Islamic legal maxim for Shari’ah audit in Islamic bank

Abstract

Purpose The purpose of this paper looks into how the Islamic legal maxims (ILM) could provide a basis for Sharīʿah audit practices in assisting the institution’s managerial practice to achieve Maqasid al Shari’ah (MS). Design/methodology/approach The findings of the study recorded in this paper are based on a single case study selected from a preliminary study. The qualitative approach was used, where two phases of a semi-structured interview were conducted on the targeted participants in their natural settings. Findings It was found that with the implementation of Sharīʿah audit practices, ILM supports the achievement of MS by Islamic banks. With this, the income generated by these banking institutions is halal, and all business transactions and operations will not violate the Sharīʿah principles. Furthermore, the ILM includes principles such as “certainty is not overruled by doubt,” “matters determined according to intentions,” “the norm in transactions is that of permissibility,” “harm must be eliminated” and “judgment is to be based on knowledge and understanding.” Social implications The findings of this study have provided valuable information that would lead Muslim auditors to exhibit a strong character while abiding by Islamic principles. Originality/value MS is strongly recommended in Islamic banking institutions because of the significant relationship between MS and the objectives of business transactions where wealth must be protected in the prevention of incoming hardships occurring in society. Moreover, this paper focuses on the application of ILM in the Sharīʿah audit practices as a part of the Sharīʿah governance in Islamic banks.

Shariah auditing: analyzing the past to prepare for the future

“…The empirical literature on this context has addressed several aspects, such as the SA association with Sukuk (Ahmed et al , 2019); professionalizing SA (Najeeb and Ibrahim, 2014); competency in Shariah auditing (Ali and Kasim, 2019; Mohd Ali et al , 2020); responsibilities of Shariah auditor (Yasoa et al , 2020b); Shariah auditor characteristics (Mohd Ali et al , 2018); challenges in Shariah practices (Puad et al , 2020); assess the implementation of the internal Shariah governance framework in selected Islamic banks (Aziz et al , 2019); the effectiveness of internal SA function (Ab Ghani et al , 2019; Shafii et al , 2013); external SA (Shafii and Salleh, 2010); SA labor market (Shafii et al , 2014a); students’ awareness of SA (Khalid et al , 2019); and Islamic legal maxims and SA practices (Abd Rahman et al , 2020). It has been reported that Shariah auditors play their roles as the third line of defense by giving assurance to the shareholders and stakeholders that all businesses and operations comply with Shariah precepts.…”

“…In this investigation, some issues have received little attention in Shariah auditing literature. Researchers have explored the SA in relation to risk (Oktavina et al , 2014; Sani and Abubakar, 2020), standardization of Shariah audit (Novikova and Kharisova, 2019), Islamic legal maxims (Abd Rahman et al , 2020), firm performance (Ajili and Bouri, 2018; Aslam and Haron, 2020; Darwanto and Chariri, 2019), labor market (Omar, 2019; Shafii et al , 2014a), fraud (Suryanto and Ridwansyah, 2016), service quality (Tawfik and Bilal, 2020), Shariah auditing of financial statement (Shafii et al , 2014a) and student awareness of SA (Khalid et al , 2019; Yaacob et al , 2014).…”

Sharia Audit and Shariah Compliance of Islamic Financial Institutions: A Bibliometric Analysis

“…Alahmadi et al, (2017) also stated that shariah audit is a part of the internal audit function involving sharia board and internal auditor. The function of shariah audit is to check and assess certain transactions in accordance with sharia and the implementation of good and effective internal control for sharia compliance (Rahman et al, 2020).…”

“…A lot of studies on audit have been conducted, such as Behrend and Eulrich (2018); Alzeban (2020); Lamboglia et al, (2020); Ciger (2020); Behrend and Eulrich (2020); Oussii and Boulila (2020); Wuttichindanon and Issarawornwanich (2020). However, studies on sharia audit are still limited, especially related to the role of sharia audit in improving sharia compliance, among others conducted by Shafii et al, (2010); Karim and Shetu (2020); Haleem et al (2020); Rahman et al, (2020); Yasoa'et al, (2020).…”

Debt Financing Vs. Equity Financing in the Context of Maqasid Al-Shari'ah in Islamic Finance

“…(Musnad). Sadly, there are various places in the modern Muslim world where many people sleep and awaken starving (Abd Rahman et al, 2020).…”