Shariah Audit Challenges in Malaysian Islamic Financial Institutions

Abstract

Shari'ah audit, a monitoring tool for ensuring Shari'ah compliance, is an important component in the operations of Islamic financial institutions.  However, this study aims to discuss Shariah's audit framework and explore the potential challenges involved in the Shariah audit. The study employed 40 practitioners from several Islamic financial institutions engaged in the audit services of Shari'ah through a purposive sampling procedure. The data was generated using a questionnaire tool. The data have been analysed with descriptive statistical tools including frequency, percentage, averages and standard differences because of the descriptive character of the study. The study findings demonstrate that the awareness of the Shariah audit is satisfactory since most of them have learned about the Shari'ah audit by way of a job training programme, which enabled them to say what Shari'ah audit practice should be. Likewise, the findings indicate that the practice has a lack of an independent audit report, an independent audit framework for the Shari'ah audit as well as inadequate competent Shari'ah auditors. In addition, the findings show that Shari'ah's audit has a strong potential in the near future to become a marketable career. Eventually, the results suggest that Shari'ah auditor should be integrated into the accounting of higher learning institutions; a comprehensive Shari'ah audit framework and standards; a new regulatory/professional body with a mandate to supervise Islamic Financial Institutions; and a professional certification in the Shari'ah audit. The study is hopeful to contribute to the development of the desired auditing practices for Shari'ah audit in Malaysia.