Factors affecting Sharīʿah audit quality in Islamic banking institutions of Pakistan: a theoretical framework

Abstract

PurposeThe objective of this study is to present a theoretical framework, which helps ascertain the meanings of the Sharīʿah audit quality and identify the factors that affect it.Design/methodology/approachThe current literature of conventional and Islamic finance on audit quality is critically reviewed to propose the theoretical framework for the quality of Sharīʿah audit.FindingsThe paper suggests that for a better Sharīʿah compliance at Islamic banking institutions (IBIs), the role of audit practitioners is very much indispensable. The competency of the practitioner is one of the important factors that affect the quality of the Sharīʿah audit. Assessment and identification of Sharīʿah risk in different financial arrangements, contracts and transactions require a unique competency on the part of the auditor, that is, gripping Sharīʿah law besides traditional assurance skills and techniques.Practical implicationsThe Sharīʿah compliance is one of the primary objectives of IBIs, which works at the conceptual level, product development and implementation level, various business models and governance level. Sharīʿah audit function, internal or external, is an important component of Sharīʿah governance framework and provides an independent assessment of IBIs’ compliance with the Sharīʿah rules and principles and helps in managing the Sharīʿah non-compliance risk and ensuring sound internal Sharīʿah control system.Originality/valueThe paper proposes a theoretical framework for defining the Sharīʿah audit quality and determining the factors that are significant in affecting the Sharīʿah audit quality in the IBIs of Pakistan.

Legitimacy Problems in Sharia Compliance Due to Fraud at Islamic Banks in Indonesia

“…The competence of practitioners becomes one of the essential factors that affect the quality of sharia audits. Different contracts, financial arrangements, and transactions require unique competencies on the part of the auditor, i.e., tightening sharia law in addition to old assurance skills and techniques [8]. Rifai's research also found that auditor organizational commitment and integrity positively affect fraud prevention [9].…”

“…The influence of audit quality, on the other hand, affects the competence of practitioners. Unique competencies on the part of the auditor needed to tighten sharia law in addition to old assurance skills and techniques [8]. In addition, the integrity of the auditor and the organization's commitment positively affect fraud preventionssss [9].…”

Biblioshiny-R Application to Map Islamic Audit Research

“…Shahar et al (2018) which discusses sharia audit for Islamic financial institutions. Rashid & Ghazi (2021) present a theoretical framework, which helps ascertain the meaning of Sharia audit quality and identify the factors that influence it. And, Shafii et al (2010) discuss the development of a Shariah compliance audit framework and a Shariah audit program to manage Shariah non-compliance audit risk in Islamic financial institutions.…”

Research Map on Islamic Audit Literatures

“…explain the conceptual framework for the effectiveness of Islamic internal audit factors in Islamic banks.Wan Shahar et al (2018) which discusses sharia auditing for Islamic financial institutions. AbdulRahman (2010) explains the needs and challenges of Sharia Audit for Islamic Financial Services Rashid & Ghazi (2021). present a theoretical framework, which helps ascertain the meaning of Shariah audit quality and identify the factors that influence it.…”