The Performance of Internal Shariah Auditor in Islamic Financial Institutions

Abstract

Purpose –It is this study’s objective to examine the correlations between internal Shariah auditors’ independence, qualifications and performance in Islamic financial institutions (IFIs), conceptually.
 Design/methodology/approach – This paper is theoretical in its approach; whereby it also undertakes an extensive literature review. From a general agency theory, an Islamic agency theory is articulated and applied to ascertain the attributes of internal Shariah auditor performance revolving around the concept of independence and qualifications.
 Findings – Performance of internal Shariahauditing, as a mechanism of assuring Shariahcompliance by IFIs varies directly with the degree of independence and qualifications enjoyed by internal Shariah auditors themselves. The study finds that in evaluating the freedom and qualifications of FIs’internalShariah auditors, Islamic agency theory can potentially serve as the theoretical foundation in developing a multi-dimensional conceptual framework.
 Research Limitations/implications – Evidence is drawn strictly from secondary sources.
 Practical implications –To ensure that internal Shariahauditor is effectively performing, IFIs ought to improve the degree of independence and qualifications of their auditors.
 Originality/value –The studies on the performance of internal and external Shariahauditorsin conventional financial institutions have been extensively researched. However, research on the performance of IFIs’ internal Shariah audit is yet to be conducted extensively.