Sharīʿah Audit Guidelines in Islamic Financial Institutions: A Comparative and Analytical Study

Abstract

Sharīʿah audit is a cornerstone of Islamic Financial Institutions (IFIs), ensuring compliance with Islamic law and maintaining the integrity of Sharīʿah-compliant financial operations. This study examines Sharīʿah audit frameworks through a comparative analysis of six prominent regulatory and standard-setting bodies: the State Bank of Pakistan (SBP), Securities and Exchange Commission of Pakistan (SECP), Bank Negara Malaysia (BNM), Saudi Arabian Monetary Authority (SAMA), Islamic Financial Services Board (IFSB), and the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI). The analysis highlights the unique approaches and commonalities across internal and external Sharīʿah audit processes, emphasizing key themes such as auditor independence, competence, governance structures, and the role of Sharīʿah boards. SBP's prescriptive guidelines focus on detailed compliance mechanisms, while SECP and AAOIFI adopt flexible frameworks tailored to institutional contexts. Governance and oversight are universally reinforced, with Sharīʿah boards playing a critical role in monitoring compliance and advising management. The study underscores the pivotal role of Sharīʿah audits in fostering transparency, accountability, and ethical governance in IFIs. By aligning financial practices with Islamic principles, Sharīʿah audits bolster investor and customer confidence, contributing to the growth and stability of the Islamic financial industry globally and within Pakistan.