AAOIFI Governance and Ethics Board (AGEB) in its 8^th meeting held in Jordan on 24-25 Shawwal 1439H, corresponding to the 8-9 July 2018 approved the issuance of exposure draft (Exposure Draft G1/2018) on “Internal Shari’ah Audit” (earlier Internal Shari’ah Review, GSIFI 3).

This standard is a revised and improved version of the Governance Standard No. (3) “Internal Shari’ah Review”  adopted by the Accounting and Auditing Standards Board on 29 Safar-1 Rabi’ I 1420H, corresponding to 13-14 June 1999 and accordingly aims to supersede that standard. The GSIFI No. 3 “Internal Shari’ah Review” standard was developed in the initial phase of the development of the Islamic finance industry. The industry has evolved significantly in the last two decades, with regulators implementing improved governance frameworks, and internal auditing profession applying improved standards. Consequently, AAOIFI felt the need to revise and update its standard on internal Shari’ah audit.

Internal Shari’ah audit function is an important component of Islamic Financial Institutions (IFIs) governance framework which promotes internal accountability and transparency, and helps gain the confidence of all its stakeholders. This function is considered important to build a strong base in the IFI in complying with Shari’ah principles and rules. The standard aims to provide a comprehensive guideline on independent assessment of IFI’s adherence with Shari’ah principles and rules to those charged with governance and the Shari’ah Supervisory Board (SSB), thereby helping in managing the Shari’ah non-compliance risk and ensuring a sound internal control system.

The Chairman of the Board, Dr. Ishrat Husain commented, “This standard aims to provide a  comprehensive guidance to professionals who perform internal Shari’ah audits in IFIs in line with development and evolution of internal Shari’ah auditing practices globally”. He further added, “The Board recognizes that internal Shari’ah audit is a crucial governance organ for IFIs to strengthen stakeholder confidence, enhance the quality and uniformity of practices, and harmonize the internal Shari’ah auditing process with the global best practices. The Board would also wish to extend appreciation to Meezan Bank Pakistan team, among others, who provided technical support for the project.”. The project also includes developing a detailed application guideline in the form of an internal Shari’ah audit manual, which will be issued in due course.

The public hearings for the exposure draft will be held in the upcoming months in different parts of the world – to obtain industry feedback. Futher details with respect to dates and venues, will be announced shortly via the AAOIFI website. Comments on the exposure draft should be directed no later than 1 November 2018 to governance@aaoifi.com. All comments and suggestions of the public hearings as well as written comments will be presented to the AGEB to discuss and to make  the necessary changes.

The exposure draft can be accessed by CLICKING HERE