The need of having Shariah Audit in

IFIs
Shariah Audit framework is
the frame of reference to
be used by the Shariah
auditors to audit the
financial statements of
Islamic financial
institutions
before

they can decide that

the operation of the
business is performed
in the manner
 At current, the practice in the banking and takaful
industry is that :
Via the voluntary
appoinment of external
Shariah auditors to
audit:
the financial
The Shariah
statement
Advisor depends
determine that the
on the work of or
financial statements
internal auditor
reflect the compliancy
of their operations with
the Shariah.

this creates the need for audit framework for

Shariah auditors: internal or external to work
with.
 Lets know .
a statutory audit which sometimes called an external audit
because it is carried out by independent external auditors.

It is different from internal audit for two main reasons:

1) internal primary responsibilities is appraising an entitys
risk management strategy and practices, management
control framework and governance process
2) Statutory audit expresses an opinion on the entitys
financial statements. Besides providing audit services,
external auditors also provide other kind of services. Most
common of them are reviews and compilations of financial
statements.
 Difference between statutory and
shariah audit
Statutory audit Shariah audit
Definition Provide assurance on Refers to the periodical
the reality and assessment conducted
fairness from time to time
Scope Financial statements Audit of financial
and related control to statements
the financial Compliance audit on
operation organisational structure,
people, process and info
technology and application
system
Responsibility External auditor Internal auditor
Framework Conventional audit No scope framework
Duties of the Outline in malaysian Governance issued by BNM
auditor companies act
Reporting Stakeholders(externa Audit committee and
structure l parties) and shariah committtee
shareholders (internal)
Audit report Standard audit report Through shariah
committee report
 Conclusion
The compliance with the Shariah principles will be achieved
by having a proper practice in Shariah Audit.
The development of Shariah Audit practice is important in
order to complement the Shariah compliance mechanisms
that are already in place and being practiced internally in
the IFIs.
Shariah audit must be undertaken systematically as part of
the corporate governance mechanism in IFIs.
Due to the increasing demands of stakeholders that require
assurance of Shariah compliance and accountability.
Shariah non-compliant element would not just effect the
confidence of the public to IFIs.
Also, might also expose IFIs to risk such as fiduciary and
reputational risks.
 References
Mustafa Mohd Hanefah, Zurina
Shafii, Supiah Salleh, Nurazalia
Zakaria, books on Governance and
Shariah Audit in IFIs, 2012
Zurina Shafii, Supiah Salleh and
Syahidawati Hj Shahwan, articles on
Management of Shariah Non-
compliance Audit Risk in the Islamic
Financial Institutions via the
Development of Shariah Audit

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