Cost-Benefit Analysis of Implementing Shariiah Auditing as a Separate Discipline in Bangladeshi Islamic Banks

Abstract

Almost all the commercial banks in Bangladesh are operating Islamic banking windows throughout the country to attract Muslims (90% of the population). To ensure shariah compliance, Islamic banks in Bangladesh currently use “Internal Shariah Review” which is basically the SSC’s supervision, monitoring and controlling ‘during’ and ‘after’ the banks’ operation. However, It does not cover a thorough and comprehensive audit to examine the transactions after executing the contracts. So, there lies a huge functional gap between shariah compliance and internal shariah review, which is obstructing Muslims from trusting these banks. The purpose of this research was to identify the feasibility of implementing shariah auditing in Bangladeshi Islami banks. This research tries to measure the respondents’ idea about establishing “Shari’ah Audit” as a discipline. It also investigates whether there should be a proper shariah audit side-by-side internal shariah review and how far Shariah audit would be worth implementing. For collecting primary data a survey questionnaire, with both ‘open-ended’ and ‘close-ended’ questions, was designed and distributed among the accounting academicians, audit practitioners and Shari’ah scholars in Bangladesh. A combination of quantitative and qualitative method was used to get the result. Frequency distribution method was used to examine the pattern of the respondents (Positivistic approach) and Hermeneutic approach was used to interpret the views of the respondents. The respondents had varying experience of awareness about shariah auditing. However, most of the respondents opined that shariah auditing should be a separate discipline and there should be a proper shariah audit side-by-side shariah review in the Islamic banks in Bangladesh. Almost all the respondents think that because of the involvement of huge transaction and monitoring costs, Islamic banks in Bangladesh are unwilling to carry out shariah audit instead of or along with shariah review.