Role of Accounting Standards for the Future of Islamic Financial Institutions

Faran Ahmad Qadri

doi:10.7176/rjfa/10-22-12

Abstract

One of the most important challenges faced by the Islamic financial Institutions (IFI’s) is ensuring that financial statements are properly presented. The IFI’s prepare financial statements under different accounting standards which results in the problem of reliability, comparability, understanding and transparency. The Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) have taken a right step in developing the accounting and sharia standards for the IFI’s. Against such a backdrop, this paper analyses whether there is requirement for specific Islamic accounting standards to make financial institution’s practices compliant with the Islamic Standards. This paper also analyses the role of AAOIFI in developing the accounting, auditing and ethical standards asper the sharia principle. Keywords: AAOIFI, Accounting Standards, Financial Statement, IFI’s, Interest, Islamic Financial Institutions, Sharia Accounting DOI : 10.7176/RJFA/10-22-12 Publication date: November 30 th 2019

Highlights

We have been witnessing that the need for Islamic finance has been overwhelmingly growing at fastest speed around the globe in general and in Islamic world
The standards developed by Auditing Organization for Islamic Financial Institutions (AAOIFI) are based on the IFRS itself but only it deals with the issues which are in contradiction to the sharia standards (Kamla 2010)
It has been observed that there was a need for a separate accounting standards for Islamic finacial institions (IFI’S) and with the establishment of AAOIFI it has been achieved

Summary

Introduction

We have been witnessing that the need for Islamic finance has been overwhelmingly growing at fastest speed around the globe in general and in Islamic world . It has not been developing only in the Islamic countries and developing rapidly in the Muslim minority countries. As a Muslim every act we do should be accountable to God and it is applicable to the economic transactions . If we think that we are accountable to God means we consider our economic transaction as a worship and seeking a return from God in here and hereafter.

Conclusion and Recommendations

Conclusion and Recommendation