Risk Based Internal Shariah Audit Practices in the Islamic Bank

Abstract

Shariah audit is an essential key function to ensure Shariah compliance in Islamic banking institutions. Shariah audit complements existing functions of conventional internal audit, which is lacking in providing adequate assurance on Shariah compliance. Hence, there is a need to incorporate Shariah audit function to existing corporate governance framework of Islamic banks (IB). However, there is not much guidance that auditors could refer to in order to perform comprehensive Shariah audit procedure. The current study intends to provide in-depth explanation on the process of internal Shariah audit, particularly on the planning, execution and reporting, also follow up phases. If focuses on the application of risk-based internal audit (RBIA) approach in the practices. The study adopts a qualitative approach of single case study in an attempt to achieve its objectives. By providing detailed explanation on practices of internal Shariah audit in Islamic banks, findings are expected to contribute in supplying valuable in-depth information for Islamic banks, as well as other Islamic institutions. This information is especially important for in strategizing internal Shariah audit practices as an important control and monitoring strategy in their business operation.