Abstract
This paper ascertains the current roles and responsibilities of Shariah auditor in the Islamic banking industry in Malaysia. To explore further, we identify the changes in these roles, especially after the introduction of the Shariah Governance Framework (SGF) 2011. The study employs a qualitative method by utilizing in-depth interviews with nine (9) key individuals in Malaysian Islamic banks. Our findings support the notion that Shariah auditors' roles and responsibilities are still under the jurisdiction of the banks' internal audit unit. More importantly, Shariah auditors play their roles as the third line of defense by giving assurance to the shareholders and stakeholders that all businesses and operations comply with Shariah precepts. Also, Shariah auditors need to look at the internal control elements of whether effective and efficient enough to alleviate any possible Shariah breaches. In terms of changes in its roles after the SGF implementation, most of the interviewees assert that the approach has been changed from compliance audit to risk-based audit. Our findings guide us to propose more structured and specific guidelines about Shariah auditors' roles and responsibilities in the Islamic banks. This guideline eventually could provide stimulus to improve governance and strengthen market as well as stakeholder's confidence. Finally, this study stipulates some precious recommendations to further enhance the Shariah auditor roles not only in the Malaysian Islamic banking industry but also in similar contexts.
Highlights
The impetus in internal audit research growth is associated with the increasing role of internal audit as one of the central corporate governance (CG) mechanisms (Stewart & Subramaniam, 2010)
The majority of them agreed that Shariah auditor should provide objective assurance that the Islamic banks comply with the Shariah precepts
Since product development process consists both pre-product approval and post-product authorization (Bank Negara Malaysia, 2011), our study suggests that a significant role of Shariah auditor should cover as early as pre-event to post-event detection
Summary
The impetus in internal audit research growth is associated with the increasing role of internal audit as one of the central corporate governance (CG) mechanisms (Stewart & Subramaniam, 2010). In the Islamic banking environment, Shariah auditor assists in developing the work of Islamic banks (Khalid, Haron, & Masron, 2018). In Islamic banks, there is a need for Shariah auditors to intensify the internal control and monitoring role in the organizations. This condition entails Islamic banks leveraging internal auditing and enhancing the effectiveness of the Shariah audit, which will eventually support the organization's objective (Abdul Wahab & Abdul Rahman, 2011). The auditor is responsible for the method in which the Islamic banks conduct their operations and the effectiveness of Shariah audit operations that contribute to Shariah's principle itself (Othman & Ameer, 2015)
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