1) Identify specific financial statements auditing concepts and procedures that could be applied in determining whether an Islamic bank has been Shari’a compliant during a given financial reporting period?
* Cultural differences across countries and regions of the world have complicated efforts to develop a common set of international accounting and auditing standards. * Islam accepts the fact that accounting is a social construction and itself constructs social reality but this reality which the accounting constructs must conform to the dictates of Islamic belief. * Most Islamic banks have their annual financial statements audited by an independent accounting firm. * An SSB (shari’a supervisory board) is a model that determines whether an Islamic bank has complied with shari’a. It is composed of a minimum of 3 Islamic religious scholars who are independent of the given bank. * An SSB reviews a given bank’s financial statements and underlying transactions, accounting records, business contracts and other relationships at the conclusion of each year to determine that the constitution has complied with shari’a throughout that period. * Another shari’a audit model results in a financial statement audit report that contains multiple references to shari’a. * Under this shari’a audit model, the shari’a related procedures performed during an entity’s independent audit effectively provide a second layer of assurance that the given entity has complied with relevant Islamic religious principles during the year under audit. * The principal shari’a related procedures integrated into a financial statement audit are performed by one or more Islamic religious scholars independent of the given audit client.
Would these concepts and procedures be applied differently in shari’a compliance audits compared to conventional financial statement audits? Explain. These concepts and procedures would be applied differently in shari’a compliance...
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