Assessing the effectiveness of internal Sharıʿah audit structure and its practices in Islamic financial institutions: a case study of Islamic banks in Yemen

• Main Authors: Algabry, Latifah, Syed Jaafar Alhabshi, Syed Musa, Soualhi, Younes, Othman, Anwar Hasan Abdullah
• Format: Article
• Language: English
• Published: Emerald Publishing Limited 2020
• Subjects: BPH Islamic Economics; HG1501 Banking
• Online Access: http://irep.iium.edu.my/81327/13/81327%20-%20Assessing%20the%20effectiveness%20of%20internal%20shari%27ah.pdf; http://irep.iium.edu.my/81327/; https://www.emerald.com/insight/publication/issn/2443-4175; https://doi.org/10.1108/AJAR-04-2019-0025

Purpose – This study aims to explore and assess the key Sharıʿah governance factors that may have an influence on the internal Sharıʿah audit structure and its practices in Islamic financial Institutions in Yemen, particularly in the Islamic banking sector. Design/methodology/approach – To do so, the study adopts a qualitative approach employing case study analysis, and both primary and secondary data are used to formulate the appropriate interview questions and achieve the objectives of the study. Findings –The authors observed that the key factors that help in assessing the internal Shar�ıʿah audit structure and its practices are Shar�ıʿah auditor charter, audit plan and audit manual. In addition, the authors observed that, in general, internal Shar�ıʿah audit tends to be subjective in Yemeni banks because they depend on the internal Shar�ıʿah auditor’s qualifications and experience more than formal guidelines and regulations. This is because there are no detailed internal Shar�ıʿah audit plans or detailed audit manual. Moreover, the internal Shar�ıʿah auditor charter is not comprehensive in explaining the duties required of the internal Shar�ıʿah auditor, and it is mixed with the Shar�ıʿah Supervisory Board (SSB) duties. This means the internal Shar�ıʿah auditor lacks the critical tools that enable him to achieve the desired audit manual objectives where the effectiveness of internal Shar�ıʿah audit can be measured. Practical implications – One of the important implications of this study is providing very important guidance about enhancing the areas where shortfalls are found within the Shar�ıʿah governance process in the Yemeni banking system. This enhancement process of the internal factors of Shar�ıʿah governance can be achieved by increasing the awareness of the enhancing internal Shar�ıʿah audit structure as it reflects ultimately on the internal Shar�ıʿah auditor’s role and his practices. Originality/value – Understanding the effectiveness of internal Shar�ıʿah audit structure among internal auditors will improve the Shar�ıʿah audit framework standards, enhance the Shar�ıʿah knowledge among internal auditors and provide general guidelines to design audit programmes for Shar�ıʿah governance auditing process