International standards on auditing adopted

AASBB: While 33 companies and financial institutions both listed and state owned, have adopted the Bhutanese Accounting Standards (BAS), derived from international financial reporting standards (IFRS), there is a dearth of auditing these standards.

IFRS is a global language for business affairs to make the company accounts understandable and comparable across boundaries. It was launched in 2012 and being implemented in three phases. By 2021, it is expected that all companies including the small and medium enterprises are compliant with it.

In BAS, the declaration of assets, dividend and income tax is transparent leading to more disclosure of information. Earlier, financial statements were prepared using generally accepted accounting principles, widely used in India, because auditors were from Indian chartered accounting firms.

The General Secretary of Accounting and Auditing Standard Board of Bhutan (AASBB), Sonam Wangdi said that while financial reporting was done in international standard such as the IFRS, it is imperative that audit of these financial statements were also done with international standard.

To this effect, the AASBB adopted the International standards on auditing (ISA) to ensure that financial auditing of companies’ meet international benchmark.

The International Federation of Accountants (IFAC) issued the ISA standards and there are about 38 standards that take care of quality control and ethical standards of the auditors.

Auditor general and chairman of the AASBB, Dasho Ugen Chewang said adoption of such standards would enhance credibility and accountability.

The adoption of standards, he said was timely since the nation is inviting foreign investment and that it would create interest and confidence among the investors.

Since IFRS is a globally recognised standard for reporting, Bhutan will have the advantage of credibility and acceptance for financial reports of companies.

According to the proposal for adoption prepared by the AASBB, Bhutanese financial reporting system will accord to best practices around the world. These practices will add credence to and reliability on the financial reports and create a conducive environment to domestic and foreign direct investments.

An amendment to the Act was required to legally recognise ISAs as an authoritative auditing standards in Bhutan.

The Companies Act states that an auditor shall conduct the audit in accordance with the generally accepted auditing standards.

However, the Parliament has amended the Companies Bill and this allows the auditor to conduct the audit in accordance with the auditing standards prescribed by the Accounting and Auditing Standards Board of Bhutan.

General secretary Sonam Wangdi said that in absence of such standards, the accounting and auditing practices somehow remained unregulated, besides lack of professional and ethical standards for auditors.

By Tshering Dorji

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