Abstract
In response to this global rise in Islamic financial organism and banking, the need for setting up a common standard for the accounting function in Islamic Banks, became an unuttered need. Addressing this need, in the year 1991, the global institute for setting accounting standards for Islamic financial institutes, Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) has been established in Bahrain. This study tries to find out the conformity level of the Islamic Banks in Bangladesh with these standards. This study analyses the annual reports of six Islamic banks from Bangladesh of the year 2012. The Reports are collected from the Banks’ website sources. It is found that these six banks conform with the AAOIFI standards by 53.79% on average in financial statements. A 2.79 standard deviation in case of total conformity refers to the low level of difference among these banks in case of disclosure. This study suggests that it is highly of importance for the banks to increase the level of conformity of the AAOIFI standards to ensure the stakeholders about their sincerity and determination to comply with Islamic Shari’ah. Analysis of AAOFI standard compliance is relatively new in Bangladesh. This research study may provide some new insights into the existing Islamic literature. Keywords: Islamic Banking, Islamic Finance, AAOIFI Standards.
Highlights
Compared to other financial institutes, Islamic Banks are obliged to disclose certain facts in the annual reports and financial statements
The findings in the degree of compliance in case of each disclosure item generated from the study might help those preparing the annual reports of Islamic Financial Institutions, to improve and upgrade the quality of the information disclosed in respective annual reports
Sarea (2012), we find in his research work titled ‘The Level of Compliance with Auditing Organization for Islamic Financial Institutions (AAOIFI) Accounting Standards:Evidence from Bahrain’ that he has done evaluation on the concepts regarding the level of compliance www.iiste.org with AAOIFI Accounting standards
Summary
Compared to other financial institutes, Islamic Banks are obliged to disclose certain facts in the annual reports and financial statements. The findings in the degree of compliance in case of each disclosure item generated from the study might help those preparing the annual reports of Islamic Financial Institutions, to improve and upgrade the quality of the information disclosed in respective annual reports. The findings of the study might constitute a further contribution to the area of the study and try to lessen the empty space of the accounting literature. Another essential contribution of this study might be to raise the awareness for those who are responsible for the preparation of financial statements on the importance of disclosing truthful and reliable information in the institutes’ annual reports
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