PERFORMANCE AUDITING FOR ISLAMIC BANKS

Muhammad Akram Khan
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Muhammad Akram Khan: Deputy Auditor General, Department of the Auditor General of Pakistan, Postal: Pakistan, Islamabad

Islamic Economic Studies, 1997, vol. 05-1, 23-37

Abstract: Although the Islamic finance is making continuous progress, yet the Islamic banks still face criticism from keen observers that they have adopted such techniques of financing which closely resemble interest-based finance. The difficulty with Islamic banks is that they feel hesitant to adopt profit-loss sharing in the contemporary environment. They are afraid that their clients may misreport or mismanage their funds leading to large-scale losses. Being trustees of public funds they think the risk in profit-loss sharing is very high. In this situation, development of appropriate accounting and auditing standards is the need of the day. Performance auditing, being a recent expansion in the scope of auditing holds a promise. The paper introduces the concept of performance auditing and shows how the Islamic banks can use it to their advantage. The paper also proposes a set of strategic measures for the Islamic banks to put performance auditing in practice.

Date: 1997
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