A study of compliance with AAOIFI accounting standards by Islamic banks in Bahrain

Vinnicombe, Thea

doi:10.1108/17590811211265902

Cited by 35 publications

(57 citation statements)

References 15 publications

(9 reference statements)

Supporting

Mentioning

Contrasting

Order By: Relevance

“…There is a number of studies that have been conducted on Bahrain due to the relatively large number of IFIs using AAOIFI standards (Vinnicombe, 2012). Some of these studies used accountants' perceptions as an indicator (Sarea, 2012;Sarea andHanefah, 2013a, 2013b), while others examined financial statements as an indicator (Vinnicombe, 2012). Sarea (2012) examined the level of compliance of accounting practices with AAOIFI standards.…”

Section: Review Of the Literaturementioning

confidence: 99%

“…These three Islamic financing products are widely used by the Islamic banks. These three financing products are among the most used products (refer to Table III) by Islamic banks (Vinnicombe, 2012). In addition, a field study conducted by AAOIFI consultants in 1991 concluded that the three products are widely used by IFIs and require more attention from accounting standards setting agencies (Nadzri, 2009;Vinnicombe, 2012).…”

Section: Development Of the Disclosure Indexesmentioning

confidence: 99%

“…These three financing products are among the most used products (refer to Table III) by Islamic banks (Vinnicombe, 2012). In addition, a field study conducted by AAOIFI consultants in 1991 concluded that the three products are widely used by IFIs and require more attention from accounting standards setting agencies (Nadzri, 2009;Vinnicombe, 2012). Moreover, a number of AAOIFI financial accounting standards related to some Islamic financing products are not currently widely used by the Islamic banks thereby rendering their investigation ineffective.…”

Section: Development Of the Disclosure Indexesmentioning

confidence: 99%

“…In the modern Mudaraba, funds are deposited with an Islamic bank, the depositor being (rab-almal), and the bank then acts as the mudarib as it mobilises funds for depositors. It can also be done by what is called the two-tier Mudaraba model with the second tier being the bank in the role of (rab-al-mal) and the borrower the mudarib (Vinnicombe, 2012). It is important to mention here that the Mudaraba contract is seen by some researchers as a contract that could expose IFIs into larger country party risk (El-Hawary et al, 2007).…”

Section: Murabaha Mudaraba and Musharaka Contractsmentioning

confidence: 99%

See 3 more Smart Citations

The compliance of disclosure with AAOIFI financial accounting standards

Al-Sulaiti

Ousama

Hamammi

2018

JIABR

View full text Add to dashboard Cite

Purpose This paper aims to examine the compliance of disclosure with the financial accounting standards of the Accounting and Auditing Organisation for Islamic Financial Institutions’ (AAOIFI) related to Islamic financing products by Islamic banks in Bahrain and Qatar. Design/methodology/approach The study measures compliance using disclosure indexes. The disclosure indexes include the three financial accounting standards of Murabaha, Mudaraba and Musharaka. The data are collected from the annual reports of 24 Islamic banks in Bahrain and Qatar over a period of 2012-2015. Findings The paper found that Islamic banks in Bahrain and Qatar comply with AAOIFI financial accounting standards related to Murabaha, Mudaraba and Musharaka. However, there was a level of non-compliance in both countries. In addition, it found that the extent of compliance had increased over the 2012-2015 period. Also, the Murabaha standard had the highest mean of compliance. Moreover, the results showed that the Islamic banks in Qatar tend to have more compliance of overall Murabaha and Mudaraba disclosures compared to the Islamic banks in Bahrain. Research limitations/implications The findings are preliminary and highlight that the issue is of high interest to Islamic banks and AAOIFI. Hence, it requires a detailed follow-up to form a complete picture that would assist AAOIFI and regulators gear their policies toward better quality disclosure by Islamic financial institutions. Even though the findings are encouraging, future research is recommended to enforce compliance with the AAOIFI financial accounting standards. Originality/value This is a pioneer empirical study that focuses on the level and trend of compliance with AAOIFI financial accounting standards related to the Islamic financing products of Murabaha, Mudaraba and Musharaka standards, especially in Qatar. Additionally, it is the first study comparing between the only two Gulf Cooperation Council (GCC) countries, i.e. Bahrain and Qatar, that mandatory apply the AAOIFI standards.

show abstract

Section: Review Of the Literaturementioning

confidence: 99%

Section: Development Of the Disclosure Indexesmentioning

confidence: 99%

Section: Development Of the Disclosure Indexesmentioning

confidence: 99%

Section: Murabaha Mudaraba and Musharaka Contractsmentioning

confidence: 99%

See 2 more Smart Citations

The compliance of disclosure with AAOIFI financial accounting standards

Al-Sulaiti

Ousama

Hamammi

2018

JIABR

View full text Add to dashboard Cite

show abstract

“…Another study Vinnicombe (2012) conducted as an extension of his previous works (Vinnicombe, 2010) for examining the compliance of AAOIFI standards by the Islamic banks in Bahrain. This study is an advanced study which evaluated the compliance status based on multiple indexes to remove the methodological limitations of Vinnicombe (2010).…”

Section: Literature Reviewmentioning

confidence: 99%

Comparative compliance status of AAOIFI and IFSB standards

Ullah

Khanam

Tasnim

2018

JIABR

View full text Add to dashboard Cite

Purpose This paper aims to examine the compliance status of Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) Financial Accounting Standards-1 and Islamic Financial Services Board (IFSB) Standard-4 by Islami Bank Bangladesh Limited (IBBL), recognizing the regulatory influence for complying with AAOIFI and IFSB standards and identifying the factors influencing the compliance with these standards. Design/methodology/approach The present study used content analysis approach for investigating the compliance status. The study considered IBBL as the only sample because it is the only Islamic bank in Bangladesh which is the member of both AAOIFI and IFSB. Hence, this paper investigated the compliance status of IBBL as a member of AAOIFI and IFSB. The study examined the annual reports of 2008-2012 as these were the latest and contemporary reports in 2013 when the study was conducted. SPSS software version 22.0 was used to analyze the data. A total of 203 items under 13 categories of AAOIFI standard and 133 items under 17 categories of IFSB standard were considered. Ordinary least squares was run to test the hypotheses of the study. Findings The study found that IBBL on an average complied 46.31 per cent of AAOIFI and 52.50 per cent of IFSB standards during the period, and importantly, IBBL did not comply some of the categories of required disclosures. The study also observed that size, as measured by total asset and number of branches, has a significant influence on compliance with IFSB standard, but not AAOIFI. The findings of the study depicted that IBBL did not reasonably recognize the importance of complying with AAOIFI and IFSB standards. Poor compliance or non-compliance with AAOIFI and IFSB accounting and reporting standards by IBBL exposed that the bank is not efficient in managing Shari`ah compliance risks, operational risks and transparent financial reporting. Therefore, recognition of the Shari`ah standards by the respective IFIs and a “regulatory push” is vital for improving the level of compliance with these standards. Research limitations/implications The study considered IBBL as the only sample of the study because it is the only Islamic bank in Bangladesh which holds the membership of both AAOIFI and IFSB. The fiscal years 2008-2012 only were selected to evaluate the compliance status of the AAOIFI and IFSB standards in preparation and presentation of the financial statements of IBBL for comparative analysis because IFSB standard for accounting and disclosure was formulated in 2007; hence, the study could not evaluate the compliance status before 2008. Practical implications The study will help IBBL in identifying their limitations in complying AAOIFI and IFSB standards and also the regulators in designing the accounting and reporting frameworks in regulating Islamic banks in Bangladesh. The study would help IBBL in identifying the reasons for non-compliance, how improvement in compliance level may help the bank in mitigating Shari`ah compliance and operational risk and how new legal and institutional framework may improve the level of compliance with those standards. Social implications The study observed that the AAOIFI and IFSB standards were set for increasing the level of Shari`ah compliance, but the compliance status showed that different classes of accounting and reporting were ignored from compliance by IBBL. This study will benefit the stakeholders in choosing a Shari`ah-compliant bank. Originality/value This is a unique study which considered both AAOIFI and IFSB accounting and reporting standards in evaluating the reporting compliance status of an Islamic bank and identified the influence of reporting compliance on managing Shari`ah compliance risks, operational risks and transparency. This study expects to instigate the Islamic banks in complying accounting and reporting standards for being Shari`ah-compliant.

show abstract

Can the Sharī’ah Be Compatible with Global Governance? Islamic Financial Institutions as a Laboratory for Conceptual Analysis

Idriz

Kaminski

2018

International Political Economy Series

View full text Add to dashboard Cite

A study of compliance with AAOIFI accounting standards by Islamic banks in Bahrain

Cited by 35 publications

References 15 publications

The compliance of disclosure with AAOIFI financial accounting standards

The compliance of disclosure with AAOIFI financial accounting standards

Comparative compliance status of AAOIFI and IFSB standards

Can the Sharī’ah Be Compatible with Global Governance? Islamic Financial Institutions as a Laboratory for Conceptual Analysis

Contact Info

Product

Resources

About