The compliance of disclosure with AAOIFI financial accounting standards

Jabir Al-Sulaiti · Abdulrahman Anam Ousama · Helmi Hammami

48 citations0/0 files storedJournal of Islamic accounting and business research

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Islamic Finance and Banking Studies Auditing, Earnings Management, Governance Accounting and Financial Management

Abstract

Purpose This paper aims to examine the compliance of disclosure with the financial accounting standards of the Accounting and Auditing Organisation for Islamic Financial Institutions’ (AAOIFI) related to Islamic financing products by Islamic banks in Bahrain and Qatar. Design/methodology/approach The study measures compliance using disclosure indexes. The disclosure indexes include the three financial accounting standards of Murabaha, Mudaraba and Musharaka. The data are collected from the annual reports of 24 Islamic banks in Bahrain and Qatar over a period of 2012-2015. Findings The paper found that Islamic banks in Bahrain and Qatar comply with AAOIFI financial accounting standards related to Murabaha, Mudaraba and Musharaka. However, there was a level of non-compliance in both countries. In addition, it found that the extent of compliance had increased over the 2012-2015 period. Also, the Murabaha standard had the highest mean of compliance. Moreover, the results showed that the Islamic banks in Qatar tend to have more compliance of overall Murabaha and Mudaraba disclosures compared to the Islamic banks in Bahrain. Research limitations/implications The findings are preliminary and highlight that the issue is of high interest to Islamic banks and AAOIFI. Hence, it requires a detailed follow-up to form a complete picture that would assist AAOIFI and regulators gear their policies toward better quality disclosure by Islamic financial institutions. Even though the findings are encouraging, future research is recommended to enforce compliance with the AAOIFI financial accounting standards. Originality/value This is a pioneer empirical study that focuses on the level and trend of compliance with AAOIFI financial accounting standards related to the Islamic financing products of Murabaha, Mudaraba and Musharaka standards, especially in Qatar. Additionally, it is the first study comparing between the only two Gulf Cooperation Council (GCC) countries, i.e. Bahrain and Qatar, that mandatory apply the AAOIFI standards.

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References

1990Corporate social disclosure practice: a comparative international analysis 1991The use of disclosure indices in accounting research: A review article 2002Corporate annual reports: research perspectives used 2006Diversity in the regulation of Islamic Financial Institutions 1999A Regional Study Of Listed Companies' Compliance with International Accounting Standards 2006The extent of financial disclosure and its determinants in an emerging capital market: the case of Egypt 2004Implementing IFRS: A Case Study of the Czech Republic 1989Global Surveys of Corporate Disclosure Practices and Audit Firms: A Review Essay

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