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1 – 10 of 596Adel Mohammed Sarea and Mustafa Mohd Hanefah
The objective of this paper is to determine the level of compliance with Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) accounting standards by…
Abstract
Purpose
The objective of this paper is to determine the level of compliance with Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) accounting standards by Islamic banks of Bahrain.
Design/methodology/approach
The paper is based on diffusion of innovation theory whereby the perceived relative advantage, compatibility, complexity, trialability and observability factors are expected to influence the level of compliance with AAOIFI accounting standards.
Findings
The findings indicate that Islamic banks of Bahrain are in full convergence with AAOIFI accounting standards.
Research limitations/implications
This research, just like many other studies, faces data limitations. Sample size employed for this study contains only the accountants in Islamic banks of Bahrain.
Originality/value
The results of this paper are expected to serve as a guide to the regulatory bodies and the setter of accounting standards for Islamic financial institutions (IFIs).
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This study aims to evaluate Islamic bank compliance with the accounting and auditing organisation for Islamic financial institutions (AAOIFI), assess the impact of multiple…
Abstract
Purpose
This study aims to evaluate Islamic bank compliance with the accounting and auditing organisation for Islamic financial institutions (AAOIFI), assess the impact of multiple accounting standards in Islamic banking, examine the need for private accounting standards and assess international financial reporting standards (IFRS) compatibility with Islamic banking and analyse financial leasing accounting in Islamic banking compared to IFRS 16.
Design/methodology/approach
A combination of comparative theoretical analysis, physical examination, and semi-structured interviews has been used as a research methodology. These methods are interconnected and complement each other to provide a comprehensive approach to address the research questions.
Findings
Islamic banks in various countries show varying compliance with AAOIFI accounting standards. Some fully comply, while others adopt a hybrid approach combining AAOIFI and IFRS. Differences in accounting treatments can result in conflicts, asset inflation and financial statement discrepancies. Challenges and criticisms faced by AAOIFI standards include violating the matching principle and lacking faithful representation. Collaboration among academics, standards-setting bodies and organisers is crucial for guiding the reporting of Islamic financial statements.
Practical implications
The research identifies gaps in implementing Islamic accounting standards and proposes strategies to enhance compliance, improve performance and increase transparency in Islamic financial institutions. It highlights the importance of a harmonised and universally accepted accounting framework for Islamic banking, considering the compatibility between IFRS and Islamic principles.
Social implications
Social implications have arisen regarding the global acceptance of Islamic finance, which leads to an increase in socially Islamic finance exchange.
Originality/value
This research examines the consequences of using multiple accounting standards in the Islamic banking industry and discusses the need for private accounting standards and compatibility with IFRS.
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Sherif El-Halaby, Sameh Aboul-Dahab and Nuha Bin Qoud
This paper aims to systematically review the existing studies for Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) standards which include…
Abstract
Purpose
This paper aims to systematically review the existing studies for Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) standards which include different tracks of researches and then identify the gaps to propose opportunities for future research.
Design/methodology/approach
By adopting a systematic literature review approach, 46 papers that were published between 2000 and 2020 from 23 journals concerned with AAOIFI were selected for review and analysis.
Findings
The authors combine electronic searches to identify relevant studies using keywords such as “AAOIFI” or and “Islamic standards.” In light of the existing studies’ limitations, this paper derives and summarizes five leading future research tracks: identifies the research gaps in AAOIFI and then suggests that AAOIFI still requires more empirical analyses; identifies the alternative analytical methods as meta-analysis; identifies additional measurements for macro and microeconomics factors; identifies recent tracks as corresponding to Covid-19 pandemic; and future studies should consider the role of central banks and positive criticism for AAOIFI.
Practical implications
This analysis address the literature gaps on measuring compliance, determinants and consequences of AAOIFI adoption as this study serves as a guide for the researchers, regulators and Islamic financial institutions in research associated with this area. The findings would support AAOIFI, regulators and related authorities across jurisdictions with suggestions on improving the current AAOIFI practices.
Originality/value
This literature review is a historical record and guidance for researchers who seek to examine and explore several questions about AAOIFI. To the best of the authors’ knowledge, this is the first paper that applies systematic literature review over AAOIFI research field.
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Fahru Azwa Mohd Zain, Wan Amalina Wan Abdullah and Majella Percy
This paper aims to determine the role governance plays in the voluntary adoption of Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) Disclosure…
Abstract
Purpose
This paper aims to determine the role governance plays in the voluntary adoption of Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) Disclosure Standards by Islamic insurance (takaful) operators in the Southeast Asia (SEA) and the Gulf Cooperation Council (GCC) regions.
Design/methodology/approach
This study uses a sample of 44 takaful operators in the SEA and the GCC regions. While corporate governance (CG) strength is measured by the use of the frequently examined variables of the board of directors and audit committee, Shari’ah governance strength is measured by the characteristics of the Shari’ah Supervisory Board (SSB). Content analysis is used to extract disclosure items from the 2014 annual reports. Agency theory, stakeholder theory and political economy theory are argued to support the hypotheses.
Findings
The results show that CG strength has a positive and significant effect on the voluntary adoption of AAOIFI Disclosure Standards by takaful operators, indicating that CG plays an important role in the disclosure of information in the annual reports of takaful operators. However, the results show a lack of association between SSB strength and voluntary adoption of AAOIFI Disclosure Standards. Our results suggest that the SSBs may not be as involved as the other CG mechanisms (such as a board of directors and audit committees) in reviewing financial reports. On another note, the level of the political right and civil liberties has a negative and significant effect on the voluntary adoption of AAOIFI Disclosure Standards, providing an indication that stakeholders in a community with greater freedom tend to be more active in pressuring takaful operators to provide more information to justify their existence in the community. Similar to SSB strength, the legal system is also found to have no significant association with the voluntary adoption of the AAOIFI disclosure standards.
Practical implications
This study provides stakeholders with a tool to evaluate the effectiveness of the governance role in increasing the transparency of takaful operators by examining the governance factors using a self-constructed disclosure index.
Originality/value
Our study is among the first to provide an in-depth analysis of voluntary adoption of AAOIFI Disclosure Standards for takaful operators in these two regions; therefore, this study has implications for regulators and standard setters. The findings of this study are expected to provide information to regulators and standard setters on the role of governance in improving the transparency of takaful operators.
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Habib Ahmed, Faruq Arif Tajul Ariffin, Yusuf Karbhari and Zurina Shafii
Since International Financial Reporting Standards (IFRS) are not primarily meant for the accounting needs of Islamic banks, the Accounting and Auditing Organisation for Islamic…
Abstract
Purpose
Since International Financial Reporting Standards (IFRS) are not primarily meant for the accounting needs of Islamic banks, the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) was established to develop specific accounting standards for Shari’ah compliance. The purpose of this paper is to assess the de jure harmonisation between the disclosure requirements of the IFRS-based Malaysian Accounting Standards (MAS) and those of the AAOIFI.
Design/methodology/approach
Using Malaysia as a case study, the paper examines the extent of the de jure congruence between the IFRS-based MAS and AAOIFI’s Financial Accounting Standard No 1 (FAS1), which is considered to be one of the key disclosure standards for Islamic banks. We employ leximetrics and content analysis to analyse these accounting standards and the additional guidelines introduced by the Malaysian Accounting Standards Board (MASB) and the Central Bank of Malaysia (Bank Negara Malaysia, BNM) to identify the gaps between different tiers of MAS and FAS1.
Findings
The study finds that de jure congruence between the IFRS-based MAS and AAOIFI standards has improved through the introduction of additional accounting guidelines by both the MASB and the banking regulator, BNM. However, some gaps remain between the two standards. These gaps may be difficult to completely eliminate due to differences in the fundamental principles underlying the development of both standards.
Originality/value
While some studies have explored the de facto congruence between AAOIFI accounting standards and others, this paper is the first, to the best of the authors’ knowledge, to examine the de jure congruence between those standards with the IFRS-based MAS.
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Adel Mohammed Sarea and Mustafa Mohd Hanefah
The purpose of this paper is to determine the need of Islamic Accounting Standards – a review of the literature – for Islamic financial institutions (IFIs).
Abstract
Purpose
The purpose of this paper is to determine the need of Islamic Accounting Standards – a review of the literature – for Islamic financial institutions (IFIs).
Design/methodology/approach
The basis of the paper was stakeholder theory to analyse the need of accounting standards and to design the conceptual framework as evidenced from Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI). The evidence reviewed suggests the need for Islamic accounting standards to fill the gap in accounting practice among Islamic financial institutions.
Findings
The AAOIFI accounting standards serve as a guideline that may reflect the unique characteristics of IFIs and become a useful tool to meet the various needs of IFIs. Currently, one of the major challenges facing IFIs lies in the preparation of the financial statements under different accounting standards and which may lead to problems of comparability, reliability and compliance level measurement. This has resulted in a heated debate among scholars which has hitherto translated to the evolving existing literature surrounding the interpretation of the level of compliance with the Islamic accounting standards. The paper concludes with various recommendations for future research, the most important of which is the need for future studies on how AAOIFI accounting standards can be made mandatory in all Muslim countries.
Originality/value
This paper contributes towards a better understanding and acceptability of the need of Islamic Accounting Standards.
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The paper is intended as an extension of the literature dealing with the Islamic accounting standards issued by the Accounting Auditing Organization for Islamic Financial…
Abstract
Purpose
The paper is intended as an extension of the literature dealing with the Islamic accounting standards issued by the Accounting Auditing Organization for Islamic Financial Institutions (AAOIFI) and still not adopted in Tunisia. Its major aim is to investigate the Tunisian accountants’ basic knowledge and perceptions of Islamic accounting. The study has been designed for the sake of the Tunisian accountants’ predisposition to adhere to the AAOIFI standards, as a population directly concerned by an eventual adoption of such standards.
Design/methodology/approach
The paper opted for an exploratory study using a questionnaire survey based on the relevant literature. The questionnaire has included items pertaining to demographic areas, information sources, basic knowledge, key differences, valuation concepts, obstacles and advantages, educational and training needs regarding Islamic accounting. The conducted study has involved data collected from the part of 200 practitioners across a number of organizations and audit firms, sited at different regions and locations of the country, employing accounting graduates.
Findings
The reached findings suggest that even though Tunisian practitioners are not well aware of most of the AAOIFI standards’ pertaining topics, proponents of stand-alone AAOIFI standards, apart from IFRS, appear to outnumber its opponents. In this context, lack of training programs arranged by professional bodies is considered as the most serious impediment facing the implementation of the standards.
Research limitations/implications
In addition to the usual limitations associated with any survey research (particularly non-response bias and desirability bias), there, also, lies a sample related limitation, as the sample turns out to involve, essentially the private/corporate sector. Pertinent organizations, as the IFI’s, appear to be not well represented in the sample.
Practical implications
The results reached through this study would have some implications on the regulatory bodies, academicians and professionals. Thus, for the AAOIFI standards to be successfully implemented in Tunisia, entirety of concerned parties should take part in improving and consolidating the situation.
Social implications
Ultimately, studying differences in the views of jurisdictions, either those who have adopted the AAOIFI standards or those who have not, might provide certain guidelines to standard setters for potential revisions.
Originality/value
Few short articles have previously exanimate the perceptions and knowledge of accounting professionals on Islamic accounting issues, there is a scarcity of research regarding the subject. To the author’s knowledge, this paper is one of the rare studies of Islamic accounting in Tunisia.
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Jabir Al-Sulaiti, A.A. Ousama and Helmi Hamammi
This paper aims to examine the compliance of disclosure with the financial accounting standards of the Accounting and Auditing Organisation for Islamic Financial Institutions’ …
Abstract
Purpose
This paper aims to examine the compliance of disclosure with the financial accounting standards of the Accounting and Auditing Organisation for Islamic Financial Institutions’ (AAOIFI) related to Islamic financing products by Islamic banks in Bahrain and Qatar.
Design/methodology/approach
The study measures compliance using disclosure indexes. The disclosure indexes include the three financial accounting standards of Murabaha, Mudaraba and Musharaka. The data are collected from the annual reports of 24 Islamic banks in Bahrain and Qatar over a period of 2012-2015.
Findings
The paper found that Islamic banks in Bahrain and Qatar comply with AAOIFI financial accounting standards related to Murabaha, Mudaraba and Musharaka. However, there was a level of non-compliance in both countries. In addition, it found that the extent of compliance had increased over the 2012-2015 period. Also, the Murabaha standard had the highest mean of compliance. Moreover, the results showed that the Islamic banks in Qatar tend to have more compliance of overall Murabaha and Mudaraba disclosures compared to the Islamic banks in Bahrain.
Research limitations/implications
The findings are preliminary and highlight that the issue is of high interest to Islamic banks and AAOIFI. Hence, it requires a detailed follow-up to form a complete picture that would assist AAOIFI and regulators gear their policies toward better quality disclosure by Islamic financial institutions. Even though the findings are encouraging, future research is recommended to enforce compliance with the AAOIFI financial accounting standards.
Originality/value
This is a pioneer empirical study that focuses on the level and trend of compliance with AAOIFI financial accounting standards related to the Islamic financing products of Murabaha, Mudaraba and Musharaka standards, especially in Qatar. Additionally, it is the first study comparing between the only two Gulf Cooperation Council (GCC) countries, i.e. Bahrain and Qatar, that mandatory apply the AAOIFI standards.
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Hana Ajili and Abdelfettah Bouri
This study measures and compares the level of compliance with the disclosure requirements provided by the International Financial Reporting Standards (IFRS) and the Accounting and…
Abstract
Purpose
This study measures and compares the level of compliance with the disclosure requirements provided by the International Financial Reporting Standards (IFRS) and the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI). This study also aims to investigate the factors associated with this compliance in a sample of Islamic banks (IBs) in Gulf Cooperation Council member states.
Design/methodology/approach
The sample consists of 39 IBs between 2010 and 2014. Among the selected IBs, 23 banks were complying with the AAOIFI standards and 16 banks were complying with the IFRS standards. An unweighted disclosure index was used to measure the level of compliance with IFRS/AAOIFI disclosure requirements.
Findings
It was found that the level of compliance with IFRS is higher than that of compliance with AAOIFI. In addition, the results reveal that compliance with IFRS/AAOIFI disclosure requirements is higher for larger and older IBs. Finally, it was observed that compliance was more noticeable for IBs having a higher leverage and multinational subsidiaries.
Originality value
These findings would be of great help to regulators and policymakers to better understand the accounting disclosure practices of IBs.
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Sherif El-Halaby, Hesham Albarrak and Rihab Grassa
The economic consequence for adopting accounting standards is one of the growing and valuable topics in accounting research. The purpose of this paper is to address the question…
Abstract
Purpose
The economic consequence for adopting accounting standards is one of the growing and valuable topics in accounting research. The purpose of this paper is to address the question whether the adoption of Islamic standards that are issued by Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFIs) has a positive effect on the level of earnings management (EM) in the Islamic banks (IBs) setting. The authors measure, in general, the impact of AAOIFI for adopter and non-adopter banks. This paper furthermore investigates whether IBs adopting AAOIFI as compulsory or as voluntary adopters, in general, are being less engaged in earnings manipulation.
Design/methodology/approach
Using empirical data from 143 IBs across 26 different countries from 2014 to 2018, the paper uses a linear regression model and probit regression analysis that group the banks investigated in this paper into adopters and non-adopters. Additional probit regressions were performed to test to what extent the status of AAOIFI adoption (compulsory or voluntary adopters) has an impact of EM.
Findings
The adoption of AAOIFI generally is associated with a reduction in the EM level. Furthermore, adopter IBs for AAOIFI is least involved in EM as compared to non-adopter IBs. In addition, the findings of this paper indicate that IBs across countries that mandate AAOIFI standards are less engaged in earnings manipulation as compared to other IBs in countries that adopt AAOIFI as voluntary standards.
Research limitations/implications
The results reported in this paper provide insights to central banks and regulators regarding the prominence of mandates of AAOIFI standards for IBs to enhance the trust level of stakeholders by reducing the unethical behavior (EM). In addition, this paper supports the applicability of AAOIFI standards for IBs rather than the conventional standards such as IFRS or local GAAP.
Originality/value
To the best of the authors’ knowledge, the findings are unique at two levels. First, the paper provides evidence on the economic consequences of using AAOIFI in the context of IBs which was not explored by previous research. Second, the paper extends the investigation of the impact of AAOIFI adoption for adopters verses non-adopters, as well as for mandatory verses voluntary adoption of AAOIFI.
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