The Measurement of Effective Internal Shariah Audit Function in Islamic Financial Institutions

Abstract

Assurance of SharA«E?ah compliance through the SharA«E?ah audit function is crucial for enhancing the integrity of Islamic Financial Institutions (IFIs). Effective SharA«E?ah audit function during periodical assessment will ensure effective internal control system for SharA«E?ah compliance in IFIs. This paper examines the measurement of effective internal SharA«E?ah audit function in IFIs. It critically reviews the emerging literature on the importance of eight components for measuring effective internal SharA«E?ah audit function. The components are SharA«E?ah audit objective, SharA«E?ah audit scope, SharA«E?ah audit and governance, SharA«E?ah audit charter, competency of internal SharA«E?ah auditors, SharA«E?ah audit process, reporting requirements and independence. These components are important for achieving effective internal control over SharA«E?ah compliance. The study also performs a structured interview with Islamic financial experts to validate the measurement before it is further examined in future empirical studies. The main argument of this paper is that highly effective internal SharA«E?ah audit function leads to inclusive opinion on reasonable assurance of SharA«E?ah compliance. Assurance of SharA«E?ah compliance should enhance stakeholder confidence and satisfy the growing demand for IFIs accountability and sustainability.

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