Since late 1990s, the RAA began Performance Audit which is also known as three Es audit –Economy, Efficiency and Effectiveness . Performance Audit refers to a theme based and cross sectoral performance audit of particular subject or schemes or programmes to effectively address the issues of economy, efficiency and effectiveness in the use of public resources. Through performance audits, it examines whether the agencies are doing the right thing in the right and least expensive way. The process not only looks at ‘what has been done’ but also ‘ what has not been done’ to achieve the Organizations’ ultimate objectives.
The mandate to carry out performance audit is derived from Article 25.1 of the Constitution of the Kingdom of Bhutan which provides that “there shall be a Royal Audit Authority to audit and report on the economy, efficiency and effectiveness in the use of public resources”. The Auditor General of Bhutan is vested with discretionary power in deciding how, what and when to conduct such audit and submit report during the Summer Session of the Parliament.
Compliance and Regularity Audits
The compliance and regularity audits are conducted to assess whether the activities of public sector entities are in accordance with the relevant laws, rules and regulations and policies governing such activities. To be more specific, it involves auditing to what extent the agencies follows rules, laws and regulation, budgetary resolutions, plans and policies and established codes, or agreed upon terms, such as the terms of a contract or the terms of a funding agreement. Its findings form a part of the financial audit report and the significant unresolved issues are included in the Annual Audit Report.
The objective, scope and nature of compliance audit is derived from the Constitution and the Audit Act of Bhutan, as well as laws and regulations that are relevant to the audited agencies.
The RAA conducts financial audits at two tiers, one at the national level, the consolidated Annual financial statements of the Royal Government and the other at the individual agency level. These audits are conducted primarily to access the true and fair view of the financial operations as presented in the financial statements. Besides, the RAA also conducts the financial audits of the donor assisted projects. Amongst others, Section 38 of the Audit Act of Bhutan 2006 mandates the RAA to carry out financial audits.
The RAA conducts propriety audits of the Government owned corporations as mandated under Section 38 of the Audit Act of Bhutan 2006, to examine whether actions and decisions taken are in public interest. More specifically, it invariably brings out cases of improprieties, wastages, irregular expenditure, unethical practices, expenditure exceeding the limits of what is appropriate, just and reasonableness etc. Such audits also have significant impact on the effectiveness of public expenditure.
The RAA conducts special audits when commanded by His Majesty the King or as directed by the Parliament. Special audits can be either investigative, compliance, propriety or performance audits depending on the directives. Special audits though not conducted frequently usually prove to be very effective in terms of timely actions and remedial measures taken in ensuring systematic and effective management of resources and delivery of services.