The Competency of Sharī‘ah Auditors of Islamic Banking Institutions: An Analytical Study

Abstract

One of the primary distinctions between conventional and Islamic financial institutions is the Sharīʿah compliance in products, services, and operations. In Islamic financial institutions, the products, services and procedures are approved by the Sharīʿah board. Besides, the Sharīʿah auditor assures that the operations of an Islamic bank are according to Islamic law and fatawa of Sharīʿah board. In this regard, the State Bank of Pakistan has required all the Islamic banking institutions to arrange internal and external Sharīʿah audit. The Sharīʿah audit is facing challenges of professional competence of their human resource. Hence, the objective of this paper is to analyse by using qualitative methods, the qualification and competency of a Sharīʿah auditor as envisaged in the existing Sharīʿah governance frameworks and standards of different standard setting bodies such as AAOIFI, BNM, SECP and SBP. After detailed analysis of the syllabus of the reputed accountancy organizations, the study concluded that the Sharīʿah audit personnels may not have the adequate knowledge of Sharīʿah to assess the transactions of Islamic Banks. The study recommended that the accountancy organizations should prepare Sharīʿah audit guidelines.