SPEECH
OF AUDITOR GENERAL AS THE CHIEF GUEST AT
THE INAUGURATION OF THE TRAINING
WORKSHOP ON COMPLIANCE WITH THE PROVISIONS OF THE COMPANIES ACT OF
THE KINGDOM OF BHUTAN 2000
ON
JUNE 13TH AND 14TH 2005
SPEECH OF AG AT
THE INAUGURATION OF THE TRAINING WORKSHOP ON COMPLIANCE WITH THE
PROVISIONS OF THE COMPANIES ACT OF THE KINGDOM OF BHUTAN 2000 ON
JUNE 13TH AND 14TH 2005
Dashos, Aums, distinguished company
secretaries, executives and participants,
Ladies and gentlemen,
I am indeed deeply honoured to be here
this morning in your company. It is a rare occasion to meet a galaxy
of executives, company secretaries and officials of the corporate
sector. I would therefore like to thank the Director General,
Department of Industry and the Office of the Registrar for your
thoughtful invitation.
The Companies Act makes us responsible
to maintain a panel of firms of chartered accountants. We also are
responsible to conduct audit of the government and joint sector
companies. I vet most of the reports that are issued. Thus I
closely watch the working of the government and the joint sector
companies in particular.
I believe we have only 75 functioning
companies. But only 15 that are listed. We all agree therefore the
corporate culture is a recent phenomenon. The society increasingly
expects the companies would make the big difference in the national
economy.
Obviously, a vibrant economy is one
where the corporate sector plays the lead role and sets the
direction. Not the other way round. We tend to be too dependent,
less risk taking and habituated in receiving hands down. Having said
so, yes the government must increasingly play the role of a willing
facilitator. It must cut down red tape where possible.
But sadly the corporate and the
private sector are becoming more bureaucratic than the bureaucracy.
Customer is irrelevant to a company as long as they profit. But how
can a company sustain if disinterested in winning over the
customers. Another thing, the quality is a strange concept when it
has to be the hallmark of management philosophy for progress and
growth.
For most, future of a company is
secondary as long as the immediate personal needs and wants are
being satisfied. Employees are treated as a burden rather than a
factor of production and to be taken care of well. The interest of
the company is secondary to the other immaterial priorities of the
management and the boards.
I dare say that there are only a few
dynamic and well functioning boards in Bhutanese companies. If a
company is faring well it is more so because of the monopoly
privilege, unlimited subsidies etc. less so through the efforts,
initiative and innovation of the managements. It was no surprise
that the financial institutions survived on the killing interest
rate they levied on the helpless customers and at the cost of the
shareholders. It is time the government and the society and the
companies to have clear understanding on the cost of social
obligations vis-à-vis the commercial objectives. One should not be
confused and used for non delivery of the other.
We have Boards with members who have
no commitment in the growth of a company. We have some boards manned
by persons with known conflict of interests. Thus in most cases
wishes of the chief executive, often have the field day.
Ladies and Gentlemen,
I am happy that the Ministry of Trade
and Industry is taking measures to introduce the culture of the
corporate way of doing business. Let us through the examples
that each one of you set in your corporations hope to make the whole
country a Bhutan incorporate.
In order that such a vision becomes a
reality, we need the government to free itself from the daily
management of the companies. Government should where possible
concentrate only on policy formulation and creation of an enabling
environment- where sincerity and hard work flourish and the cheats
and crooks will have no place.
Let the Ministers and secretaries be
out of the Boardrooms. Let them be responsible to hold or make
companies accountable. So must the other non-functioning board
members. Board meetings should not be held only as mere formalities
but to resolve tough managerial issues and set higher goals and
performance. Any member, who does not contribute towards the
progress of a company and its interest, should be voted out. On the
other hand, the price for effective participation on the boards must
be compensated with remuneration commensurate to the
responsibilities to gain their sincere and devoted commitment to the
company.
Let bureaucratic and incompetent
senior executives be replaced by the professional and dynamic
persons. Many managers who had not made any impact making
performances be replaced. Most rewards in companies must be
productivity based and linked as against gradation and seniority.
Irony in corporate sector is that we
have some loss making companies with prosperous employees. One gets
puzzled. Whether the executives were rich before they joined a
company, which now is a sick company. Or a company became sick as
the employees became rich. It is sad if an employee amasses wealth
at the cost of a company that ultimately languishes instead of
prospering. In such cases we need to know whys and hows.
A rich company with rich employees is
something to be admired but a persistently loss making company with
rich employees is a thing to be seriously concerned.
We also observe shareholders who do
not know about their shares and companies, which do not have proper
records on shareholders. It is interesting. Dividends are not
declared and when declared they are not paid out timely. We are
increasingly concerned especially about the interest of the minority
and public shareholders.
Statutory audit reports of Government
owned and government-controlled corporations still invariably report
such instances of the nature of non-compliances.
I must reiterate here that
non-compliance of any Act or statute, in your case the companies
Act, is a serious offence. Non-compliance is not only a violation of
national laws, it costs in terms of indecisions and lost
opportunities to companies and stakeholders.
Most companies resist having effective
internal control system. Auditors are taken as interferences not as
essential feedback mechanism. We had cases where audit was ridiculed
and while their internal control system was non-functioning to the
extent the criminal operation went undetected for a long period.
Companies openly disregard the laws,
rules and directives as irrelevant and insignificant. I believe this
fact was even more evident to the auditors. A few days ago in this
very hall chief executives of government corporations, one after
another, had cried foul of all controls including the Companies Act.
Some of those chief executives did not
realize that for their callous attitude business slipped away under
their own noses. Employees ran scam operations as if it were their
daily chores. Executives from these companies do not enjoy any moral
authority, to comment on the merits and demerits of auditing and
controls, checks and counterchecks.
Some write in the Kuensel if a single client pay
tomorrow the whole issue of the outstanding would be resolved.
Problem here is that the client did not bother to clear. Management
had not shown enough concern to pursue. The responses and reactions
are only attempts to deflect the sting of audit.
I would also wish to with your
permission a make a few specific remarks on some of the issues
raised by the top executives.
The accounting standard was a felt
need. We could not agree less. We hope that the Ministry of Finance
has made some progress. The MTI and RAA shall take up once again
with them.
On the issue of performance of
statutory auditors, do tell us if a statutory auditor fails to
perform. We intend to follow up with each company to really
understand the situation.
As to the need for a
harmonized approach to auditing, the RAA does not have any objection
to the concurrent auditing. Provided it is acceptable to a company.
We would request ROC/MTI to advise which companies would prefer such
an arrangement. It must be born in mind
however the
multiple auditing, in no way, would undermine the professional
credibility of any institution as long as the certain norms guiding
the respective profession were upheld.
We are happy to note that the
companies are willing to pay the chartered accountants higher
remuneration than what RAA has fixed. Companies are also willing to
host statutory auditors for a longer period. We shall review the
matter at the earliest and intimate an appropriate decision.
The RAA is cognizant of the fact that
accounting is gaining sophistication and complexity. Thus in due
course of time we shall apply ICT and IT Auditing tools to detect
such incidences perpetrated by corporate employees.
Friends,
I am happy knowing from the briefing I
had received from Karma that things are going to be different.
There is light at the end of the tunnel for the corporate sector of
Bhutan.
As a proverb says a chain is strong as
the weakest link in it. The particular link I am talking is the
company secretaries. This link was missing in the companies. In some
companies out of ignorance, in some, management did not want any
restraints imposed on themselves, and yet in a few, they could not
afford.
Most of you are now that link. We
therefore, look up to each one of you to take up the challenge of
building the Bhutan incorporate.
Therefore this Training Workshop
targeted for Company Secretaries, and others and with the employment
of trained company secretaries there will be improvement in
compliances. We expect accordingly more business and commerce will
be carried out "in a lawful manner."
The Corporate Governance receives increasing
attention worldwide. The added and positive initiatives of the
Ministry through a series of workshops to promote better corporate
governance are a laudable effort. As Bhutan attracts foreign
investors a strong corporate governance culture is a must. More so
as we become closer to becoming the member of WTO.
I commend the good works of the
Registrar of companies in particular your Compliance checklist and
compliance calendar. We have included these as additional
requirement for the statutory auditors to review compliances.
For full realisation of the benefits of globalization
we need to grow big, bigger and bigger to be competitive. We must
learn to abide by laws and play by the book. Also the corporate
Bhutan must contemplate not to confine itself only within the
boundaries of our country. It must look out beyond Bhutan as its
playing field.
We must aim to take the presence of the Bhutanese
companies into the world- first into the region and then the world.
To be able to do that company need to put on extra muscle. Begin to
learn to work together and work with each other. Above all learn and
work on trusts.
With this as I conclude here, on
behalf of the Royal Audit Authority and on my own, I would reassure
our support in your endeavor to strengthen and build an ideal
corporate culture in our Kingdom.
May I most respectfully wish you all a
fruitful and meaningful workshop?
Thank you for the invitation and thank
you for listening.
