Difference between revisions of "Audit Issue of Islamic Banking"

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AUDIT & SHARIA COMPLIANCE –
 
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ISSUES IN ISLAMIC BANKING AND
 
−
FINANCE
 
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Presentation By:
 
−
Omar Mustafa Ansari
 
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Partner
 
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Ford Rhodes Sidat Hyder & Co.
 
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(Member of Ernst & Young Global Limited)
 
  
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                  ‫الرحمن الرحیم‬        ‫ٰ‬                ‫بسم ہللا‬
 
−
                          ‫ب ا ْش َر ْح ِّلي َ‬
 
−
                  ‫ص ْد ِّري‬                          ‫قَا َل َر ِّ‬
 
−
                            ‫َویَ ِّس ْر ِّلي أ َ ْم ِّري‬
 
−
                    ‫سانِّي‬                    ‫احلُ ْل ُ‬
 
−
                            ‫ع ْق َدة ً ِّمن ِّل َ‬          ‫َو ْ‬
 
−
                                ‫یَ ْفقَ ُهوا قَ ْو ِّلي‬
 
−
                              ‫(سورہ طه)‬
 
−
‫‪Presentation By:‬‬ ‫‪Omar Mustafa Ansari – Partner – Ford Rhodes Sidat Hyder & Co.‬‬
 
  
−
Role of Auditors and Accountants in
 
−
Islamic Finance
 
−
 Allah SWT says in Quran that “Allah doth command you to
 
−
  render back your trusts to those to whom they are due; And
 
−
  when ye judge between people that ye judge with justice.”
 
−
 According to the code of ethics for accountants and auditors of
 
−
  Islamic financial institutions, accounting (duly including auditing
 
−
  – external, as well as, internal) is one of the professions that is
 
−
  required by Shariah as a Fard Kifaya.
 
−
 In other words it is a duty which, if performed by some, would
 
−
  exempt others in the society. Otherwise, the whole society is
 
−
  sinful.
 
−
  Presentation By:    Omar Mustafa Ansari – Partner – Ford Rhodes Sidat Hyder & Co.
 
  
−
Purity of Transactions and Building
+
== Top 20 FREQUENT WORDS ==
−
Reliance on Islamic Finance
+
shariah 96
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 Islamic banking industry is presently growing at a very high
+
islamic 61
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  pace.
+
compliance 59
−
 One of the critical issues the industry is facing is the matter of
+
ansari 48
−
  purity in transactions which, in longer run, will ensure reliance of
+
ford 48
−
  Muslim Ummah in this model of Islamic finance and banking.
+
hyder 48
−
 If this issue, at this stage, is ignored, it may result in a disaster
+
mustafa 48
−
  in the name of Islamic Finance.
+
partner 48
−
Presentation By:    Omar Mustafa Ansari – Partner – Ford Rhodes Sidat Hyder & Co.
+
rhodes 48
 +
sidat 48
 +
omar 47
 +
presentation 47
 +
financial 42
 +
institutions 26
 +
audit 23
 +
auditor 22
 +
review 22
 +
shari 20
 +
issues 18
 +
finance 17
  
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Strategy to Build Reliance on Islamic
 
−
Finance and Banking
 
−
 A three fold strategy may help out the industry to ensure
 
−
  Shariah compliance on an ongoing basis.
 
−
    1. Standardization of Shariah Compliance Regulations for
 
−
        Islamic Finance;
 
−
    2. Improved governance and Shariah Compliance Assurance
 
−
        for Islamic Financial Institutions; and
 
−
    3. Shariah Compliance Rating of Islamic Financial Institutions
 
−
        and Products.
 
−
Presentation By:    Omar Mustafa Ansari – Partner – Ford Rhodes Sidat Hyder & Co.
 
  
−
STANDARDIZATION OF SHARIAH
 
−
COMPLIANCE REGULATIONS FOR
 
−
ISLAMIC FINANCE
 
  
−
Standardization of Shariah Compliance
+
== DOCUMENT KEY POINTS ==
−
Regulations for Islamic Finance
+
*audit sharia compliance a issues in islamic banking and finance presentation by omar mustafa ansari partner ford rhodes sidat hyder co
−
 Standardization is necessary to ensure that all the matters of
+
*member of ernst young global limited
−
  Islamic financial institutions are dealt with, within a framework
 
−
  which is acceptable for all Muslims.
 
−
 Internationally, there have been a lot of efforts for
 
−
  standardization of practices being followed by various Islamic
 
−
  financial institutions. These efforts include a lot of research
 
−
  work.
 
−
Presentation By:    Omar Mustafa Ansari – Partner – Ford Rhodes Sidat Hyder & Co.
 
  
−
Standardization of Shariah Compliance
+
*role of auditors and accountants in islamic finance i allah swt says in quran that allah doth command you to render back your trusts to those to whom they are due and when ye judge between people that ye judge with justice
−
Regulations for Islamic Finance
+
*i according to the code of ethics for accountants and auditors of islamic financial institutions accounting duly including auditing a external as well as internal is one of the professions that is required by shariah as a fard kifaya
−
 The most admirable job has been performed by:
 
−
      the Islamic Fiqh Academy of the Organization of Islamic
 
−
      Countries; and
 
−
     the Accounting and Auditing Organization of Islamic
 
−
      Financial Institutions (AAOIFI).
 
−
 In respect of governance and risk management, Islamic
 
−
  Financial Services Board has also performed a commendable
 
−
  job.
 
−
Presentation By:    Omar Mustafa Ansari – Partner – Ford Rhodes Sidat Hyder & Co.
 
  
−
Introduction to AAOIFI
+
*i one of the critical issues the industry is facing is the matter of purity in transactions which in longer run will ensure reliance of muslim ummah in this model of islamic finance and banking
−
 AAOIFI was established in 1990 in Algiers under an Agreement
+
*purity of transactions and building reliance on islamic finance i islamic banking industry is presently growing at a very high pace
−
  of Association between a number of Islamic financial institutions
 
−
  (IFIs). Now it is based in Bahrain.
 
−
 Its objectives primarily include development of accounting,
 
−
  auditing, governance and Shariah standards for Islamic
 
−
  financial institutions.
 
−
 Accounting, Auditing and Governance Standards (AAGS) are
 
−
  issued by AAOIFI’s Accounting and Auditing Standards Board
 
−
  whereas the Shariah Standards Board issues the Shariah
 
−
  Standards.
 
−
  Presentation By:    Omar Mustafa Ansari – Partner – Ford Rhodes Sidat Hyder & Co.
 
  
−
Introduction to AAOIFI
+
*strategy to build reliance on islamic finance and banking i a three fold strategy may help out the industry to ensure shariah compliance on an ongoing basis
−
 These Boards have, to date, performed a remarkable job by
+
*improved governance and shariah compliance assurance for islamic financial institutions and
−
  issuing accounting, governance, auditing and Shariah
 
−
  standards for Islamic financial institutions.
 
−
 These Boards have been established by choosing the experts
 
−
  of the fields from throughout the Islamic world. Accordingly,
 
−
  their works, are considered to be a consensus (Ijma) of the
 
−
  experts from the field.
 
−
 These work may be used for standardization of practices of
 
−
  Islamic finance and banking throughout the world.
 
−
  Presentation By:    Omar Mustafa Ansari – Partner – Ford Rhodes Sidat Hyder & Co.
 
  
−
Introduction to IFSB
+
*standardization of shariah compliance regulations for islamic finance i standardization is necessary to ensure that all the matters of islamic financial institutions are dealt with within a framework which is acceptable for all musli miss i internationally there have been a lot of efforts for standardization of practices being followed by various islamic financial institutions
−
 Officially inaugurated on November 03, 2002 and started
+
*presentation by omar mustafa ansari a partner a ford rhodes sidat hyder co
−
  operations on March 10, 2003.
 
−
 Serves as an international-standard setting body of regulatory
 
−
  and supervisory agencies that have vested interest in ensuring
 
−
  the soundness and stability of the Islamic financial services
 
−
  industry.
 
−
 Promotes the development of a prudent and transparent Islamic
 
−
  financial services industry through introducing new, or adapting
 
−
  existing international standards consistent with Islamic Shariah
 
−
  principles.
 
−
  Presentation By:    Omar Mustafa Ansari – Partner – Ford Rhodes Sidat Hyder & Co.
 
  
−
Pakistan’s Perspective
+
*standardization of shariah compliance regulations for islamic finance i the most admirable job has been performed by i R the islamic fiqh academy of the organization of islamic countries and i R the accounting and auditing organization of islamic financial institutions aaoifi
−
 Accounting and Financial Reporting
+
*i in respect of governance and risk management islamic financial services board has also performed a commendable job
−
      The Institute of Chartered Accountants of Pakistan has issued
 
−
      Islamic Financial Accounting Standards for Ijara and Murabaha
 
−
      which are under implementation stages. These standards are
 
−
      approved by SBP and notified by SECP.
 
−
 Shariah Compliance
 
−
     SBP has established a Shariah Board.
 
−
     SBP has issued essentials for Islamic banking and financial
 
−
      products and a bunch of model agreements. But all these are
 
−
      considered to be guidelines, and not regulations. SBP has also
 
−
      issued various circulars in this respect.
 
−
Presentation By:    Omar Mustafa Ansari – Partner – Ford Rhodes Sidat Hyder & Co.
 
  
−
Pakistan’s Perspective
+
*i accounting auditing and governance standards aags are issued by aaoifi s accounting and auditing standards board whereas the shariah standards board issues the shariah standards
−
 Governance – What SBP is Doing
+
*introduction to aaoifi i aaoifi was established in in algiers under an agreement of association between a number of islamic financial institutions ifis
−
      Shariah compliance framework being established. Draft Islamic
 
−
      banking guidelines issued and comments received.
 
−
      A Shariah compliance inspection mechanism is being introduced
 
−
      and a Shariah compliance inspection manual has been
 
−
      developed.
 
−
      Risk management standards are being adopted with suitable
 
−
      modifications.
 
−
Presentation By:    Omar Mustafa Ansari – Partner – Ford Rhodes Sidat Hyder & Co.
 
  
−
Pakistan’s Perspective
+
*i these boards have been established by choosing the experts of the fields from throughout the islamic world
−
 Takaful
+
*introduction to aaoifi i these boards have to date performed a remarkable job by issuing accounting governance auditing and shariah standards for islamic financial institutions
−
      Takaful Rules developed and now being reviewed for
 
−
      improvement. Revised Rules will include accounting regulations
 
−
      for Takaful.
 
−
     SECP has established a Central Shariah Board.
 
−
     Mandatory Shariah Compliance Audit for Takaful.
 
−
 Modarabas
 
−
     All model agreements and products are being reviewed from
 
−
      Shariah compliance perspective.
 
−
     Religious Board for Modarabas is now in operation after a long
 
−
      gap.
 
−
Presentation By:  Omar Mustafa Ansari – Partner – Ford Rhodes Sidat Hyder & Co.
 
  
−
IMPROVED GOVERNANCE AND
+
*i serves as an international standard setting body of regulatory and supervisory agencies that have vested interest in ensuring the soundness and stability of the islamic financial services industry
−
SHARIAH COMPLIANCE
+
*i promotes the development of a prudent and transparent islamic financial services industry through introducing new or adapting existing international standards consistent with islamic shariah principles
−
ASSURANCE FOR ISLAMIC
 
−
FINANCIAL INSTITUTIONS
 
  
−
Shariah Non-Compliance Risk: What &
+
*pakistan s perspective i accounting and financial reporting i R the institute of chartered accountants of pakistan has issued islamic financial accounting standards for ijara and murabaha which are under implementation stages
−
Why?
+
*these standards are approved by sbp and notified by secp
−
    Shariah non-compliance risk is a significant risk for an Islamic
 
−
    financial institution from two perspectives:
 
−
    1.  It impacts the reputation of the Islamic financial institution
 
−
          and deteriorates reliance of the depositors, investors,
 
−
          customers and other stakeholders in the long-term; and
 
−
    2.  It impacts the revenue as well, because in case of an
 
−
          identified Shariah non-compliance, the income arising
 
−
          from such transaction is to be given in charity.
 
−
 But, for the society, and considering it a step towards
 
−
    complete transition of economy on Islamic principles, Shariah
 
−
    compliance is the essence of Islamic banking and finance.
 
−
  Presentation By:      Omar Mustafa Ansari – Partner – Ford Rhodes Sidat Hyder & Co.
 
  
−
            How to Manage Shariah Non-
+
*i R a shariah compliance inspection mechanism is being introduced and a shariah compliance inspection manual has been developed
−
            Compliance Risk?
+
*presentation by omar mustafa ansari a partner a ford rhodes sidat hyder co
−
                                  Shariah Review
 
−
                                      Shariah
 
−
                                Supervisory Board
 
−
                                / Shariah Advisor
 
−
                                                                          Consideration of
 
−
Internal Shariah                                                              Shariah
 
−
    Review                                                              Compliance by the
 
−
                                                                          External Auditor
 
−
              Presentation By: Omar Mustafa Ansari – Partner – Ford Rhodes Sidat Hyder & Co.
 
  
−
Shariah Compliance Assurance for
+
*pakistan s perspective i takaful i R takaful rules developed and now being reviewed for improvement
−
Islamic Financial Institutions
+
*i modarabas i R all model agreements and products are being reviewed from shariah compliance perspective
−
 Rules, regulations and standards might not work unless and
 
−
  until an effective network of check and balance is established to
 
−
  ensure compliance of the same in letter and spirit.
 
−
 Shariah compliance cannot be ensured merely on the basis of
 
−
  approval of products by the Shariah Supervisory Boards and
 
−
  the Shariah Advisors.
 
−
 Approvals have to be matched with the ground realities.
 
−
  Presentation By:    Omar Mustafa Ansari – Partner – Ford Rhodes Sidat Hyder & Co.
 
  
−
Shariah Compliance Assurance for
+
*it impacts the reputation of the islamic financial institution and deteriorates reliance of the depositors investors customers and other stakeholders in the long term and
−
Islamic Financial Institutions
+
*shariah non compliance risk what why i shariah non compliance risk is a significant risk for an islamic financial institution from two perspectives
−
1.  Shariah compliance review report of Shariah Supervisory
 
−
    Board or the Shariah Advisor (May, or may not be, based on
 
−
    Internal Shariah Review).
 
−
2. Shariah compliance audit by the external auditors of the
 
−
    Islamic financial institutions.
 
−
3. Shariah Compliance Inspection of Islamic commercial banks.
 
−
4. Independent Shariah compliance assurance (internal or
 
−
    external) from professionals.
 
−
  Presentation By:    Omar Mustafa Ansari – Partner – Ford Rhodes Sidat Hyder & Co.
 
  
−
Shariah Compliance Review By Shariah
+
*shariah compliance assurance for islamic financial institutions i rules regulations and standards might not work unless and until an effective network of check and balance is established to ensure compliance of the same in letter and spirit
−
Advisor – Issues
+
*i shariah compliance cannot be ensured merely on the basis of approval of products by the shariah supervisory boards and the shariah advisors
−
 Competence (From Assurance Perspective)
 
−
      Without any disregard to the individuals, and not as a
 
−
        generalized rule, it needs to be realized that the jurists
 
−
        sitting on the Board or working as Shariah Advisors
 
−
        possess little knowledge about the accounting and
 
−
        auditing, and more importantly, the operations of the
 
−
        financial institutions.
 
−
Presentation By:    Omar Mustafa Ansari – Partner – Ford Rhodes Sidat Hyder & Co.
 
  
−
Shariah Compliance Review By Shariah
+
*shariah compliance review report of shariah supervisory board or the shariah advisor may or may not be based on internal shariah review
−
Advisor – Issues
+
*shariah compliance audit by the external auditors of the islamic financial institutions
−
      Consequently, their compliance review generally remains
 
−
        limited to the extent of assurance of the legal form of
 
−
        transactions i.e. vetting of agreements and documents etc.
 
−
      On the contrary, the operational matters which include the
 
−
        substance of the transaction might remain unattended
 
−
        because it is not the core competence of these respectable
 
−
        jurists.
 
−
Presentation By:    Omar Mustafa Ansari – Partner – Ford Rhodes Sidat Hyder & Co.
 
  
−
Shariah Compliance Review By Shariah
+
*shariah compliance review by shariah advisor a issues i competence from assurance perspective i R without any disregard to the individuals and not as a generalized rule it needs to be realized that the jurists sitting on the board or working as shariah advisors possess little knowledge about the accounting and auditing and more importantly the operations of the financial institutions
−
Advisor – Issues
+
*presentation by omar mustafa ansari a partner a ford rhodes sidat hyder co
−
 Management’s Attitude
 
−
      Generally the management does not wish to bring each and
 
−
      every matter in the attention of the Board or the Advisor.
 
−
      Accordingly, unless they have enough time to review things
 
−
      on their own, and they take reasonable interest in the same,
 
−
      it is not possible for them to have a look on most of the
 
−
      operational matters.
 
−
Presentation By:    Omar Mustafa Ansari – Partner – Ford Rhodes Sidat Hyder & Co.
 
  
−
Shariah Compliance Review By Shariah
+
*shariah compliance review by shariah advisor a issues i R consequently their compliance review generally remains limited to the extent of assurance of the legal form of transactions ie vetting of agreements and documents etc
−
Advisor – Issues
+
*i R on the contrary the operational matters which include the substance of the transaction might remain unattended because it is not the core competence of these respectable jurists
−
 Independence
 
−
      Although we don’t have any doubt on the personal
 
−
      independence and integrity of these respectable jurists, they
 
−
      would themselves appreciate that the work performed under
 
−
      one’s guidance should always be counter checked by an
 
−
      independent person.
 
−
      Particularly, keeping in view the human tendency of errors,
 
−
      it cannot be advised that the person supervising and
 
−
      monitoring the transactions is also entrusted to recheck and
 
−
      audit the same.
 
−
Presentation By:    Omar Mustafa Ansari – Partner – Ford Rhodes Sidat Hyder & Co.
 
  
−
Shariah Compliance Review By Shariah
+
*shariah compliance review by shariah advisor a issues i management s attitude i R generally the management does not wish to bring each and every matter in the attention of the board or the advisor
−
Advisor – Issues
+
*i R accordingly unless they have enough time to review things on their own and they take reasonable interest in the same it is not possible for them to have a look on most of the operational matters
−
 Scarcity of Resources (Time and Skilled Staff)
 
−
      Generally those on the Shariah Boards and on the seat of
 
−
      Shariah Advisors are busy guys. They are generally serving
 
−
      a number of Boards and educational institutions and are
 
−
      involved in a number of social and religious activities.
 
−
      In addition, they do not have sufficient budgets available for
 
−
      their departments, nor an adequate number of skilled staff
 
−
      hired for the purpose of assisting them in the assurance
 
−
      work.
 
−
Presentation By:    Omar Mustafa Ansari – Partner – Ford Rhodes Sidat Hyder & Co.
 
  
−
Shariah Compliance Review By Shariah
+
*shariah compliance review by shariah advisor a issues i independence i R although we don t have any doubt on the personal independence and integrity of these respectable jurists they would themselves appreciate that the work performed under one s guidance should always be counter checked by an independent person
−
Advisor – Issues
+
*i R particularly keeping in view the human tendency of errors it cannot be advised that the person supervising and monitoring the transactions is also entrusted to recheck and audit the same
−
      Consequently, you can easily imagine that it is humanly not
 
−
      possible for a single person to perform a comprehensive
 
−
      Shariah compliance audit of the operations of a full-fledged
 
−
      Islamic financial institution which may even have a number
 
−
      of branches.
 
−
Presentation By:    Omar Mustafa Ansari – Partner – Ford Rhodes Sidat Hyder & Co.
 
  
−
Shariah Compliance Audit by External
+
*shariah compliance review by shariah advisor a issues i scarcity of resources time and skilled staff i R generally those on the shariah boards and on the seat of shariah advisors are busy guys
−
Auditors – Issues
+
*i R in addition they do not have sufficient budgets available for their departments nor an adequate number of skilled staff hired for the purpose of assisting them in the assurance work
−
      According to AAOIFI standards, the auditor should, to a
 
−
      limited extent, ensure compliance with Shariah
 
−
      requirements.
 
−
      Option being used by certain Islamic mutual funds in the
 
−
      country is Shariah compliance audit by their external
 
−
      auditors.
 
−
      According to Takaful Rules, a Shariah compliance audit is
 
−
      required. But this is not being performed by external
 
−
      auditors, as the Rules do not provide any further detail.
 
−
Presentation By:    Omar Mustafa Ansari – Partner – Ford Rhodes Sidat Hyder & Co.
 
  
−
Shariah Compliance Audit by External
+
*shariah compliance review by shariah advisor a issues i R consequently you can easily imagine that it is humanly not possible for a single person to perform a comprehensive shariah compliance audit of the operations of a full fledged islamic financial institution which may even have a number of branches
−
Auditors – Issues
+
*presentation by omar mustafa ansari a partner a ford rhodes sidat hyder co
−
      Since the external auditor is also entrusted with the task of
 
−
      performing the Shariah compliance audit, his expertise in
 
−
      Islamic finance is not ensured. You would appreciate that if
 
−
      the auditor is not equipped with the necessary skills and
 
−
      knowledge, the output of the assignment might not be as
 
−
      good as may be expected from an experience auditor; and
 
−
      Since the scope of the audit is pre-defined and the matter of
 
−
      permissibility of a transaction is generally subject to the
 
−
      opinions and perspectives of the Shariah Supervisory Board
 
−
      or the Shariah Advisor, the independence of the exercise, to
 
−
      some extent, remains in jeopardy.
 
−
Presentation By:    Omar Mustafa Ansari – Partner – Ford Rhodes Sidat Hyder & Co.
 
  
−
Shariah Compliance Inspection by SBP
+
*shariah compliance audit by external auditors a issues i R according to aaoifi standards the auditor should to a limited extent ensure compliance with shariah requirements
−
- Issues
+
*but this is not being performed by external auditors as the rules do not provide any further detail
−
      This is a very good approach, as it is independent and
 
−
        authoritative in nature.
 
−
      Issues identified are forwarded to the SBP’s Shariah Board
 
−
        so the exercise remains independent.
 
−
      Nevertheless, since the results of such inspections are
 
−
        considered to be confined to the management of the Bank
 
−
        and the State Bank, the benefits of such exercises cannot
 
−
        be forwarded to the general public.
 
−
  Presentation By:    Omar Mustafa Ansari – Partner – Ford Rhodes Sidat Hyder & Co.
 
  
−
Shariah Compliance Inspection by SBP
+
*you would appreciate that if the auditor is not equipped with the necessary skills and knowledge the output of the assignment might not be as good as may be expected from an experience auditor and i R since the scope of the audit is pre defined and the matter of permissibility of a transaction is generally subject to the opinions and perspectives of the shariah supervisory board or the shariah advisor the independence of the exercise to some extent remains in jeopardy
−
- Issues
+
*shariah compliance audit by external auditors a issues i R since the external auditor is also entrusted with the task of performing the shariah compliance audit his expertise in islamic finance is not ensured
−
      Moreover, such exercise is limited to the Islamic commercial
 
−
        banks and the Islamic banking branches of conventional
 
−
        commercial banks and consequently other financial
 
−
        institutions that are governed by the SECP including Islamic
 
−
        mutual funds, Modarabas, Takaful companies, Housing
 
−
        finance companies, Investment finance companies and
 
−
        leasing companies shall remain out of ambit of such
 
−
        exercise.
 
−
  Presentation By:    Omar Mustafa Ansari – Partner – Ford Rhodes Sidat Hyder & Co.
 
  
−
Independent Shariah Compliance
+
*i R nevertheless since the results of such inspections are considered to be confined to the management of the bank and the state bank the benefits of such exercises cannot be forwarded to the general public
−
Assurance by Professionals
+
*shariah compliance inspection by sbp issues i R this is a very good approach as it is independent and authoritative in nature
−
 This approach is now being applied by a few Islamic banks.
 
−
 This may be applied in form of:
 
−
    1.  Internal Shariah Review; and
 
−
    2.  External Shariah Compliance Assurance / Audit.
 
−
  Presentation By:    Omar Mustafa Ansari – Partner – Ford Rhodes Sidat Hyder & Co.
 
  
−
SHARIAH COMPLIANCE RATING
+
*shariah compliance inspection by sbp issues i R moreover such exercise is limited to the islamic commercial banks and the islamic banking branches of conventional commercial banks and consequently other financial institutions that are governed by the secp including islamic mutual funds modarabas takaful companies housing finance companies investment finance companies and leasing companies shall remain out of ambit of such exercise
−
OF ISLAMIC FINANCIAL
+
*presentation by omar mustafa ansari a partner a ford rhodes sidat hyder co
−
INSTITUTIONS AND PRODUCTS
 
  
−
Shariah Compliance Rating of Islamic
+
*independent shariah compliance assurance by professionals i this approach is now being applied by a few islamic banks
−
Financial Institutions and Products
+
*presentation by omar mustafa ansari a partner a ford rhodes sidat hyder co
−
      Anyone having basic understanding of Islamic finance
 
−
      would easily understand that generally all the products
 
−
      being launched by Islamic financial institutions cannot be
 
−
      termed equivalent for Shariah compliance purpose.
 
−
      There might be certain provisions in an Ijara contract that
 
−
      may render it less desirable as compared to a similar Ijara
 
−
      contract. Or in general a Murabaha may be less preferable
 
−
      as compared to a Modaraba product.
 
−
Presentation By:    Omar Mustafa Ansari – Partner – Ford Rhodes Sidat Hyder & Co.
 
  
−
Shariah Compliance Rating of Islamic
+
*shariah compliance rating of islamic financial institutions and products i R anyone having basic understanding of islamic finance would easily understand that generally all the products being launched by islamic financial institutions cannot be termed equivalent for shariah compliance purpose
−
Financial Institutions and Products
+
*i R there might be certain provisions in an ijara contract that may render it less desirable as compared to a similar ijara contract
−
      In addition to the products being launched by the Islamic
 
−
      financial institutions that are subject to the approval of their
 
−
      respective Shariah Advisors and Shariah Supervisory
 
−
      Boards there are certain Islamic financial products that are
 
−
      launched by the conventional financial institutions or by
 
−
      various companies and even by the Government.
 
−
      These products, for example, include the housing finance
 
−
      option offered by the House Building Finance Corporation,
 
−
      Sukuks being issued by the Government of Pakistan and
 
−
      various government owned entities, Musharaka TFCs
 
−
      issued by the Sitara Energy and operating lease options
 
−
      offered by various leasing companies.
 
−
Presentation By:    Omar Mustafa Ansari – Partner – Ford Rhodes Sidat Hyder & Co.
 
  
−
Shariah Compliance Rating of Islamic
+
*shariah compliance rating of islamic financial institutions and products i R in addition to the products being launched by the islamic financial institutions that are subject to the approval of their respective shariah advisors and shariah supervisory boards there are certain islamic financial products that are launched by the conventional financial institutions or by various companies and even by the government
−
Financial Institutions and Products
+
*i R these products for example include the housing finance option offered by the house building finance corporation sukuks being issued by the government of pakistan and various government owned entities musharaka tfcs issued by the sitara energy and operating lease options offered by various leasing companies
−
      In view of the same it is imperative that a Shariah
 
−
      compliance rating mechanism be introduced so that the
 
−
      general public may be able to differentiate between various
 
−
      products being launched.
 
−
      In addition, this will encourage the financial institutions to
 
−
      continuously improve the purity factor in their financial
 
−
      products.
 
−
Presentation By:    Omar Mustafa Ansari – Partner – Ford Rhodes Sidat Hyder & Co.
 
  
−
GOVERNANCE STANDARDS BY
+
*shariah compliance rating of islamic financial institutions and products i R in view of the same it is imperative that a shariah compliance rating mechanism be introduced so that the general public may be able to differentiate between various products being launched
−
AAOIFI
+
*i R in addition this will encourage the financial institutions to continuously improve the purity factor in their financial products
  
−
Governance Standards
+
*i appointment composition and report i it is appointed by shareholders in agm upon recommendation of board of directors bod they may authorize bod to fix the remuneration of ssb
−
 Shari’a Supervisory Board: Appointment, Composition and
+
*shari a supervisory board ssb i it is an independent body of specialized jurists in fiqh almua malat islamic commercial jurisprudence
−
  Report
 
−
 Shari’a Review
 
−
 Internal Shari’a Review
 
−
 Audit and Governance Committee for Islamic Financial
 
−
  Institutions
 
−
Presentation By:  Omar Mustafa Ansari – Partner – Ford Rhodes Sidat Hyder & Co.
 
  
−
Shari’a Supervisory Board (SSB)
+
*shari a review i the objective of the shari a review is to ensure that the activities carried out by an ifi do not contravene the shari a
−
 It is an independent body of specialized jurists in fiqh
+
*it is the responsibility of ssb to form and express an opinion on the extent of an ifi s compliance with the shari a
−
  almua’malat (Islamic commercial jurisprudence).
 
−
 Appointment, Composition and Report
 
−
 It is appointed by shareholders in AGM upon recommendation
 
−
  of Board of Directors (BOD), they may authorize BOD to fix the
 
−
  remuneration of SSB. SSB shall be consisted of atleast three
 
−
  members, it may seek the service of consultants but excludes
 
−
  directors and significant shareholders of IFI.
 
−
Presentation By:  Omar Mustafa Ansari – Partner – Ford Rhodes Sidat Hyder & Co.
 
  
−
Shari’a Review
+
*the primary objective of internal shari a review is to ensure that the management of an ifi discharge their responsibilities in relation to the implementation of the shari a rules and principles as determined by the ifi s ssb
−
 The objective of the Shari’a review is to ensure that the
+
*it shall be carried out by an independent division or part of internal audit department depending on the size of an ifi
−
  activities carried out by an IFI do not contravene the Shari’a. It
 
−
  is the responsibility of SSB to form and express an opinion on
 
−
  the extent of an IFI’s compliance with the Shari’a.
 
−
Presentation By:    Omar Mustafa Ansari – Partner – Ford Rhodes Sidat Hyder & Co.
 
  
−
Internal Shari’a Review
+
*audit and governance committee agc i the importance of the agc for an ifi emanates from its role in i R achieving the fundamental objectives of an ifi by enhancing greater transparency and disclosure in financial reporting and i R enhancing the public s confidence of the ifi as genuine in its application of shari a rules and principles
−
 The internal Shari’a review is an integral part of the organs of
+
*presentation by omar mustafa ansari a partner a ford rhodes sidat hyder co
−
  governance of the IFI and operates under the policies
 
−
  established by the IFI. It shall be carried out by an independent
 
−
  division or part of internal audit department, depending on the
 
−
  size of an IFI. The primary objective of internal Shari’a review is
 
−
  to ensure that the management of an IFI discharge their
 
−
  responsibilities in relation to the implementation of the Shari’a
 
−
  Rules and Principles as determined by the IFI’s SSB.
 
−
  Presentation By:    Omar Mustafa Ansari – Partner – Ford Rhodes Sidat Hyder & Co.
 
  
−
Audit and Governance Committee
+
*objective and principles i objective to enable the auditor to express an opinion as to whether the financial statements are prepared in accordance with shari a rules and principles and the accounting standards of the accounting and auditing organization for islamic financial institutions aaoifi
−
(AGC)
+
*presentation by omar mustafa ansari a partner a ford rhodes sidat hyder co
−
 The importance of the AGC for an IFI emanates from its role in:
 
−
      achieving the fundamental objectives of an IFI, by
 
−
      enhancing greater transparency and disclosure in financial
 
−
      reporting; and
 
−
      enhancing the public’s confidence of the IFI as genuine in
 
−
      its application of Shari’a rules and principles.
 
−
Presentation By:    Omar Mustafa Ansari – Partner – Ford Rhodes Sidat Hyder & Co.
 
  
−
AUDITING STANDARDS BY AAOIFI
+
*objective and principles i principles the auditor should comply with code of ethics for professional accountants which include righteousness integrity trustworthiness fairness honesty independence objectivity professional competence due care confidentiality professional behavior and technical standards
−
Auditing
+
*presentation by omar mustafa ansari a partner a ford rhodes sidat hyder co
−
 Objective and Principles of Auditing
 
−
 The Auditor's Report
 
−
 Terms of Audit Engagement
 
−
 Testing for Compliance with Shari'a Rules and Principles by an
 
−
  External Auditor
 
−
 The Auditor's Responsibility to Consider Fraud and Error in an
 
−
  Audit to Financial Statements
 
−
Presentation By:  Omar Mustafa Ansari – Partner – Ford Rhodes Sidat Hyder & Co.
 
  
−
Objective
+
*auditor s report i the auditor should review and assess the conclusions drawn from the audit evidence obtained as the basis for the expression of an opinion on the financial statements it should contain a clear written expression of opinion on the financial statements taken as a whole
−
And Principles
+
*presentation by omar mustafa ansari a partner a ford rhodes sidat hyder co
−
 Objective
 
−
  To enable the auditor to express an opinion as to whether the
 
−
  financial statements are prepared, in accordance with Shari’a
 
−
  Rules and Principles and the accounting standards of the
 
−
  Accounting and Auditing Organization for Islamic Financial
 
−
  Institutions (AAOIFI).
 
−
Presentation By:  Omar Mustafa Ansari – Partner – Ford Rhodes Sidat Hyder & Co.
 
  
−
Objective
+
*i the engagement letter documents and confirms the auditor s acceptance of the appointment the objective and the scope of the audit the extent of the auditor s responsibilities to the client and the form of any reports to be provided by the auditor
−
And Principles
+
*terms of audit engagement i the auditor and the client should agree on the terms of the engagement
−
 Principles
 
−
  The auditor should comply with Code of Ethics for
 
−
  Professional Accountants which include; righteousness,
 
−
  integrity, trustworthiness, fairness, honesty, independence,
 
−
  objectivity, professional competence, due care, confidentiality,
 
−
  professional behavior and technical standards.
 
−
Presentation By:    Omar Mustafa Ansari – Partner – Ford Rhodes Sidat Hyder & Co.
 
  
−
Auditor’s Report
+
*testing for compliance with shari a rules and principles i when testing for shari a compliance the auditor shall obtain sufficient appropriate audit evidence that provides the auditor with reasonable assurance that the islamic financial institution ifi has complied with islamic shari a rules and principles the fatwas rulings and guidance issued by shari a supervisory board ssb constitutes islamic shari a rules and principles
−
 The auditor should review and assess the conclusions drawn
+
*presentation by omar mustafa ansari a partner a ford rhodes sidat hyder co
−
  from the audit evidence obtained as the basis for the expression
 
−
  of an opinion on the financial statements, it should contain a
 
−
  clear written expression of opinion on the financial statements
 
−
  taken as a whole.
 
−
Presentation By:  Omar Mustafa Ansari – Partner – Ford Rhodes Sidat Hyder & Co.
 
  
−
Terms of Audit Engagement
+
*fraud and errors i the fact that an audit is carried out may act as a deterrent but the auditor is not and can not be held responsible for prevention of fraud and error however the auditor shall be held responsible for negligence and misconduct
−
 The auditor and the client should agree on the terms of the
+
*presentation by omar mustafa ansari a partner a ford rhodes sidat hyder co
−
  engagement. The agreed terms would need to be recorded in
 
−
  an audit engagement letter.
 
−
 The engagement letter documents and confirms the auditor’s
 
−
  acceptance of the appointment, the objective and the scope of
 
−
  the audit, the extent of the auditor’s responsibilities to the client
 
−
  and the form of any reports to be provided by the auditor.
 
−
Presentation By:  Omar Mustafa Ansari – Partner – Ford Rhodes Sidat Hyder & Co.
 
  
−
Testing for Compliance with Shari’a Rules and
+
*what issues i have faced i as external auditor i R management is of the view that i have nothing to do in respect of shariah compliance even if i feel that it has something to do with the objects of the bank modaraba
−
Principles
+
*i am independent and without any disregard he is a paid employee and a party to the transaction as he approved it
−
 When testing for Shari’a compliance, the auditor shall obtain
 
−
  sufficient appropriate audit evidence that provides the auditor
 
−
  with reasonable assurance that the Islamic Financial Institution
 
−
  (IFI) has complied with Islamic Shari’a Rules and Principles
 
−
  (the Fatwas, Rulings and Guidance issued by Shari’a
 
−
  Supervisory Board (SSB) constitutes Islamic Shari’a Rules and
 
−
  Principles).
 
−
Presentation By:  Omar Mustafa Ansari – Partner – Ford Rhodes Sidat Hyder & Co.
 
  
−
Fraud and Errors
+
*what issues i have faced i as internal shariah reviewer external shariah auditor i R top management and shariah advisor are on my side but the middle level management makes all efforts to fail the exercise
−
 The fact that an audit is carried out may act as a deterrent, but
+
*i R i am bound to follow the advice of the shariah advisor without any opportunity of being heard at any independent forum
−
  the auditor is not and can not be held responsible for prevention
 
−
  of fraud and error, however, the auditor shall be held
 
−
  responsible for negligence and misconduct.
 
−
Presentation By:    Omar Mustafa Ansari – Partner – Ford Rhodes Sidat Hyder & Co.
 
  
−
WHAT ISSUES I HAVE FACED?
+
*what issues i have faced i as shariah compliance inspector i R management of the bank under inspection makes all efforts that either no inspection be carried out or if an inspection is inevitable then it should remain limited to whatever shariah advisor has approved
−
What Issues I Have Faced?
+
*i R sbp s management is not sure as to what extent it may interfere into the matters of the bank with respect to shariah compliance
−
 As External Auditor
 
−
      Management is of the view that I have nothing to do in
 
−
      respect of Shariah compliance (Even if I feel that it has
 
−
      something to do with the Objects of the Bank / Modaraba).
 
−
      Even if I have some evidence in hand, coupled with some
 
−
      sort of research work, I am told that the Shariah Advisor is
 
−
      the final authority. (I am independent, and without any
 
−
      disregard, he is a paid employee and a party to the
 
−
      transaction as he approved it).
 
−
Presentation By:    Omar Mustafa Ansari – Partner – Ford Rhodes Sidat Hyder & Co.
 
  
−
What Issues I Have Faced?
+
*i R sbp s shariah board includes a member who was the government s advocate in the case against the declaration of bank s interest as haram and another member who is on a number of shariah boards and shariah advisor of a bank whose independence from this perspective is not ensured
−
 As Internal Shariah Reviewer / External Shariah Auditor
+
*what issues i have faced i R sbp s management changes its decisions with regard to the scope of inspection and the responsibility for inspection within various departments
−
      Top management and Shariah Advisor, are on my side, but
 
−
      the middle level management makes all efforts to fail the
 
−
      exercise.
 
−
      I am bound to follow the advice of the Shariah Advisor,
 
−
      without any opportunity of being heard at any independent
 
−
      forum.
 
−
Presentation By:  Omar Mustafa Ansari – Partner – Ford Rhodes Sidat Hyder & Co.
 
  
−
What Issues I Have Faced?
 
−
 As Shariah Compliance Inspector
 
−
      Management of the bank under inspection makes all efforts
 
−
      that either no inspection be carried out or if an inspection is
 
−
      inevitable, then it should remain limited to whatever Shariah
 
−
      Advisor has approved.
 
−
      Shariah Advisor becomes a party along with the
 
−
      management, as he has approved the transactions and
 
−
      issued a clean Shariah review report.
 
−
      SBP’s management is not sure as to what extent it may
 
−
      interfere into the matters of the Bank with respect to Shariah
 
−
      compliance.
 
−
Presentation By:    Omar Mustafa Ansari – Partner – Ford Rhodes Sidat Hyder & Co.
 
  
−
What Issues I Have Faced?
+
  ''Please note, This is an auto generated summary based on sentances position in the document and other factors''
−
     SBP’s management changes its decisions with regard to the
+
== DOCUMENT WORD ANALYSIS ==
−
      scope of inspection and the responsibility for inspection
+
=== Main Category ===
−
      within various departments.
+
: AlHuda Material\takaful
−
      SBP’s Shariah board includes a member who was the
 
−
      Government’s advocate in the case against the declaration
 
−
      of bank’s interest as Haram, and another member, who is
 
−
      on a number of Shariah boards and Shariah Advisor of a
 
−
      Bank whose independence from this perspective is not
 
−
      ensured.
 
−
Presentation By:   Omar Mustafa Ansari – Partner – Ford Rhodes Sidat Hyder & Co.
 
  
−
                        Thank you…..
+
 
−
Presentation By: Omar Mustafa Ansari – Partner – Ford Rhodes Sidat Hyder & Co.
+
=== KeyWords ===
 +
taka islam insur malaysia productdeferred shariah countries muslim financial retakaful model growth custom partner developed service mutual bankable provided scheme
 +
 
 +
 
 +
 
 +
== RELATED DOCUMENTS ==
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 +
:[[ReTakaful by Rohail Ali Khan]]
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:[[Takaful Products Family Takaful Linked Investment Plans by S]]
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:[[The Success of Retakaful by Farid Benbouzid]]
 +
 
 +
 
 +
 
 +
== DOCUMENT REFERENCES ==
 +
 
 +
 
 +
=== Number of Pages ===
 +
54
 +
 
 +
 
 +
=== Published Date ===
 +
2016-09-17 01:17:20
 +
 
 +
 
 +
== Full Document ==
 +
 
 +
 
 +
[https://www.hodhood.com/en/HodHoodDocuments/IslamicFinance/Takaful/Audit%20Issue%20of%20Islamic%20Banking.pdf Read the Full Document]
 +
 
 +
 
 +
[[Category:Islamic Finance]]
 +
 
 +
[[Category: Takaful]]

Latest revision as of 12:08, 10 November 2017


Top 20 FREQUENT WORDS

shariah 96 islamic 61 compliance 59 ansari 48 ford 48 hyder 48 mustafa 48 partner 48 rhodes 48 sidat 48 omar 47 presentation 47 financial 42 institutions 26 audit 23 auditor 22 review 22 shari 20 issues 18 finance 17


DOCUMENT KEY POINTS

  • audit sharia compliance a issues in islamic banking and finance presentation by omar mustafa ansari partner ford rhodes sidat hyder co
  • member of ernst young global limited
  • role of auditors and accountants in islamic finance i allah swt says in quran that allah doth command you to render back your trusts to those to whom they are due and when ye judge between people that ye judge with justice
  • i according to the code of ethics for accountants and auditors of islamic financial institutions accounting duly including auditing a external as well as internal is one of the professions that is required by shariah as a fard kifaya
  • i one of the critical issues the industry is facing is the matter of purity in transactions which in longer run will ensure reliance of muslim ummah in this model of islamic finance and banking
  • purity of transactions and building reliance on islamic finance i islamic banking industry is presently growing at a very high pace
  • strategy to build reliance on islamic finance and banking i a three fold strategy may help out the industry to ensure shariah compliance on an ongoing basis
  • improved governance and shariah compliance assurance for islamic financial institutions and
  • standardization of shariah compliance regulations for islamic finance i standardization is necessary to ensure that all the matters of islamic financial institutions are dealt with within a framework which is acceptable for all musli miss i internationally there have been a lot of efforts for standardization of practices being followed by various islamic financial institutions
  • presentation by omar mustafa ansari a partner a ford rhodes sidat hyder co
  • standardization of shariah compliance regulations for islamic finance i the most admirable job has been performed by i R the islamic fiqh academy of the organization of islamic countries and i R the accounting and auditing organization of islamic financial institutions aaoifi
  • i in respect of governance and risk management islamic financial services board has also performed a commendable job
  • i accounting auditing and governance standards aags are issued by aaoifi s accounting and auditing standards board whereas the shariah standards board issues the shariah standards
  • introduction to aaoifi i aaoifi was established in in algiers under an agreement of association between a number of islamic financial institutions ifis
  • i these boards have been established by choosing the experts of the fields from throughout the islamic world
  • introduction to aaoifi i these boards have to date performed a remarkable job by issuing accounting governance auditing and shariah standards for islamic financial institutions
  • i serves as an international standard setting body of regulatory and supervisory agencies that have vested interest in ensuring the soundness and stability of the islamic financial services industry
  • i promotes the development of a prudent and transparent islamic financial services industry through introducing new or adapting existing international standards consistent with islamic shariah principles
  • pakistan s perspective i accounting and financial reporting i R the institute of chartered accountants of pakistan has issued islamic financial accounting standards for ijara and murabaha which are under implementation stages
  • these standards are approved by sbp and notified by secp
  • i R a shariah compliance inspection mechanism is being introduced and a shariah compliance inspection manual has been developed
  • presentation by omar mustafa ansari a partner a ford rhodes sidat hyder co
  • pakistan s perspective i takaful i R takaful rules developed and now being reviewed for improvement
  • i modarabas i R all model agreements and products are being reviewed from shariah compliance perspective
  • it impacts the reputation of the islamic financial institution and deteriorates reliance of the depositors investors customers and other stakeholders in the long term and
  • shariah non compliance risk what why i shariah non compliance risk is a significant risk for an islamic financial institution from two perspectives
  • shariah compliance assurance for islamic financial institutions i rules regulations and standards might not work unless and until an effective network of check and balance is established to ensure compliance of the same in letter and spirit
  • i shariah compliance cannot be ensured merely on the basis of approval of products by the shariah supervisory boards and the shariah advisors
  • shariah compliance review report of shariah supervisory board or the shariah advisor may or may not be based on internal shariah review
  • shariah compliance audit by the external auditors of the islamic financial institutions
  • shariah compliance review by shariah advisor a issues i competence from assurance perspective i R without any disregard to the individuals and not as a generalized rule it needs to be realized that the jurists sitting on the board or working as shariah advisors possess little knowledge about the accounting and auditing and more importantly the operations of the financial institutions
  • presentation by omar mustafa ansari a partner a ford rhodes sidat hyder co
  • shariah compliance review by shariah advisor a issues i R consequently their compliance review generally remains limited to the extent of assurance of the legal form of transactions ie vetting of agreements and documents etc
  • i R on the contrary the operational matters which include the substance of the transaction might remain unattended because it is not the core competence of these respectable jurists
  • shariah compliance review by shariah advisor a issues i management s attitude i R generally the management does not wish to bring each and every matter in the attention of the board or the advisor
  • i R accordingly unless they have enough time to review things on their own and they take reasonable interest in the same it is not possible for them to have a look on most of the operational matters
  • shariah compliance review by shariah advisor a issues i independence i R although we don t have any doubt on the personal independence and integrity of these respectable jurists they would themselves appreciate that the work performed under one s guidance should always be counter checked by an independent person
  • i R particularly keeping in view the human tendency of errors it cannot be advised that the person supervising and monitoring the transactions is also entrusted to recheck and audit the same
  • shariah compliance review by shariah advisor a issues i scarcity of resources time and skilled staff i R generally those on the shariah boards and on the seat of shariah advisors are busy guys
  • i R in addition they do not have sufficient budgets available for their departments nor an adequate number of skilled staff hired for the purpose of assisting them in the assurance work
  • shariah compliance review by shariah advisor a issues i R consequently you can easily imagine that it is humanly not possible for a single person to perform a comprehensive shariah compliance audit of the operations of a full fledged islamic financial institution which may even have a number of branches
  • presentation by omar mustafa ansari a partner a ford rhodes sidat hyder co
  • shariah compliance audit by external auditors a issues i R according to aaoifi standards the auditor should to a limited extent ensure compliance with shariah requirements
  • but this is not being performed by external auditors as the rules do not provide any further detail
  • you would appreciate that if the auditor is not equipped with the necessary skills and knowledge the output of the assignment might not be as good as may be expected from an experience auditor and i R since the scope of the audit is pre defined and the matter of permissibility of a transaction is generally subject to the opinions and perspectives of the shariah supervisory board or the shariah advisor the independence of the exercise to some extent remains in jeopardy
  • shariah compliance audit by external auditors a issues i R since the external auditor is also entrusted with the task of performing the shariah compliance audit his expertise in islamic finance is not ensured
  • i R nevertheless since the results of such inspections are considered to be confined to the management of the bank and the state bank the benefits of such exercises cannot be forwarded to the general public
  • shariah compliance inspection by sbp issues i R this is a very good approach as it is independent and authoritative in nature
  • shariah compliance inspection by sbp issues i R moreover such exercise is limited to the islamic commercial banks and the islamic banking branches of conventional commercial banks and consequently other financial institutions that are governed by the secp including islamic mutual funds modarabas takaful companies housing finance companies investment finance companies and leasing companies shall remain out of ambit of such exercise
  • presentation by omar mustafa ansari a partner a ford rhodes sidat hyder co
  • independent shariah compliance assurance by professionals i this approach is now being applied by a few islamic banks
  • presentation by omar mustafa ansari a partner a ford rhodes sidat hyder co
  • shariah compliance rating of islamic financial institutions and products i R anyone having basic understanding of islamic finance would easily understand that generally all the products being launched by islamic financial institutions cannot be termed equivalent for shariah compliance purpose
  • i R there might be certain provisions in an ijara contract that may render it less desirable as compared to a similar ijara contract
  • shariah compliance rating of islamic financial institutions and products i R in addition to the products being launched by the islamic financial institutions that are subject to the approval of their respective shariah advisors and shariah supervisory boards there are certain islamic financial products that are launched by the conventional financial institutions or by various companies and even by the government
  • i R these products for example include the housing finance option offered by the house building finance corporation sukuks being issued by the government of pakistan and various government owned entities musharaka tfcs issued by the sitara energy and operating lease options offered by various leasing companies
  • shariah compliance rating of islamic financial institutions and products i R in view of the same it is imperative that a shariah compliance rating mechanism be introduced so that the general public may be able to differentiate between various products being launched
  • i R in addition this will encourage the financial institutions to continuously improve the purity factor in their financial products
  • i appointment composition and report i it is appointed by shareholders in agm upon recommendation of board of directors bod they may authorize bod to fix the remuneration of ssb
  • shari a supervisory board ssb i it is an independent body of specialized jurists in fiqh almua malat islamic commercial jurisprudence
  • shari a review i the objective of the shari a review is to ensure that the activities carried out by an ifi do not contravene the shari a
  • it is the responsibility of ssb to form and express an opinion on the extent of an ifi s compliance with the shari a
  • the primary objective of internal shari a review is to ensure that the management of an ifi discharge their responsibilities in relation to the implementation of the shari a rules and principles as determined by the ifi s ssb
  • it shall be carried out by an independent division or part of internal audit department depending on the size of an ifi
  • audit and governance committee agc i the importance of the agc for an ifi emanates from its role in i R achieving the fundamental objectives of an ifi by enhancing greater transparency and disclosure in financial reporting and i R enhancing the public s confidence of the ifi as genuine in its application of shari a rules and principles
  • presentation by omar mustafa ansari a partner a ford rhodes sidat hyder co
  • objective and principles i objective to enable the auditor to express an opinion as to whether the financial statements are prepared in accordance with shari a rules and principles and the accounting standards of the accounting and auditing organization for islamic financial institutions aaoifi
  • presentation by omar mustafa ansari a partner a ford rhodes sidat hyder co
  • objective and principles i principles the auditor should comply with code of ethics for professional accountants which include righteousness integrity trustworthiness fairness honesty independence objectivity professional competence due care confidentiality professional behavior and technical standards
  • presentation by omar mustafa ansari a partner a ford rhodes sidat hyder co
  • auditor s report i the auditor should review and assess the conclusions drawn from the audit evidence obtained as the basis for the expression of an opinion on the financial statements it should contain a clear written expression of opinion on the financial statements taken as a whole
  • presentation by omar mustafa ansari a partner a ford rhodes sidat hyder co
  • i the engagement letter documents and confirms the auditor s acceptance of the appointment the objective and the scope of the audit the extent of the auditor s responsibilities to the client and the form of any reports to be provided by the auditor
  • terms of audit engagement i the auditor and the client should agree on the terms of the engagement
  • testing for compliance with shari a rules and principles i when testing for shari a compliance the auditor shall obtain sufficient appropriate audit evidence that provides the auditor with reasonable assurance that the islamic financial institution ifi has complied with islamic shari a rules and principles the fatwas rulings and guidance issued by shari a supervisory board ssb constitutes islamic shari a rules and principles
  • presentation by omar mustafa ansari a partner a ford rhodes sidat hyder co
  • fraud and errors i the fact that an audit is carried out may act as a deterrent but the auditor is not and can not be held responsible for prevention of fraud and error however the auditor shall be held responsible for negligence and misconduct
  • presentation by omar mustafa ansari a partner a ford rhodes sidat hyder co
  • what issues i have faced i as external auditor i R management is of the view that i have nothing to do in respect of shariah compliance even if i feel that it has something to do with the objects of the bank modaraba
  • i am independent and without any disregard he is a paid employee and a party to the transaction as he approved it
  • what issues i have faced i as internal shariah reviewer external shariah auditor i R top management and shariah advisor are on my side but the middle level management makes all efforts to fail the exercise
  • i R i am bound to follow the advice of the shariah advisor without any opportunity of being heard at any independent forum
  • what issues i have faced i as shariah compliance inspector i R management of the bank under inspection makes all efforts that either no inspection be carried out or if an inspection is inevitable then it should remain limited to whatever shariah advisor has approved
  • i R sbp s management is not sure as to what extent it may interfere into the matters of the bank with respect to shariah compliance
  • i R sbp s shariah board includes a member who was the government s advocate in the case against the declaration of bank s interest as haram and another member who is on a number of shariah boards and shariah advisor of a bank whose independence from this perspective is not ensured
  • what issues i have faced i R sbp s management changes its decisions with regard to the scope of inspection and the responsibility for inspection within various departments


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AlHuda Material\takaful


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taka islam insur malaysia productdeferred shariah countries muslim financial retakaful model growth custom partner developed service mutual bankable provided scheme


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Number of Pages

54


Published Date

2016-09-17 01:17:20


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