Does Shariah Audit Framework Matter? Views from Practitioners in Islamic Banks

Shariah auditor plays an important check and balance mechanism in the Shariah governance system of Islamic banks. However, previous studies confirm that the Shariah audit framework is yet to be developed. Therefore, the current Shariah audit practice heavily relies on the conventional audit system and general Shariah governance policy. This chapter investigates the need for the Shariah audit framework in the Islamic banking industry in Malaysia. Nine (9) important industry participants were interviewed for the study using a qualitative methodology, including a few Shariah auditors, Shariah committee members, heads of Shariah audit, and the Chief of Shariah officer. In addition, Atlas.ti has been used to transcribe and analyse the interview data. Findings from the interviews reveal interesting mixed views since there are views that support the establishment and those against the notion. Even though the Shariah audit framework is worth establishing in the future, considering the current practices, it could be concluded that the Islamic bank in Malaysia is comfortable with the recent exercise by not having a specific Shariah audit framework. Bank Negara Malaysia (BNM) is argued to decentralise the autonomy of the respective Islamic banks to determine its approach so long Islamic banks follow the required general guideline as stipulated in the latest Shariah Governance 2019. Besides, given that each bank has its audit appetite due to its structure and size distinctions, it is plausible to let IBs produce their best Shariah audit framework that suits their needs and capacity. To provide a more comprehensive outcome, the future study may take into account additional perspectives from pertinent stakeholders, such as the regulator and external auditor.