Financial Reporting Of Islamic Bank In The Light Of Shariah: A Conceptual Framework

Ahmed Razman Abdul Latif,Sarimah Ahmad Sarimah Ahmad

doi:10.33102/jfatwa.vol26no2.396

Ahmed Razman Abdul Latif, Sarimah Ahmad Sarimah Ahmad

Open Access

https://doi.org/10.33102/jfatwa.vol26no2.396

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Abstract

This paper intent to examine the function of the financial reporting, in enhancing the Shariah compliance of the Islamic financial transactions and the role of the Shariah committee in the Islamic bank in giving the assurance of Shariah compliance of the financial reporting. These would enhance the integration of the financial reporting of the Islamic bank and Shariah compliance. However, how Shariah compliance is conveyed in financial reporting received scant attentions in academia. This study uses literature as the study method. This is a conceptual paper describing the link between financial reporting on the Islamic financial transactions and Shariah compliance. The conclusion of this study shows that the knowledge in finance and accounting and experience of the Shariah committee enhances the financial reporting to be aligned with the Shariah. Therefore, it could increase the confidence of the stakeholders. As such, this study might be of interest to top management in Islamic banking, industry players, Shariah committee and regulators.

Highlights

Islamic finance has steadily progress despite the downturn of the economy, with assets of 2.4 trillion USD and has since growns higher than 2018
Shariah committee is not being emphasize in determining the Shariah compliance of accounting procedures and policies of the Islamic financial transactions
The finance and accounting knowledge and experience of the Shariah committe enhance the financial reporting to be aligned with Shariah

Summary

INTRODUCTION

Islamic finance has steadily progress despite the downturn of the economy, with assets of 2.4 trillion USD and has since growns higher than 2018. Shariah committee is not being emphasize in determining the Shariah compliance of accounting procedures and policies of the Islamic financial transactions. Though financial reporting is importance in achieving Shariah compliance in Islamic bank (Rini, 2014), there is hardly any study done on the link between the Shariah compliance and financial reporting practices (Che Azmi & Hanifa, 2015). The above meaning of Shariah compliance has been elaborated by Laldin & Furqani (2018) into three elements, namely (1) complying with the rulings of the SAC of BNM and its Shariah standards; (2) ensuring internal policies and procedures are consistent with Shariah requirements; and (3) developing a Shariah audit function. Mohd Zamil (2014) has asserted that financial accounting and reporting is one of the main elements in the process of ensuring Shariah compliance of financial transactions as well as the approval of product development and innovation, implementation of approved product and auditing

Shariah compliance

Findings

DISCUSSION AND CONCLUSION