the power to revise, settle and drop any audit finding and in addition may concur the actions initiated by the division head.
6.13.4 In the final review of an audit report, the Auditor General is empowered to exclude or delete from the report matters that are irrelevant, unimportant or of doubtful validity and such other matters that he may deem improper and inappropriate
6.14 The team leader/division head/department head/any designated representative in exercising his powers of revising, settling and droping an audit finding shall pursue sound judgement and ensure that the findings and observations represented are within the bounds of laws and the standards of regularity, economy. efficiency and effectiveness.
6.15 The cost of audit, including the payment of personal emoluments and other entitlements of auditors, shall be provided for in the budget as prescribed in the Command.
7.1 The norm of conduct of auditors in the performance of their audit functions is stated in the Sixth Command of the 'Kasho", quoted hereunder.
"The Royal Auditors and their subordinates while conducting audit must not indulge in any kind of malpractises. They must not accept any bride in the form of gifts and presents while auditing. where travel is necessary for conducting audit, the auditors will receive their daily allowances, travel allowances and porter charges in keeping with their rank and entitlements. Unfair methods used for availing any extra entitlement are strictly prohibited".
7.2 An auditor shall be guided by a set of "Code of Ethics and Conduct" in addition to the standard "Code of Conduct and Ethics" prescribed under Civil Service rules and regulations.
7.3 An auditor shall maintain the highest degree of integrity and incorruptibility in his personal and official actuations, He shall also observe and maintain complete independence, impartiality and objectivity especially in his audit, technical inspection, appraisals, opinion, conclusions and recommendations on matters presented to him for resolution.
7.4 The "Code of Ethics and Conduct for Auditors" that the Auditor General may prescribe and include in an Audit Manual shall be observed by all officers and employees of the Authority. Non-observance thereof shall be a cause for disciplinary action.
As used in the "General Auditing Rules and Regulations", the following terms shall be taken and understood in the sense indicated hereunder:
1. "Auditor(s)" refers to the officers and employees of the Royal Audit Authority, particularly those involved in the audit function of the Authority. In some specific rules herein, the term "Auditor(s)" may include the staff members of the Authority who are involved in non-audit functions.
2. "Agency" refers to any Ministry, independent Commission or Authority, Autonomous and semi-autonomous Government Body, Department, Zonal Administration, Dzongkhag, Annexed Budget Agency, Special Project, Service Centre or institute/institution, Hospital, School or Office, as well as Government-Owned and/or Controlled Corporation/Financial institution, Subsidiary, and any other entity within the audit jurisdiction of the Royal Audit Authority.
3. "Audit" is the systematic and analytical examination of all transaction, accounts, operations and reports of Government agencies, instrumentalities and entities receiving, managing and utilizing government resources, or executing government programmes and projects, for the purpose of ascertaining proper accountability and responsibility in Government, and recommending improvement thereof. It comprises (1) the examination of documents, activities, funds, property and other resources (2) the audit of transactions, accounts, and accountabilities, as well as (3) the evaluation of compliance and performance, including the economy, efficiency, and effectiveness of personnel management and other management systems, practices and operations, decisions and policies; and (4) the settlement of balances or accounts by determining the adjustment of accounts among different agencies/parties and establishing final accountability therefore. However, the enforcement or implementation of the final accountability thus established in audit shall be the responsibility of the agencies/parties concerned.
4. "Resources" refers to funds, property and other actual and contingent assets of an agency, such as cash, letters of credit and other instruments representing or convertible to money, receivables, furniture and equipment, supplies/materials or stores, land, buildings, court and guaranty/security deposits, and the hike.
5. The terms "fund", "Internal Control", "Excessive Expenditure", Extravagant Expenditure", "Irregular Expenditure ", "Unnecessary Expenditure", "Grant" or "Aid" "Loan" or "Borrowing", "letter of credit", and "Other receipts" shall be taken and understood in the same sense as they are defined in the Financial Manual.
