The Measurement of Effective Internal Shariah Audit Function in Islamic Financial Institutions

Nur Laili Ab Ghani; Noraini Mohd Ariffin; Abdul Rahim Abdul Rahman

doi:10.31436/ijema.v27i1.600

Authors

Nur Laili Ab Ghani Universiti Kebangsaan Malaysia, Malaysia
Noraini Mohd Ariffin International Islamic University Malaysia, Malaysia
Abdul Rahim Abdul Rahman Universiti Sains Islam Malaysia, Malaysia

DOI:

https://doi.org/10.31436/ijema.v27i1.600

Keywords:

SharÄ«Ê¿ah audit, SharÄ«Ê¿ah compliance, SharÄ«Ê¿ah governance, Islamic financial institutions

Abstract

Assurance of SharÄ«Ê¿ah compliance through the SharÄ«Ê¿ah audit function is crucial for enhancing the integrity of Islamic Financial Institutions (IFIs). Effective SharÄ«Ê¿ah audit function during periodical assessment will ensure effective internal control system for SharÄ«Ê¿ah compliance in IFIs. This paper examines the measurement of effective internal SharÄ«Ê¿ah audit function in IFIs. It critically reviews the emerging literature on the importance of eight components for measuring effective internal SharÄ«Ê¿ah audit function. The components are SharÄ«Ê¿ah audit objective, SharÄ«Ê¿ah audit scope, SharÄ«Ê¿ah audit and governance, SharÄ«Ê¿ah audit charter, competency of internal SharÄ«Ê¿ah auditors, SharÄ«Ê¿ah audit process, reporting requirements and independence. These components are important for achieving effective internal control over SharÄ«Ê¿ah compliance. The study also performs a structured interview with Islamic financial experts to validate the measurement before it is further examined in future empirical studies. The main argument of this paper is that highly effective internal SharÄ«Ê¿ah audit function leads to inclusive opinion on reasonable assurance of SharÄ«Ê¿ah compliance. Assurance of SharÄ«Ê¿ah compliance should enhance stakeholder confidence and satisfy the growing demand for IFIs accountability and sustainability.

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