The Quality of Financial Reporting: Sharia Supervisory Board Role in Zakat Management Organization

Abstract

Public trust is closely related to the quality of the financial information which is presented by Zakat Management Organization (ZMO). The information will be useful if the information is able to support the community decision-making to entrust their zakat to ZMO. Sharia Supervisory Board (SSB) is a very important organ in the Islamic financial institutions (IFIs), SSB ensures all the objectives of Islamic governance are achieved, which includes directing, reviewing and supervising all the activities of IFIs in order to adhere to sharia. This study aims to determine the relation role of sharia supervisory board on the quality of financial reporting. The method which is used in this study is a survey method. The unit of analysis in this study is the ZMO in Indonesia. The respondents in this study are director, member of the supervisory board of sharia as well as Zakat collection and utilization. The hypothesis testing uses moment product moment correlation and coefficient of determination (R2). The result of this research is the relation of sharia supervisory board role with the quality of financial reporting is positive and very strong

Can disclosure practices and stakeholder management influence zakat payers’ trust? A Malaysian evidence

“…This study shows that there is a significant positive relationship between perceived disclosure practices and zakat payers' trust. The findings in this study is consistent with the findings of Mustafa et al (2013), Taha et al (2015) and Mediawati (2016). These studies agree that financial disclosure serves as a This study also shows no significant relationship between perceived stakeholder management and zakat payers' trust.…”

“…The information is important to prove that such institutions are legitimate (Mustafa et al, 2013). A study conducted in Indonesia by Mediawati (2016) noticed the difference between the potential zakat fund and actual zakat received by the Zakat Management Organisation (ZMO) in Indonesia. Allegedly, the difference or shortage of zakat funds occurred due to lack of public trust in ZMO that resulted from the quality of the financial information that were presented by ZMO.…”

“…Allegedly, the difference or shortage of zakat funds occurred due to lack of public trust in ZMO that resulted from the quality of the financial information that were presented by ZMO. The information would be useful if it is able to support the community's decision-making in entrusting their zakat to ZMO as an institution whose mandate is to receive, utilise and distribute zakat that is entrusted by the community (Mediawati, 2016). Taha et al (2015) explore the needs of zakat institutions to disclose zakat information.…”

Effect of Board Management and Governmental Model on Zakat Payers’ Trust on Zakat Institutions

“…Internal control must be comprehensive and involve people at all levels in a firm (Deloitte and Touche LLP, 2004). In addition, internal control must be supported by quality financial reporting, which is a credible source to measure the performance of management (Mediawati, 2016). Karim and Ahmed (1990) claimed that zakat institutions need a Shariah Supervisory Board (SSB) to ensure that institutional processes are in accordance to the Islamic law.…”

Internal Control and Quality of Financial Reporting in Zakat Management Organization

“…Public trust is closely associated with the financial information quality which is presented by ZMO. The information will be useful if the information is able to support the community decision-making to entrust their zakat to ZMO as an institution that is considered a mandate to receive, utilize and distribute zakat which is entrusted by community [1].…”