Audit Profile

Royal Audit Authority Bhutan

(A clean public services - Nation's Pride)

Country Focus - Bhutan


The Kingdom of Bhutan, a landlocked country is peacefully cradled in the heart of the great Himalayas. Bhutan has an area of 46,500 sq. km. It is mountainous with vast rugged mountain ranges on all sides, separating it from its neighbors the hill districts of the Indian State of Sikkim, West Bengal, Arunachal Pradesh, Assam borders on the south, east and west of the country and on its north lies the Tibetan autonomous region of China.

With the launching of the First Five Year Plan in 1961, Bhutan decided to come out of the isolation and decided to open its door to the outside world.

Bhutan at a glance:

Country:    Bhutan
Capital:     Thimphu
State:       Mahayana
Religion:   Buddhism
Language: Dzongkha
Currency:  Ngultrum
Economy: Agrarian

Background information about the SAI of Bhutan.

Evolution of the audit system in Bhutan.

Bhutan consciously adopted an efficient and effective financial management system to support and enhance its development plans from the very inception of the development plans. The financial management system stressed on the accountability of resources, effective evaluation and reporting for appropriate decision-making. The audit organization was reposed with the responsibility of evaluating and reporting on the economic and efficient management of scarce resources of the Royal Government.

As early as 1961, the 16th National Assembly proposed the establishment of an audit system. In response to the need for establishing accountability, the Royal government issued the first edition of the Financial Manual (FM) in 1963. The manual provided for the organization of the Development wing of the government and the Accounts and audit for the development wing.

The audit and Accounts organization maintained the books of accounts, conducted budgetary controls of revenues and expenditures and undertook periodic audit and inspections of accounts and records.

The 31st National Assembly voted in October 1969 for the appointment of Royal Auditors to conduct the audit of accounts and records of the Royal Government. Consequently, four Royal Auditors were appointed on 16th April 1970 under a Royal Ordinance (KASHO) The ordinance defined and authorized the jurisdiction of the then Royal Audit Department as primarily responsible for the audit of accounts of the Ministry of Finance, all other Ministries, the Royal Bhutan Army, the Royal Bhutan Police and the His Majesty’s Secretariat.

In 1974, the financial management system was restructured. The FM 1974, acclaimed under the 29th resolution of the 34th Assembly placed the Royal Audit Department under the Ministry of Finance. In 1985, the audit service was restructured as an autonomous entity and named as the RAA. The issuing of the FM 1988 further strengthened the financial management system. Subsequently, in 1989, the General Auditing Rules and Regulations (GARR) were issued properly defining the roles and responsibilities of the Royal Audit Authority (RAA). The latest Kasho (Royal Edict) of March 2, 1999 further reiterates the independence of the RAA.

Organizational Structure

An effective audit service necessitates an appropriate organizational structure to operationalise its mandates and to be responsive to the demands of the overall structure of the government. For this purpose, the structure of the RAA consists of two hierarchical levels of management as follows.

  1. Executive: includes the Auditor General
  2. Operational: Divisions, which includes the Sections Audit Teams and Units

For the operational management, the RAA is divided into nine Divisions.

A Division Chief at the rank of an Assistant Auditor General heads each Division. Eight Divisions are responsible for auditing and one looks after the Administration and Finance of the RAA. There are 146 employees working for the RAA.

Scope and Jurisdiction

The GARR mandate the RAA to carry out any type of audit, as it may deem proper. Presently the RAA conducts financial and compliance audits of about 400 agencies including externally funded projects, Government and joint sector corporations, financial institutions and non-government organizations.

In addition special investigations and special subject reviews are also carried out for selected agencies as required from time to time.

The main office is in the capital, Thimphu. The only regional office is in Samdrupjongkhar that is located in the southern part of Bhutan.

Audit mandates

The canons of auditing are contained in the six Royal Commands issued by His late Majesty, the King. The GARR 1989 stipulates that the RAA in executing audit functions shall conduct:

  1. Comprehensive audits;
  2. Financial and compliance audits;
  3. Performance audits; and/or
  4. Any other form of audit as it may deem proper.

Audit reports as per GARR shall recommend measures to improve economy, efficiency and effectiveness in government operations. Chapter 5, of the FM 1988 also stipulate that as a part of the budget accountability phase the RAA has the responsibility to report whether the agencies are ensuring economy, efficiency and effectiveness in the operations of the government.

The Roles and Responsibilities of the RAA

The Royal Decree 1970, The GARR 1989, and the FM GARR 1989, and the FM 1988 delineate the roles and responsibilities of the RAA. As indicated in the GARR, audit shall be primarily directed towards enhancing Government accountability.

In pursuance thereof, the RAA’s function are to :

Conduct audit in accordance with laws, rules regulations of:

Reporting system

One of the major functions of audit is to provide report by consolidating the facts and figures observed during audit along with criticisms, comments and recommendations. Generally, audit findings are reported in the following phases.

Preliminary Report/Memos

The preliminary reports/memos is made available to the audited entity after concluding the audit work. The report contains detailed description of audit observations and actions to be taken on the observations. These observations are discussed in the Audit Exit Conference normally presided over by the division Chiefs. Where there are serious and significant issues, the auditor General attends such exit conferences. Observations are dropped and treated as settled where satisfactory explanations and evidences are provided during these conferences. The management of the audited entity is given a period of three months to responds to the unresolved observations during the audit exit conference.

Final Report

The Final report is prepared after discussions are held between the Auditor General/Division Chiefs with the management of the audited entity. The report incorporates the replies and justifications provided by the management of the audited entity and further recommendations of the RAA. Generally, the final report is addressed to the head of the audited entity but where there are issues of serious nature like misappropriation, the copies of the report are submitted to the Royal Civil Service Commission, Ministry of Finance, Cabinet Secretariat, High Court, Department of Legal Affairs and the His Majesty’s Secretariat. The Royal Civil Service Commission and the Department of Legal Affairs prosecute the defaulters in the court of law. RAA may act as observers in such prosecutions.

IT in the RAA

Local Area Network

RAA has installed a local area network (LAN) within the Authority itself. 38 computers and 13 printers are currently linked using a 100Base TP backbone, 4 hubs and an Ethernet switch. Two servers have been installed for reliability and load sharing. The servers are running Windows NY® and the client computers are operating with Windows 97

Audit Information Management System (AIMA)

AIMS is written using Microsoft Access and is a comprehensive system for maintaining and administering audit reports. The system operates on the Local Area Network and is entirely multi user, which allows any auditors to access and enter the date at the same time.

The functions of AIMS is:

The system maintains three main types of date:

Audit Data

Information regarding each audit that is to be, or has been, performed by the RAA. The basic data includes the dates the audit reviewed, the type of audit the agency in which the agency was performed, the names of the audit team and a chronology of events (including their estimated and actual dates) that occurred.

Observation Data - In addition to the “basic” audit data above, information is also maintained on each observation (or “Para”) that was made during the audit. For each observation, data is maintained on who was accountable, the individuals’ immediate supervisor, both the accountable and non-accountable loss realised, and a categorised identification of the observation. The observation identification will allow the RAA to be able to create statistical information on the frequent problems found within the Government. This has forced the RAA to undertake an exercise to identify and organise common problems found in audits and to devise a scheme for categorising them

Recovery Data

After an observation has been made against an individual and unaccountable loss has been realised, the information system assists in the management of the recovery of that loss. Whenever a settlement is made, the details of the settlement are recorded and the balance against the individual is adjusted. The ability to quickly ascertain a person’s balance will substantially decrease the time required for the RAA to provide the “audit clearance” as required by the Royal Civil Service Commission.

Future Efforts

Various activities have been initiated to enhance the quality of work of the Auditor General and improve performance of the employees of the RAA

Performance Auditing

The RAA had since now carried out only regularity/propriety audits. Attempts are being made to enhance the practice of such audits in recent years by creating a division to look after the Value for Money and Environmental Audit wing.

Besides, the RAA is also publishing various Manuals to guide the Auditors such as Manual on audit of Contracting Process, Manual on Audit Planning etc.

Audit Act

The audit Act of the Kingdom of Bhutan is in the final draft waiting to be placed in the National Assembly during its next session for approval. With the passing of the Act, the RAA will ensure greater effectiveness and promote efficiency, transparency, and accountability through increased independence. The RAA will also assist the Department of Legal Affairs in drafting an Anti Corruption Act.

Auditing Standards of Bhutan

The RAA has initiated and drafted the Auditing Standards of Bhutan. The Standard is expected to guide the auditors and make the audit reports uniform and professional. The Standard incorporates most of the INTOSAI guidelines so that it is in accordance with the International Auditing Standards.

International Relations

The RAA is a member of the International Organization of Supreme audit Institutions(INTOSAI) and Asian Organization of Supreme audit Institutions (ASOSAI). It participates in training workshops and conferences organized by these organizations to make best use of knowledge and skill imparted through exchange of views and ideas etc.

For more information, contact :

Auditor General of Bhutan,
RAA, Thimphu, Bhutan
Post Box: 191

E-mail Address: Kwangdi@Druknet.netbt,
Telephone: 975-2-322388,s
Fax: 975-2-323491,
PABX No. 975-2-322111, 322388.