Frequently Asked Questions

Q 1. What are the immediate benefits of adopting and implementing ISSAIs?

Well, the benefits of adopting and implementing ISSAIs is not something that can happen overnight or in immediate terms. It will take its own course depending on the intensity of strategies and approaches adopted to implement ISSAIs in our daily course of auditing and reporting. There may be a need for initiating several reforms and harmonisation of our existing audit methodologies and practices to make it more ISSAIs compliant. The impact of implementing ISSAIs are very subtle and entrenched in the processes, and implementing it in letter and spirit is expected to contribute towards enhancing quality, building professionalism and credibility of the audit institution in the long run.

Q 2. It should be the responsibility of Accounting and Auditing Standards Board of Bhutan (AASBB) to come out with accounting and auditing standards? From where does the RAA draw that mandate to promulgate or adopt auditing standards?

AASBB’s mandates amongst others, is to promote high quality financial reporting standards that are consistent with international best practices, and auditing standards for private sectors as per the Companies Act of the Kingdom of Bhutan. The RAA is the Supreme Audit Institution of Bhutan that has the authority to establish auditing, reporting standards and practices that will meet the highest auditing and reporting standards in the country (Section 56 of the Audit Act of Bhutan 2006).

Q 3. What is ISA? How is ISSAI different from ISA?

ISA stands for International Standards on Auditing issued by International Federation of Accountants (IFAC) through the International Auditing and Assurance Standards Board (IAASB). ISA is professional standards particularly developed for the performance of financial audit of private sectors. Whereas ISSAI is developed as professional standards for public-sector auditing (Financial, Performance and Compliance Audits). However, in the case of Financial Audit, the ISSAIs is just an extension of ISA with practice notes designed for public-sector auditing.

Q 4. What is applicable financial reporting framework? What is this framework in Bhutan?

It is the framework adopted in the preparation of the financial statements. Some of the globally accepted financial reporting frameworks are International Financial Reporting Standards (IFRS) and International Public Sector Accounting Standards (IPSAS). The AASBB has adopted IFRS as accounting standards for preparation of public company financial statements in Bhutan and named as Bhutanese Accounting Standards (BAS). For audit of public sector in Bhutan, the acceptable financial reporting framework in terms of ISSAI is Financial Rules & Regulations which is prescribed by law.

Q 5. What are the deficiencies in your existing RAA’s Auditing Standards?

The public-sector auditing profession in Bhutan has evolved over the period of time responding to growing complexities and technological advancement in the conduct of business operations of audited entities. The existing RAA’s Auditing Standards is no more relevant and responsive enough to gauge the evolving auditing practices. In fact, the existing Standards was also adopted from the old INTOSAI’s Auditing Standards which now in its newest form is called the ISSAIs.

Q 6. Why don’t the RAA adapt ISSAIs and come out with your own revised sovereign auditing standards?

There are several reasons for the Authority to consciously decide for adopting the ISSAIs as it is. Firstly, developing and promulgating our own national auditing standards would require necessary technical skills and professional expertise which is not only lacking in the country, but also scarce in the public-sector audit fraternity world-wide. Secondly, it would entail enormous resources to invest for continuous researches, which is practically daunting and resource-intensive tasks for resources crunch country like Bhutan to afford. Thirdly, there is no added value to reinvent the wheel when ISSAIs which are supposedly the standards that reflect the experiences of many SAIs around the globe and it has culminated after lots of thinking and continuous research put in by the INTOSAI Professional Standards Committee. Fourthly, the ISSAIs provide a freedom to apply our own professional approach in accordance with our national laws and regulations. The applications of ISSAIs requirements are subservient to our national legislations and statutes. In fact, in application, we are basically adapting the ISSAIs as we are required to comply only with relevant principles and requirements. Fifthly, ISSAIs would provide greater confidence particularly to the international clients and donor agencies. Lastly, the RAA as a member SAI for INTOSAI, there is no professional fees charged to adopt ISSAIs as our authoritative auditing standards. So, it is cheaper and most feasible option to adopt as it is.

Q 7. How much resources would the RAA required in adopting and implementing ISSAIs?

Well, the resources will be required to train auditors to conduct ISSAI complaint audits, harmonizing existing audit methodologies and practices, and developing ISSAI compliant audit methodologies on continuous basis. However, these resources would even otherwise be required to cope up with evolving audit methodologies and practices if we are following standards different from ISSAIs.

Q 8. In the event of ISSAI requirements conflicting with our national legislation(s), which one should prevail?

Of course, in such conflict, the ISSAI requirements would be considered null and void, and by which we are still compliant to ISSAI as it seeks for compliance only with its relevant principles.

Q 9. What does the ISSAI provides for auditing government policies?

It is a very delicate issue confronting all SAIs around the world, and it may be appropriate to discuss here in detail as such concern was also raised in many forums in Bhutan. ISSAI is the professional standards that will not determine what the SAIs can audit or what cannot be audited. It will just provide a benchmark or standard for auditing and reporting functions of SAIs provided by their specific legislation or mandates. However, the ISSAIs also reflects some of the auditing practices world-wide, and it records that except when specifically required to do so by legislation, SAIs do not audit government or public entities policy but restrict themselves to the audit of policy implementation. But, it may not necessarily imply that we cannot audit the basis of policy formulation if it doesn’t yield the desired impact.

In the case of RAA (SAI Bhutan), the Audit Act of Bhutan 2006 is silent on this delicate issue – whether the Authority can audit government policies or not? Inferences from the general auditing practices globally indicate restriction on auditing or commenting on government policies if not specifically provided by the legislation. In the absence of direct stipulation in the Audit Act, it may be worthwhile to reflect on the provision of Section 42 (d) of the Audit Act. It provides authority to the RAA to develop investigative auditing procedures designed to increase the likelihood of detection of fraud and corruption. So, what does this particular provision actually implies? Questions to be asked to ourselves, how do we check on the occurrence of policy corruption (if one cannot comment on policy)? How do we audit without fear, favour or prejudice? How do we maintain the independence of the Authority in true spirit of the Constitution of the Kingdom of Bhutan? How do we promote transparent and accountable public operations? These are some of the tricky issues confronting the Authority. But we are very clear in our mandate, i.e., to promote good governance through auditing and reporting without fear, favour or prejudice.

At the end of the day, it may also be important that we find the balance without actually breaching the sacrosanct provision of the Constitution of the Kingdom of Bhutan. Because the policy makers, legislatures and executives are also our primary stakeholders, and we exist to add value to their decision-making process.

Q 10. How many SAIs in the INTOSAI region have adopted and implemented ISSAIs?

While this appears to be a very good question, unfortunately such information seems to be lacking owing primarily to the initiatives having started only in recent times. ISSAIs framework was endorsed in 2010 through South Africa Declaration. Its implementation initiatives started globally only in 2012 through ISSAI Implementation Initiatives (3i) Programme – Phase I steered by the INTOSAI Development Initiatives (IDI).

However, as inferred from various discussions happening in the international forum of public-sector audit community, not many SAIs have implemented it, but many agrees that implementation of ISSAIs would add value in their audit works. Therefore, the small SAI like RAA assuming a lead role in taking forward its implementation has lots of advantages and stake on the credibility of the Authority. It provides an opportune time to display an exemplary role motivated by our urge to improve delivery of quality audit services that adds value and benefits to the citizens. The RAA by its smallness in size and strong conviction of its top leader has the advantage in terms of flexibility and making things happen with lesser effort. In moving forward with its implementation, we expect to raise another bar in our credibility and reputation rating in the public-sector auditing fraternity world-wide.

Q 11. ISSAIs covers standards only for financial, performance and compliance audits. What standards would the RAA follow for conducting investigations or other review functions?

The standards befitting to the functions or prudent practice accompanied with exercise of professional judgement should govern the conduct of investigations or other review functions as deemed appropriate.

Q 12. Does the RAA has sufficient mandate to carry out all types of public-sector auditing as defined by the ISSAIs?  

Article 25(1) of the Constitution of the Kingdom of Bhutan stipulates that “There shall be a Royal Audit Authority to audit and report on the economy, efficiency and effectiveness in the use of public resources”. Further, Section 38 of the Audit Act of Bhutan 2006 provides the function of the Authority to carry out financial, propriety, compliance, performance, special audits and any other form of audits that the Auditor General may consider significant and necessary. Hence, the Authority has sufficient mandates to carry out all types of public-sector auditing.

Q 13. How would the actual implementation of ISSAIs happen in your daily course of auditing and reporting?   

ISSAI per se is just a professional standard that provides an essential guide to the auditors in executing their duties of auditing and reporting, and a yardstick to the stakeholders and alike to gauge the performance of the RAA. It will be put into audit practice through our own auditing approaches and methodologies complying with the requirements of the ISSAIs. Therefore, we have our own audit manuals and guidelines which may require some harmonisation to seek full compliance with relevant principles of ISSAIs.

The ultimate aim is to see that we can state in our audit reports that we have conducted our audit ‘in accordance with the ISSAIs’. This statement in our audit reports would carry immense intrinsic values in defining the professionalism and credibility of the institution.

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