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The main purpose of this research is to figure out the most effective determinants that play a vital role in enhancing the effectiveness of the internal Sharīʿah audit in the Islamic banking industry.

This paper reviews the existing literature to build comprehensive knowledge that would assist in determining the main factors that impact on the effectiveness of Sharīʿah audit in Islamic banks.

This research proposes a conceptual framework of factors that impact on Sharīʿah audit effectiveness in IBs based on previously published studies. The proposed framework includes external and internal factors as well as internal Sharīʿah audit structure, process and requirements.

First, the regulators need to provide a detailed framework for Sharīʿah audit which covers the main requirements for effective Sharīʿah governance. Second, Islamic financial institutions (IFIs) need to pay more attention to following the Sharīʿah audit process in order to achieve the objective of effective Sharīʿah governance. Finally, the dearth of empirical research on the role and effectiveness of Sharīʿah audit in Islamic banking highlights the need to develop an appropriate methodology to enhance the study of the effectiveness of Sharīʿah governance practices.

The Sharīʿah ensures compliance with its rules and regulations and enhances the soundness and credibility of the Islamic finance industry. This study identifies a number of issues that require further investigation in order to establish a better system of Sharīʿah audit and to identify the factors that affect Sharīʿah auditing practices. This paper is unique in covering the main elements that have influence on the effectiveness of Sharīʿah audit and proposes them in one framework.

The purpose of this study is to identify the competencies required of Shari’ah auditor (SAR) in the Islamic banking environment.

A qualitative approach using a multiple-case study through the semi-structured interview was used. Data was gathered from a representative of Central Bank of Malaysia, and 30 other respondents consist of the Head of Shari’ah audit (HSA) and SAR from four types of banking institutions. A focus group discussion was later conducted to validate the model of competency proposed.

Results show a mixed practice on the recruitment of SAR. Most banking institutions prefer to use their existing internal auditors as opposed to recruiting fresh graduates or acquire experienced SAR from other financial institutions. Knowledge in Shari’ah, Islamic banking and Fiqh Muamalat is considered as the essential knowledge component for SAR, while auditing is revealed as the core skill that SAR should have to perform the Shari’ah audit effectively. The study also found that personal skills such as willingness to learn and teamwork as the complementing characteristics to the knowledge and skill components, as a package required for a competent SAR.

The results of this study would have both theoretical and practical contributions to the regulatory bodies, academicians and professionals. Theoretically, this study made a concerted effort to enhance prior studies on the qualification aspect of Shari’ah audit literature, emphasizing the elements necessary to recruit competent SARs in the Islamic financial institutions (IFIs). The element of “time” has been infused to the existing effective job performance theory add dynamics to the model, recognizing the need for years of experience as part of elements necessary to become competent SAR. In practice, the competency model is recommended to the industry players in pooling competent talents in the Islamic finance industry (R4) and (B5). In spite of its limitation to confine only to the IFIs, it sheds light on human resource management within the Islamic organizations.

The study would contribute to the practitioners as a guideline to the Human Resource Department in recruiting their SAR and also for succession planning purposes.

A competency model for SAR was proposed focusing on building knowledge, core and personal skills that can be used as guidance in determining the criteria needed for a competent SAR, which is a new dimension for Islamic auditing literature. The sub-objective of determining the elements of competency, as well as understanding the current practice of recruiting the SAR became the input in the building of the competency model.

The purpose of this paper is to examine the level of harmonization of auditors’ reports issued by independent auditors of Islamic banks.

The homogenization of the auditors’ reports of Islamic banks has been statistically measured. Supranational auditing standards on auditors’ reports (ISA 700 and AAOIFI standard) are used as the control.

The results show lack of harmonization in several elements related to the form of the auditor’s report and in all elements related to the content of the auditor’s report among the Islamic banks.

This paper provides new empirical evidence about the measurement of harmonization in the form and content of the auditors’ reports of Islamic banks. It discusses the level of compliance with the elements enumerated by the standards issued by the International Federation of Accountants and the Accounting and Auditing Organization for Islamic Financial Institutions.

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

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.

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.

Evidence is drawn strictly from secondary sources.

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

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.

The purpose of this paper is to examine the level of harmonization of consolidated auditors’ reports issued by the independent auditors of Islamic banks.

A statistical measurement of the homogenization of the consolidated auditors’ reports of Islamic banks. International and Islamic auditing standards on consolidated auditors’ reports are used as the control (ISA 700 and AAOIFI standard-IAS2).

The results show a lack of harmonization among the Islamic bank’s groups in several elements related to the form of the consolidated auditor’s report and in all elements related to the independent auditor’s report.

This paper provides new empirical evidence about the measurement of harmonization in the form and content of the consolidated auditors’ reports of Islamic banks groups. It discusses the level of compliance with the consolidated elements enumerated by the standards issued by the International Federation of Accountants and the Accounting and Auditing Organization for Islamic Financial Institutions.

This study aims to explore and assess the key Sharīʿah governance factors that may have an influence on the internal Sharīʿah audit structure and its practices in Islamic financial Institutions in Yemen, particularly in the Islamic banking sector.

To do so, the study adopts a qualitative approach employing case study analysis, and both primary and secondary data are used to formulate the appropriate interview questions and achieve the objectives of the study.

The authors observed that the key factors that help in assessing the internal Sharīʿah audit structure and its practices are Sharīʿah auditor charter, audit plan and audit manual. In addition, the authors observed that, in general, internal Sharīʿah audit tends to be subjective in Yemeni banks because they depend on the internal Sharīʿah auditor’s qualifications and experience more than formal guidelines and regulations. This is because there are no detailed internal Sharīʿah audit plans or detailed audit manual. Moreover, the internal Sharīʿah auditor charter is not comprehensive in explaining the duties required of the internal Sharīʿah auditor, and it is mixed with the Sharīʿah Supervisory Board (SSB) duties. This means the internal Sharīʿah auditor lacks the critical tools that enable him to achieve the desired audit manual objectives where the effectiveness of internal Sharīʿah audit can be measured.

One of the important implications of this study is providing very important guidance about enhancing the areas where shortfalls are found within the Sharīʿah governance process in the Yemeni banking system. This enhancement process of the internal factors of Sharīʿah governance can be achieved by increasing the awareness of the enhancing internal Sharīʿah audit structure as it reflects ultimately on the internal Sharīʿah auditor’s role and his practices.

Understanding the effectiveness of internal Sharīʿah audit structure among internal auditors will improve the Sharīʿah audit framework standards, enhance the Sharīʿah knowledge among internal auditors and provide general guidelines to design audit programmes for Sharīʿah governance auditing process.

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

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.

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.

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.

The purpose of this study is to examine the extent of audit report lag and its association with governance mechanisms in the Islamic banking institutions in Malaysia.

The extent of audit report lag is defined by the number of days from a company’s financial year-end to the signature date on its audit report. The sample of the study comprises 112 observations of Islamic banking institutions’ financial reports for the period 2008-2014. A balanced panel data analysis is performed to analyse the association between the extent of audit report lag and governance mechanisms.

The findings show that the extent of audit report lag for the sample selected ranges from a minimum period of 7 days to a maximum period of 161 days, and the extent of audit report lag is approximately two months on average. A fixed effects analysis indicates that audit committee expertise and audit committee meeting have significant association with the extent of audit report lag. On the other hand, board independence, audit committee size and Shari’ah board expertise have insignificant association with the extent of audit report lag. In addition, one control variable (Islamic bank size) is found to be significantly associated with longer audit report lag.

The findings provide useful feedback for Malaysian policymakers on the past and current practices of financial reports and of governance mechanisms. The findings of the study would help the policymakers in monitoring the Islamic banking institutions’ compliance with financial reports submission requirements. The policymakers perhaps could relook into governance mechanisms that reduce the extent of audit report lag in the Islamic banking institutions and implement regulations to strengthen them.

Unlike the majority of prior studies that investigated the association between the extent of audit report lag and governance mechanisms, this study provides two contributions. First, to the authors’ knowledge, this study is the first piece of research that examined the association between governance mechanisms and the extent of audit report lag in Islamic banking institutions. Second, the study examined the association of new governance variable, namely, Shari’ah committee expertise which has not been previously examined in the literature of audit report lag.

The purpose of this paper is to describe the role and responsibilities of Shari’ah auditors in Islamic financial institutions (IFIs) in the auditing process in the IFIs, to highlight capacity building challenges in the Shari’ah auditing industry.

The authors used a legitimacy theory to understand linkages between demand for Shari’ah audit and the role of Shari’ah auditors in IFIs complemented with the review the Accounting and Auditing Organization of Islamic Financial Institutions and Auditing Standard for Islamic Financial Institutions to understand the Shari’ah audit work requirements from an Islamic perspective.

Shari’ah auditing is an emerging field of investigation. There is no doubt that conventional auditing has a significant influence on the auditing frameworks used in IFIs. Western auditing practices are undergoing a metamorphosis to meet the needs of stakeholders in the Islamic economic system. The role and responsibilities of auditors in IFIs are much broader than those found in conventional banks in relation to an examination of a variety of contracts, product structures, transactions reporting, preparation of financial statements, reports, marketing circulars and any other legal documents, which are pertinent to IFIs’ operations.

We posit that the absence of a proper Shari’ah auditing framework and standards attuned to the needs of an Islamic economic system could dampen the future of the Islamic finance industry. The regulators and management of IFIs should meet the expectations of the stakeholders to whom they owe a duty of care by selecting competent professionals for auditing work, along with transparent policies and systems.

This paper presents an attempt to establish auditors’ roles and responsibilities from an Islamic perspective.

This study aims to provide empirical evidence on the role of corporate governance mechanisms in reducing earnings-management practices in Islamic banks in Asia.

This study used 28 Islamic banks in Asia, which were listed on the stock exchange from 2013–2017. The research method used quantitative regression with data on the characteristics of Islamic banks taken from the websites of each bank. This study used discretionary loan loss provision as a proxy for measuring earnings management.

The results show that only the audit committee size has a significantly negative effect on earnings management. An independent audit committee has a negative, but not significant, effect. The difference expectation signs cannot be interpreted further.

Only a few components of corporate governance were tested in this study. Therefore, it is expected that future studies will include more components.

In general, the components of corporate governance that include the characteristics of the board of directors and the audit committee have a varied effect on reducing the earnings-management practices in Islamic banks, except audit committee size. In practice, audit committee size should have an important role in earning management reduces.

This may be the first paper that studies the effect of corporate governance on earnings management in Islamic banks in Asia.