If there is Shariah Non-Compliance in the entity, who is responsible to that activity?
Conventional auditing procedures do not account for the speciﬁc Shariah compliance risk to which all Islamic ﬁnancial institutions are exposed. The role of a Shariah auditor is different to that of a conventional auditor because its remit is derived from the basic values of Islamic society. The most important point to be noted is that a Shariah audit is separate from the ﬁnancial and operational auditing processes undertaken by Islamic ﬁnancial Institutions. Deloitte explains in its Islamic Accounting Guidelines that: “Standards for Islamic ﬁnancial institutions have to be developed because in some cases Islamic ﬁnancial institutions encounter problems because the existing standards were developed based on conventional institutions, product structures or practices, and may be perceived to be insuﬃcient. The Islamic finance industry is in improvement whereby there is enhance in practice, improve risk management and also increase in number of investor. A proper standard framework for Shariah Compliance Audit is essential to ensure the harmonization of Shariah practice in Islamic Financial Institutions. The development of Shariah audit programme is also important as to ensure the procedures of each product in Islamic Financial Institutions are being followed. So this shows that Shariah Compliance Audit Framework and Audit Programme are important for Islamic Financial Institutions specifically in Islamic Banking and Takaful Institutions which are responsible in Shariah Non-Compliance. A number of Shariah auditing guidelines have been set out both by domestic authorities such as Bank Negara Malaysia (BNM), Malaysia’s central bank, and international organizations such as AAOIFI. Although AAOIFI uses the term ‘Internal Shariah Review’ for substitute of Shariah audit but its guidelines are largely consistent with those of BNM. Last but not least for the conclusion, there are two...
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