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Open Access
Article
Publication date: 30 April 2020

Azam Abdelhakeem Khalid

The purpose of this study is to explore the role of Audit and Governance Committee (AGC) for internal Shariah auditing's effectiveness in Bahrain's Islamic banks.

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Abstract

Purpose

The purpose of this study is to explore the role of Audit and Governance Committee (AGC) for internal Shariah auditing's effectiveness in Bahrain's Islamic banks.

Design/methodology/approach

This paper employed two-stage approach, i.e. collecting and analysis of data. In this paper, the interviews and literature review on AGC and internal Shariah auditor were conducted as these respondents are considered vital to Islamic banks.

Findings

This paper posited that in building internal Shariah audit effectiveness' conceptual framework, the Islamic worldview theory may be employed as the theoretical foundation. Based on the theory, it was suggested that the Islamic bank's auditors and governance committees may enhance the internal Shariah auditors' effectiveness.

Practical implications

In view of the roles of AGC on internal Shariah audit effectiveness, the current exploratory research contribute to enhance the limited knowledge about AGC by describing the practices of Bahraini Islamic banks in terms of composition, roles/duties and responsibilities and operations. This study also adds to the body literature of AGC effectiveness by identifying roles, duties and responsibilities of characterizing more active AGC and suggesting that these AGC could have a positive impact on internal Shariah audit effectiveness in Bahraini Islamic banks. Overall, this paper provides important insights for Board of Director's member can refer to AGC roles, duties and responsibilities to conduct a self-diagnosis of current practice.

Originality/value

This paper uniquely seized Islamic world view for Islamic banks' AGC.

Details

Asian Journal of Accounting Research, vol. 5 no. 1
Type: Research Article
ISSN: 2443-4175

Keywords

Article
Publication date: 20 November 2020

Azam Abdelhakeem Khalid and Adel M. Sarea

This paper aims to examine bases of effectiveness in internal Shariah auditing undertaken in Islamic financial institutions (IFIs).

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Abstract

Purpose

This paper aims to examine bases of effectiveness in internal Shariah auditing undertaken in Islamic financial institutions (IFIs).

Design/methodology/approach

This paper is theoretical in approach taking, as its starting-point, an extensive literature review. From a general agency theory, an Islamic agency theory is articulated and then applied to ascertain attributes of internal Shariah audit effectiveness revolving around the concept of independence.

Findings

Effective internal Shariah auditing, as a mechanism of assuring Shariah compliance by IFIs, varies directly with the degree of independence enjoyed by internal Shariah auditors themselves. The research propounds that an articulated Islamic agency theory holds potential to serve as a theoretical foundation to build a multi-dimensional conceptual framework based on independence utile for evaluating internal Shariah audit effectiveness.

Research limitations/implications

Evidence is drawn strictly from secondary sources.

Practical implications

To assure effectiveness of internal Shariah auditing, IFIs ought to increase the level of independence of internal Shariah auditors.

Originality/value

Internal Shariah audit effectiveness in IFIs has not been extensively studied in comparison with both studies of external Shariah audit effectiveness in IFIs and internal audit effectiveness undertaken by conventional financial institutions. This research fills that gap.

Details

International Journal of Law and Management, vol. 63 no. 3
Type: Research Article
ISSN: 1754-243X

Keywords

Article
Publication date: 8 May 2017

Azam Abdelhakeem Khalid, Hasnah Haj Haron and Tajul Ariffin Masron

This paper aims to examine the characteristics influencing internal Shariah audit effectiveness in Islamic financial institutions (IFIs) in Bahrain.

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Abstract

Purpose

This paper aims to examine the characteristics influencing internal Shariah audit effectiveness in Islamic financial institutions (IFIs) in Bahrain.

Design/methodology/approach

Data were collected from 76 internal Shariah auditors, 23 Shariah supervisory board and 16 audit and governance committee from 52 IFIs in Bahrain. The data were analyzed using structural equation method via SmartPLS 2.0 to examine the relationship between characteristics and effectiveness of internal Shariah audit.

Findings

It was found that competency and work performance were positively significant with internal Shariah audit effectiveness. The findings revealed that the main competency of internal Shariah audit to influence effectiveness were to have professional certification and skills, while work performance to influence effectiveness were engagement planning, performing the engagement and communicating results with management and having sufficient information to provide sound opinion formed by Shariah audit.

Originality/value

From the research perspective, this is the first study that examines the relationship between internal Shariah audit characteristics and its effectiveness in Bahraini IFIs.

Details

Humanomics, vol. 33 no. 2
Type: Research Article
ISSN: 0828-8666

Keywords

Article
Publication date: 5 March 2018

Azam Abdelhakeem Khalid, Hasnah Haron and Tajul Ariffin Masron

The purpose of this paper is to propose the conceptual relationship between competency and effectiveness of internal Shariah auditors in Islamic financial institutions (IFIs).

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Abstract

Purpose

The purpose of this paper is to propose the conceptual relationship between competency and effectiveness of internal Shariah auditors in Islamic financial institutions (IFIs).

Design/methodology/approach

Normative and theorizing based on the main sources of Islam, mainly Maqasid al-Shariah theory, has been utilized in this research.

Findings

This study demonstrated how Maqasid al-Shariah or higher objectives of Islamic law have gradually captured the attention of increasing numbers of modern Muslim scholars for solving contemporary issues.

Originality/value

This study uniquely captured Maqasid al-Shariah for the competency of internal Shariah auditor.

Details

Journal of Islamic Accounting and Business Research, vol. 9 no. 2
Type: Research Article
ISSN: 1759-0817

Keywords

Article
Publication date: 20 October 2023

Mustafa Faza', Nemer Badwan and Montaser Hamdan

This study aims to conduct a review and analysis of the literature on Shariah audit compliance by examining the difference between internal and external auditors, the scope of…

Abstract

Purpose

This study aims to conduct a review and analysis of the literature on Shariah audit compliance by examining the difference between internal and external auditors, the scope of internal Shariah audits and the qualification of Shariah auditors.

Design/methodology/approach

The current study used content analysis and the descriptive approach to achieve the main objective of the study. To ensure that Islamic Financial Institutions’ (IFIs) practices preserve Shariah principles and values when providing Shariah-compliant products and services, this audit will be used to supervise and monitor the operations of IFIs. The main goal of Shariah compliance auditing is to protect the interests of IFIs stakeholders, including account holders, shareholders, creditors, management and employees, as well as the general public while ensuring that the mechanisms of checks and balances in place are appropriate and tailored to the goals and missions of its establishment following the Maqasid Al-Shariah.

Findings

The findings of this study attempt to contribute to the body of knowledge surrounding Shariah audit compliance by advising IFIs on the value of Shariah compliance auditing in addressing the needs of its stakeholders. As a result, the benefits of Shariah compliance audits will be maximized, and future legislative changes will be implemented to reduce or completely remove the risk of Shariah’s failure to comply.

Practical implications

This research advises IFIs on the usefulness of Shariah compliance auditing in addressing the demands of its stakeholders to add to the body of knowledge on Shariah audit compliance. Moreover, all parties involved to take action to reduce the gap that will significantly affect stakeholders’ confidence, particularly concerning the Shariah compliance of the IFIs’ products and services on their operations and activities.

Originality/value

The advantages of Shariah compliance audits will thus be maximized, and future regulatory improvements will be made to lessen or eliminate the danger of Shariah noncompliance.

Details

Journal of Money Laundering Control, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1368-5201

Keywords

Article
Publication date: 4 April 2022

Saleh F.A. Khatib, Dewi Fariha Abdullah, Hamzeh Al Amosh, Ayman Hassan Bazhair and Ali Shariff Kabara

This study aims to present a detailed investigation of Shariah audit research based on a systematic literature review.

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Abstract

Purpose

This study aims to present a detailed investigation of Shariah audit research based on a systematic literature review.

Design/methodology/approach

A total of 53 studies were collected from the Scopus and Web of Science databases following a systematic methodology. These studies were analyzed and evaluated based on the theoretical perspective, geographical distribution, research settings and themes background.

Findings

The findings indicate an increase in the literature on Shariah auditing over time, especially in the Malaysian context, with a dearth of research in other contexts and institutions (Takaful). It has been also revealed that the existing literature is still unclear about the effectiveness and consequences of effective Shariah auditing, pointing the need for more work on these areas. The authors outline opportunities for future Shariah auditing research.

Originality/value

The synthesized findings are helpful for policymakers and managers to understand better how research in Shariah auditing is developing and how to translate research findings into practice. To the best of the authors’ knowledge, this is the first research to comprehensively synthesize the literature on this topic and identify the potential opportunities for future research directions.

Details

Journal of Islamic Accounting and Business Research, vol. 13 no. 5
Type: Research Article
ISSN: 1759-0817

Keywords

Article
Publication date: 22 March 2023

Md. Kausar Alam, Abu Umar Faruq Ahmad, Mezbah Uddin Ahmed and Md. Salah Uddin

The study explores the existing Shariah audit practice of Islamic banks (IBs) in Bangladesh aiming at providing suggestions for improvements on the detected shortfalls in the…

Abstract

Purpose

The study explores the existing Shariah audit practice of Islamic banks (IBs) in Bangladesh aiming at providing suggestions for improvements on the detected shortfalls in the relevant areas.

Design/methodology/approach

This research applied a qualitative method, and data were collected through conducting semi-structured interviews in Bangladesh. A total of 17 interviews were conducted for accomplishing the research objectives.

Findings

The study finds that there is no comprehensive Shariah audit manual in the current operation for IBs in Bangladesh, and as such, the requirements of their Shariah compliance remain a big question. Although the Shariah audit is conducted within IBs, and the Shariah audit officers or Shariah officers inspect necessary documents while conducting the Shariah audit, they only cover 10–20% of total investments and transactions. Based on the findings of this study, it is recommended that the Shariah auditing tasks should broadly cover at least 80% of the investment portfolios, documents and financial contracts and activities.

Research limitations/implications

The findings of this research are expected to significantly contribute to the regulatory authorities concerned in Bangladesh and beyond, which include the suggestions that IBs can adopt to strengthen their Shariah governance system. The study also pinpoints that in the current system, Shariah auditors' roles are somehow limited in examining and checking the investment sides with a minimal portion (10–20%), for which they are unable to perform their responsibilities in a befitting manner to provide assurance services and overall Shariah compliance of IBs activities.

Practical implications

This study explores the current Shariah audit systems and provides recommendations to improve the existing systems which will be beneficial for Islamic banks of Bangladesh.

Originality/value

To the researchers' knowledge, perhaps this is the first research of its kind which seeks to explore the current Shariah audit practice in Bangladesh qualitatively, and it provides some practical suggestions for making the necessary developments of the current audit process of IBs. In addition, there are no empirical studies in the entire Emerald insight publishers and Scopus database regarding Shariah audit practices. The study contributes to the agency, stakeholder and legitimacy theories by exploring the Shariah audit of IBs.

Details

Journal of Applied Accounting Research, vol. 24 no. 5
Type: Research Article
ISSN: 0967-5426

Keywords

Article
Publication date: 28 March 2023

Muhammad Iqmal Hisham Kamaruddin, Zurina Shafii, Mustafa Mohammed Hanefah, Supiah Salleh and Nurazalia Zakaria

This study aims to explore the current Shariah audit practices in zakat and waqf institutions in Malaysia.

Abstract

Purpose

This study aims to explore the current Shariah audit practices in zakat and waqf institutions in Malaysia.

Design/methodology/approach

A focus group discussion (FGD) with 38 zakat and waqf officers from 17 different zakat and waqf institutions in Malaysia was conducted. For reporting purposes, this study used a single-case study approach. The FGD was conducted and completed at the end of June 2021 via an online approach through Microsoft Teams.

Findings

The finding highlights the existing Shariah governance practices especially in terms of Shariah supervision roles, Shariah audit implementation in terms of Shariah audit scopes and common findings, Shariah audit competency, Shariah audit effectiveness especially the need for external Shariah audit function and Shariah audit issues and challenges faced in the implementation of Shariah audit practices.

Practical implications

The study findings and recommendations are useful for zakat and waqf institutions as well as the State Islamic Religious Councils to enhance Shariah audit practices in Malaysia.

Originality/value

This study is among the pioneer studies that explore Shariah audit practices in zakat and waqf institutions in Malaysia.

Details

Journal of Islamic Accounting and Business Research, vol. 15 no. 3
Type: Research Article
ISSN: 1759-0817

Keywords

Article
Publication date: 20 May 2021

Md. Kausar Alam

The purpose of this paper is to focus on conceptualizing the origin of legitimacy, the legitimation process and its trustworthiness toward the people, regulators, society and…

Abstract

Purpose

The purpose of this paper is to focus on conceptualizing the origin of legitimacy, the legitimation process and its trustworthiness toward the people, regulators, society and stakeholders. In achieving the purpose of the study, an inclusive research gap concerning the roles of the Shariah Supervisory Board (SSB) as a Shariah regulatory authority or an internal mechanism of Shariah Governance Framework (SGF) in the development and formation of Islamic financial institutions (IFIs) would also be addressed.

Design/methodology/approach

The paper implements an analytical approach to investigate the legitimation process of SSB, and its presence, significance, as well as credibility to the stakeholders.

Findings

This study proposes an additional authority of legitimacy, namely, SSB/Shariah regulatory authority, along with regulators, professionals and people. These could be derived from the internal mechanism of Shariah Governance (SG) practices of IFIs. The study also proposes another type of legitimacy (ethical/Shariah legitimacy) that derives from the organizational SG practices through its internal mechanisms. The formation of SSB is mandatory and more significant for the isomorphic identification of IFIs, SG system, legitimacy and broader acceptance to stakeholders.

Research limitations/implications

The rational argument shows that SSB legitimates the overall functions of IFIs, SG practices, processes and structures. It is more apposite because it has substantial validity, dominance, recognition and acceptability along with three external bodies. Besides, IFIs and their SG do not have the proper value to the general people, society, regulators and other stakeholders without the legitimization of SSB. Thus, theorists and academicians may consider SSB as the fourth party of legitimacy along with three legitimacy providing authorities (regulators, professionals and people).

Originality/value

The paper focuses on illustrating and extending the border knowledge concerning the legitimacy from SG and how do SSBs legitimize IFIs and enhance their credibility to the general people, government, society and other stakeholders. The paper first clarified the internal legitimacy concerning SGF and contributed to the area of Islamic finance, legitimacy, institutional theory, legitimacy theory and internal legitimacy.

Details

Journal of Islamic Accounting and Business Research, vol. 12 no. 3
Type: Research Article
ISSN: 1759-0817

Keywords

Article
Publication date: 20 January 2020

Saed Ahmed Sulub, Zalailah Salleh and Hafiza Aishah Hashim

This paper aims to identify the effects of some corporate governance (CG) mechanisms and Shariah Supervisory Board (SSB) strength on the voluntary use of internal audit function…

Abstract

Purpose

This paper aims to identify the effects of some corporate governance (CG) mechanisms and Shariah Supervisory Board (SSB) strength on the voluntary use of internal audit function (IAF) by Islamic banks in Sudan.

Design/methodology/approach

Based on Agency and Stakeholder Theories, this paper hypothesizes that IAF is likely used by Islamic banks with strong CG and Shariah governance systems. To test these hypotheses, we examine the annual reports of 14 Sudanese banks for a period of five years following the global financial crisis in 2008, using logistic regression analysis.

Findings

This paper found that IAF is likely used by Islamic banks with higher CG disclosure (CGD) and strong SSB. While the findings showed that the audit committee and IAF are likely used as substitutes, this paper also indicated that there is a negative association between levels of Unrestricted Investment Account Holders’ (UIAH) ownership and the use of IAF. However, the evidence of this study did not find any impact for the board of directors’ strength on the use of IAF.

Research limitations/implications

There may be better measures for some variables in the study model. Additionally, the restriction of the study sample to Sudanese banks may limit the generalization of the results. Therefore, future studies may refine the model and expand the sample to Islamic banks in other countries.

Practical implications

This paper highlights the importance of IAF for Shariah governance in Islamic banks. Moreover, the insignificant association between the use of IAF and the strength of board of directors has important implications for the board’s effectiveness in Islamic banks.

Originality/value

This is the first study to investigate the factors associated with the use of IAF by Islamic banks.

Details

Journal of Islamic Accounting and Business Research, vol. 11 no. 1
Type: Research Article
ISSN: 1759-0817

Keywords

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