The factors affecting the adherence of Islamic accounting standards AAOIFI in Jordan

Mithkal Hmoud Alqaraleh,Abdulnaser Ibrahim Nour,Nawaf Samah Mohammad Thuneibat

doi:10.22495/jgrv9i4art6

Mithkal Hmoud Alqaraleh, Abdulnaser Ibrahim Nour + Show 1 more

Open Access

https://doi.org/10.22495/jgrv9i4art6

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Abstract

The aim of this paper is to knowledge the problems faced by Islamic banks in Jordan towards the adherence to AAOIFI accounting standards. And to study the problems faced with adherence to AAOIFI accounting standards, a meticulous market survey was conducted from banking (employees of the financial department) in Islamic banks in Jordan – their number 4 – banks. A structured questionnaire was designed and distributed in person among respondents – their number 80 – employees in the financial departments. We are found towards adherence to AAOIFI accounting standards. Internal and external problems are found to adherence Islamic banks to AAOIFI accounting standards. The sample is limited to Islamic banks in Jordan. This is necessitated by the lack of adaptation elsewhere. Also, there is little research in Jordan on adherence to AAOIFI accounting standards developed by this body. This paper, along with the previous study, helps to address this gap.

Highlights

Islamic banking has been emerging and expanding very rapidly since the last years, inside but outside the Islamic sphere as well
The problems faced by Islamic banks in Jordan in their Auditing Organization for Islamic Financial Institutions (AAOIFI) accounting standards compliance were determined in this study and the quantitative approach was employed for the purpose
AAOIFI is providing specific accounting standards for Islamic banks and Islamic financial institutions, but very few Islamic banks in the world are following this set of rules

Summary

Introduction

Islamic banking has been emerging and expanding very rapidly since the last years, inside but outside the Islamic sphere as well. As explained in Maali, Casson, and Napier (2006), the financial products offered by Islamic banks are those that comply with the Islamic law of human conduct called the Sharia. Islamic banks denote the vast portion of Islamic financial institutions (IFIs), and these IFIs have proliferated all over the world, both in- and outside of the Muslim and the Islamic nations. Islamic banking has come into existence following the expanding demand from the Muslim communities all over the world, for financial products and services (among others) that are Sharia-compliant (Sarea & Hanefah, 2013). To assist the preparation and promulgation of accounting standards in accordance with the principles of Sharia for IFIs, a private standard-setting organization known as the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) was established by the Islamic banks and other parties of interest (Karim, 2001). In the context of Malaysia, Ahmed (2002) reported the presence of the national accounting standards grounded upon IAS

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