 Integrated Internal-External Shariah Audit Model: A Proposal towards the Enhancement of Shariah Assurance Practices in Islamic Financial InstitutionsZurina Shafii (),
Ahmad Zainal Abidin () and
Supiah Salleh ()
No 1436-7, Working Papers from The Islamic Research and Teaching Institute (IRTI) Abstract: Shariah Governance and audit is one of the vital elements of corporation as it promotes principles of accountability, transparency and Shariah assurance of IFIs to the stakeholders. In addition to the clear structure of the organs of Shariah governance namely the Board of Directors, Shariah Committee and the Management, an Islamic Financial Institution (IFI) must ensure the Shariah compliance function to be carried out through the Shariah review and Shariah audit functions. The studies conducted on the practice of Shariah review and audit in the jurisdictions adopting Islamic finance revealed that both functions are conducted inconsistently. Many jurisdictions are yet to offer independent Shariah assurance as they only managed to perform Shariah review function. Shariah review serves as compliance function that provide review to the management on the state of IFIs’ Shariah compliance. Shariah audit, on the other hand, is an independent exercise that aims to examine the effectiveness of the internal control for Shariah compliance within the organization. Both of the functions serve as the Shariah assurance mechanisms that ensure robust practice of Shariah-compliant activities. This study identifies the practice of Shariah audit among GCC countries, namely Bahrain, Saudi Arabia, Kuwait, UAE and Qatar and in Islamic Development Bank’s member countries where Islamic finance is adopted as part of the mainstream finance, i.e. Sudan, Pakistan, Indonesia and Malaysia. Upon identifying the practice of Shariah assurance mechanisms, this study develops a model for Shariah audit that integrates the internal and external Shariah audit function. This study identifies the scope of Shariah audit that is to be performed by internal Shariah auditors and external Shariah auditors. In order to formulate the integrated internalexternal Shariah audit model, this study qualitatively analyses the arguably the most comprehensive guideline on Shariah governance Framework issued by Bank Negara Malaysia in 2010 and other guidelines issued in jurisdictions practicing Islamic finance that forms guiding principles for Shariah audit conduct. For the external Shariah audit function, the study refers to the standards that are applicable to Islamic financial transactions issued by the International Financial Reporting Standard (IFRS). This study is useful for policymaking in the jurisdictions that offer Islamic finance, with relation to Shariah assurance mechanisms, especially on policies related to Shariah audit conduct. The integrated model of internal-external Shariah audit will promote efficiency and effectiveness of Shariah audit practice in IFIs. Keywords: Shariah assurance; Shariah audit; Integrated Shariah audit model (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:ris:irtiwp:1436_007 Access Statistics for this paper More papers in Working Papers from The Islamic Research and Teaching Institute (IRTI) Contact information at EDIRC. |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.