Companies Act of Bhutan, 2016,

In the past five years, the unresolved financial irregularities have kept increasing as per the annual audit report (AAR) 2020, conducted by the Royal Audit Authority (RAA). According to the report, unresolved irregularities in 2020 stands at Nu 2,051.23 million (M), an increase of 44.95 percent compared to the irregularities of 2019.

Shortfalls, lapses and deficiencies account to Nu 1,574.24M, followed by non-compliance to laws and rules with Nu 408.86M. Mismanagement accounts to Nu 42.76M, fraud and corruption misused Nu 18.33M, and embezzlement involve Nu 7.83M.

Under the non-budgetary agencies, Bhutan Development Bank Ltd. had irregularities amounting to Nu 311.02M, followed by Royal Insurance Corporation of Bhutan Ltd and Bank of Bhutan with irregularities of Nu 183.44M, and Nu 160.44M, respectively. The report cited that the significant increase of lapses for the non-budgetary agencies was due to a huge portion of non-performing loans.

RAA officials said that auditing was a continuous process and it would be difficult to tell when to subside irregularities. The lack of timely response to the audit report aggravated the irregularities, as per the officials.

 (Source: Kuensel, July 13, 2021)

Why do you think the non-budgetary agencies have failed to respond to the RAA’s audit report on time? Explain TWO reasons. ( 10 marks  )With reference to the Companies Act of Bhutan, 2016, suggest THREE changes in the regulatory framework mechanism of non-budgetary agencies, which could have ensured that these agencies are prompt in their response.                                                                                                          (15 marks)