The Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) held the 10^th meeting of its Governance and Ethics Board (AGEB) recently at AAOIFI head office in the Kingdom of Bahrain.

During the meeting the Board deliberated on the external Shari’ah audit guidelines which aim at setting out a detailed manual for performing external Shari’ah audit or an attestation external Shari’ah audit. It also provides detailed guidance on the principal procedures and key considerations for performing an external Shari’ah audit engagement as well as the reporting guidelines, including for planning, risk assessment and execution, and Shari’ah related work programs.

Sheikh Esam Eshaq, Deputy Chairman, AGEB, who chaired the meeting, stated that: “External Shari’ah audit is a key pillar in Shari’ah governance framework. An independent and comprehensive external Shari’ah audit is essential for safeguarding the integrity, reputation and sustainability of IFIs, and hence these detailed guidelines will complement the external Shari’ah audit standard (issued in March 2018) in its full-fledged implementation for the industry stakeholders.”

The Board also discussed the consultation notes for the revision of AAOIFI Code of Ethics. The objective of the revised code is to provide significant enhancement to the two codes of ethics which were issued in January 2003, targeting the professionals working in the Islamic finance industry. The Board also provided feedback and recommendation to the proposed joint standard between AAOIFI and IFSB.

Mr. Omar Mustafa Ansari, Acting Secretary General, AAOIFI stated “ the comprehensive Ethics project was initiated by the AAOIFI Governance and Ethics Board (AGEB) in January 2017 with the objective to develop a Code of Ethics for professionals working in the Islamic Financial Institutions (IFIs). AAOIFI Secretariat has so far conducted 58 interviews covering 4 markets (Bahrain, Pakistan, Turkey, and Oman). The target is to complete a minimum total of 125 interviews covering at least 12 countries from all major world regions. The preliminary study and the consultation notes have already been approved by AGEB and it is expected that the exposure draft for the Code of Professional Ethics will be issued by year end”.

AGEB considered a proposal for the development of a standard on “Shari’ah decision making process”. This included the process of issung Fatwa  by the Shari’ah  Supervisory Board (SSB) and the Central Shari’ah Board (CSB), the process of raising issues to SSB and CSB, and the process of product development and request for Fatwa by SSB and CSB.

The next AGEB meeting is scheduled to be held in May 2019.