The need of accounting standards for Islamic financial institutions: evidence from AAOIFI

2013 ◽  
Vol 4 (1) ◽  
pp. 64-76 ◽  
Author(s):  
Adel Mohammed Sarea ◽  
Mustafa Mohd Hanefah
Keyword(s):  
Financial Institutions ◽  
Accounting Standards ◽  
Future Research ◽  
Content Type ◽  
Accounting Practice ◽  
Muslim Countries ◽  
Level Measurement ◽  
Compliance Level ◽  
Islamic Financial Institutions ◽  
Heated Debate

PurposeThe purpose of this paper is to determine the need of Islamic Accounting Standards – a review of the literature – for Islamic financial institutions (IFIs).Design/methodology/approachThe basis of the paper was stakeholder theory to analyse the need of accounting standards and to design the conceptual framework as evidenced from Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI). The evidence reviewed suggests the need for Islamic accounting standards to fill the gap in accounting practice among Islamic financial institutions.FindingsThe AAOIFI accounting standards serve as a guideline that may reflect the unique characteristics of IFIs and become a useful tool to meet the various needs of IFIs. Currently, one of the major challenges facing IFIs lies in the preparation of the financial statements under different accounting standards and which may lead to problems of comparability, reliability and compliance level measurement. This has resulted in a heated debate among scholars which has hitherto translated to the evolving existing literature surrounding the interpretation of the level of compliance with the Islamic accounting standards. The paper concludes with various recommendations for future research, the most important of which is the need for future studies on how AAOIFI accounting standards can be made mandatory in all Muslim countries.Originality/valueThis paper contributes towards a better understanding and acceptability of the need of Islamic Accounting Standards.

The compliance of disclosure with AAOIFI financial accounting standards

2018 ◽  
Vol 9 (4) ◽  
pp. 549-566 ◽  
Author(s):  
Jabir Al-Sulaiti ◽  
A.A. Ousama ◽  
Helmi Hamammi
Keyword(s):  
Financial Institutions ◽  
Accounting Standards ◽  
Financial Accounting ◽  
Annual Reports ◽  
Future Research ◽  
Islamic Banks ◽  
Content Type ◽  
Quality Disclosure ◽  
Islamic Financial Institutions

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.

Factors influencing compliance level with AAOIFI financial accounting standards by Islamic banks

2017 ◽  
Vol 18 (1) ◽  
pp. 137-159 ◽  
Author(s):  
Yosra Mnif Sellami ◽  
Marwa Tahari
Keyword(s):  
Audit Committee ◽  
Explanatory Power ◽  
Accounting Standards ◽  
Financial Accounting ◽  
Future Research ◽  
Islamic Banks ◽  
Omitted Variables ◽  
Content Type ◽  
Factors Influencing ◽  
Compliance Level

Purpose The purpose of this paper is to investigate the compliance level of Islamic banks with disclosure accounting standards in some Middle East and North African countries, and most importantly to analyse the factors associated with compliance. Design/methodology/approach This study uses a self-constructed checklist of 203 items to measure the compliance of 38 Islamic banks with disclosure accounting standards during the 2011-2013 period. A multivariate regression analysis is used to determine significant factors influencing the extent of this compliance. Findings The results show a wide variation in compliance levels among the disclosure accounting standards and reveal that compliance is positively related to the listing status, the existence of an audit committee, the bank’s age and the country of domicile. Research limitations/implications This study analyses the compliance level with only disclosure accounting standards. It remains to future research to examine compliance with all Accounting and Auditing Organization for Islamic Financial Institutions’ Financial Accounting Standards (AAOIFI FAS). Moreover, the explanatory power of the model remains modest. This connotes the existence of omitted variables that could be explored in future research. Practical implications The research contributes to the international financial accounting literature about the banking industry. The results are relevant for researchers, accounting professionals, stakeholders, standard-setters and regulatory bodies that are concerned with Islamic banks’ disclosures. Originality/value Although AAOIFI was established since 1991, very few empirical studies about compliance with the FAS have been undertaken. To the authors’ knowledge, there are no studies that investigated the determinants of compliance level with AAOIFI FAS. Then, this study concentrates on disclosure accounting standards (FAS 1 and FAS 5) with a high risk of non-compliance.

Compliance with AAOIFI guidelines in general presentation and disclosure by Libyan Islamic banks

2015 ◽  
Vol 11 (2) ◽  
pp. 90-99 ◽  
Author(s):  
Nassr Saleh Mohamad Ahmad ◽  
Abdu Samia Daw Ben Daw
Keyword(s):  
Financial Institutions ◽  
Design Methodology ◽  
Financial Statements ◽  
Future Research ◽  
Two Dimensional ◽  
Islamic Banks ◽  
Policy Makers ◽  
Content Type ◽  
Islamic Financial Institutions ◽  
Training Programmes

Purpose – The purpose of this paper is to reveal the level of compliance with Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) guidelines in general presentation and disclosure in the financial statements of Fashlowm Islamic branch of the Gumhouria Bank as the biggest bank in Libya. Design/methodology/approach – The study used two-dimensional analysis, which combines a questionnaire with content analysis. It allowed a better understanding of the picture than would have been provided by the questionnaire alone. Findings – The results of this study indicate that the level of compliance with AAOIFI guidelines regarding general presentation and disclosure in the financial statements is low. Many reasons were identified as being behind such a low level. The lack of training programmes on AAOIFI standards was at the forefront of these reasons. Research limitations/implications – The sample is limited to the Fashlowm Islamic branch of Gumhouria Bank. This is may not be true for other branches and banks. Further research is needed in this area. Originality/value – The AAOIFI has existed for over 20 years, but little empirical research has been conducted into compliance with the standards developed by this body in the Libyan context. This paper helps to address this gap and provide a foundation for future research and development in this area. Moreover, the findings of this study may be useful to policy makers and legislators.

A systematic literature review on AAOIFI standards

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Sherif El-Halaby ◽  
Sameh Aboul-Dahab ◽  
Nuha Bin Qoud
Keyword(s):  
Literature Review ◽  
Financial Institutions ◽  
Systematic Literature Review ◽  
Meta Analysis ◽  
Historical Record ◽  
Research Field ◽  
Future Research ◽  
Content Type ◽  
Islamic Financial Institutions

Purpose This paper aims to systematically review the existing studies for Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) standards which include different tracks of researches and then identify the gaps to propose opportunities for future research. Design/methodology/approach By adopting a systematic literature review approach, 46 papers that were published between 2000 and 2020 from 23 journals concerned with AAOIFI were selected for review and analysis. Findings The authors combine electronic searches to identify relevant studies using keywords such as “AAOIFI” or and “Islamic standards.” In light of the existing studies’ limitations, this paper derives and summarizes five leading future research tracks: identifies the research gaps in AAOIFI and then suggests that AAOIFI still requires more empirical analyses; identifies the alternative analytical methods as meta-analysis; identifies additional measurements for macro and microeconomics factors; identifies recent tracks as corresponding to Covid-19 pandemic; and future studies should consider the role of central banks and positive criticism for AAOIFI. Practical implications This analysis address the literature gaps on measuring compliance, determinants and consequences of AAOIFI adoption as this study serves as a guide for the researchers, regulators and Islamic financial institutions in research associated with this area. The findings would support AAOIFI, regulators and related authorities across jurisdictions with suggestions on improving the current AAOIFI practices. Originality/value This literature review is a historical record and guidance for researchers who seek to examine and explore several questions about AAOIFI. To the best of the authors’ knowledge, this is the first paper that applies systematic literature review over AAOIFI research field.

Level of Maqāsid ul-Shari’āh’s in financial reporting standards for Islamic financial institutions

2020 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Murniati Mukhlisin
Keyword(s):  
Financial Institutions ◽  
Financial Reporting ◽  
Design Methodology ◽  
Reporting Standards ◽  
Complete Understanding ◽  
Content Type ◽  
Financial Reporting Standards ◽  
Compliance Level ◽  
Compliance Measure ◽  
Islamic Financial Institutions

Purpose This study aims to measure levels of Sharīʿah-compliance in Islamic financial institutions (IFIs) financial reporting standards with the objective to investigate the application of Maqāsid ul-Sharīʿah as a compliance measure reflected in the reporting standards. Design/methodology/approach This paper adopts Maqāsid ul-Sharīʿah’s model to measure levels of Sharīʿah-compliance amongst three available financial reporting frameworks and presentation standards; international financial reporting standards (IFRS), accounting and auditing organization for Islamic financial institutions (AAOIFI), Pernyataan Standar Akuntansi Keuangan (PSAK) Syariah. NVivo 10 software is used in this paper to help measure quantitatively the compliance level of each standard. Findings The findings suggest that the use of Maqāsid ul-Sharīʿah leads to a more complete understanding of how the meaning of Sharīʿah and its values can be integrated into the demands of financial reporting, and hence, offering greater convergence between ethics and accounting regulations amongst IFIs. Originality/value It documents different context of content analysis that takes examples of Islamic financial reporting studies and uses both classical and contemporary theoretical bases. The main outputs are designed for standard setters and policymakers with expectation for Sharīʿah objectives (i.e. Maqāsid ul-Sharīʿah), to be embedded in the preparation of financial reporting standards for the IFIs. Hence, they will be able to show their full accountability then gain better trust from the stakeholders.

The need for Islamic accounting standards: the Malaysian Islamic financial institutions experience

2019 ◽  
Vol 10 (1) ◽  
pp. 115-133 ◽  
Author(s):  
Nor Farizal Mohammed ◽  
Fadzlina Mohd Fahmi ◽  
Asyaari Elmiza Ahmad
Keyword(s):  
Financial Institutions ◽  
Accounting Standards ◽  
Financial Statements ◽  
Advisory Council ◽  
Main Concern ◽  
Structured Interviews ◽  
Accounting Standard ◽  
Content Type ◽  
Body Of Knowledge ◽  
Islamic Financial Institutions

Purpose The purpose of this paper is to examine views of financial statements preparers with regard to the practices in reporting Islamic Financial Institutions (IFIs), thereby contributing to answer whether there is indeed a need for a separate set of Islamic accounting standards for IFIs. Design/methodology/approach Drawing upon seven in-depth semi-structured interviews conducted with IFIs’ leading officers who are highly involved in preparing financial statements in Malaysia, the paper offers evidence on the current stance of reporting the operation of IFIs, the influence of AAOIFI accounting standards and the feasible application of IFRSs in reporting IFIs. Findings While it is shown that most of the interviewees admit the feasibility of IFRSs in reporting IFIs, many interviewees placed greater emphasis on the spirit of Islam based on Islamic contract. In that case, the findings show that to convince the public that they offer Shariah compliance products approved by Shariah Advisory Council, there is a need for specificity guidelines or standards for IFIs within the IFRS framework. The main concern raised in the paper is that separate Islamic accounting standard is not needed, instead the option needs to be within the IFRS framework with the collaboration work of Accounting and Auditing for Islamic Financial Institutions (AAOIFI) and the International Accounting Standard Board (IASB). Originality/value With the recent rapid growth of IFIs, this paper contributes regarding the inconclusive stance on the need for specificity accounting standards for IFIs such as the ones issued by AAOIFI. It adds to the current body of knowledge by highlighting the collaboration of the AAOIFI and the IASB for the intended specific guidelines for IFIs to be accepted globally.

Issues and challenges of IFRS 9 in Malaysian Islamic financial institutions: recognition criteria perspective

2021 ◽  
Vol 12 (2) ◽  
pp. 239-257
Author(s):  
Marziana Madah Marzuki ◽  
Abdul Rahim Abdul Rahman ◽  
Ainulashikin Marzuki ◽  
Nathasa Mazna Ramli ◽  
Wan Amalina Wan Abdullah
Keyword(s):  
Financial Institutions ◽  
Financial Reporting ◽  
Business Models ◽  
Fair Value ◽  
Financial Instruments ◽  
Structured Interviews ◽  
Content Type ◽  
Reporting Framework ◽  
Islamic Financial Institutions ◽  
Ifrs 9

Purpose The purpose of this paper is to investigate the effects and challenges of the new amendment of International Financial Reporting Standards (IFRS) 9 in Malaysia from the perspectives of regulators, auditors, accountants and academicians in Malaysian Islamic financial institutions. For the purpose of this study, this paper focuses on the recognition criteria perspective of the standard, which provides a basic understanding of the financial reporting framework. Design/methodology/approach Using 10 series of semi-structured interviews undertaken with key individuals in regulatory bodies, audit companies, full-fledged Malaysian Islamic Banks and Malaysian higher learning institutions. Findings The findings revealed that IFRS 9 strengthens International Accounting Standards 39 in terms of relevance and reliability, recognition of financial instruments and identification of business models. Nevertheless, Islamic financial institutions face challenges in terms of a faithful representation of fair value, substance over form, identification of financial instruments before recognition criteria and the extent of the role of risk management in reducing manipulation in identifying business models. Research limitations/implications This study provides implications to regulators and standard setters in Malaysia to enhance the quality of financial reporting framework and practices in Islamic financial institutions in this country using IFRS 9. Practical implications Practically, the findings of this study can be used by the regulators to resolve the issues that arise in adopting IFRS 9 among Islamic financial institutions to further enhance financial reporting quality. Originality/value The findings of this study are very important to ensure that the adoption of IFRS among Islamic financial institutions are in line with Sharīʿah principles. To date, no studies have been done on the challenges of adopting IFRS 9 among Islamic financial institutions in Malaysia.

scholarly journals Modeling crowdfunders’ behavioral intention to adopt the crowdfunding-waqf model (CWM) in Malaysia

2018 ◽  
Vol 11 (2) ◽  
pp. 231-249 ◽  
Author(s):  
Mohamed Asmy Mohd Thas Thaker ◽  
Hassanudin Mohd Thas Thaker ◽  
Anwar Allah Pitchay
Keyword(s):  
Technology Acceptance ◽  
Behavioral Intention ◽  
Perceived Usefulness ◽  
Primary Data ◽  
Equation Modeling ◽  
Future Research ◽  
Content Type ◽  
Liquidity Constraint ◽  
Muslim Countries ◽  
The Government

PurposeWaqf institutions in many Muslim countries including in Malaysia are facing liquidity constraints in developing waqf land. This paper aims to offer a sustainable model of source of financing for waqf institutions to meet their liquidity constraint in developing waqf land, which is known as the crowdfunding–waqf model (CWM). Later, CWM validated its acceptance in the field among the crowdfunders by adopting the theory of technology acceptance model (TAM).Design/methodology/approachThe primary data are collected from the survey administered to donors or crowdfunders in Selangor, Penang, Johor and Pahang. The total number of respondents aren= 1,000. The analysis is conducted using structural equation modeling (SEM).FindingsBased on findings, both the perceived usefulness and perceived easy to use of CWM are found to have a positive impact on the behavioral intention of crowdfunders or donors in assisting waqf institutions to develop waqf land in Malaysia. Furthermore, perceived easy to use has a positive relationship and direct effect on perceived usefulness of crowdfunders to use the CWM.Research limitations/implicationsThere are some limitations of the current study. The sample size and area of study become the obvious limitations. Thus, there is a need for caution in the interpretation of the results, and the conclusion cannot be as generalized. Besides, the use of current factors might limit the ability to explore other potentially important determinants of the crowdfunders’ behavioral intention on using CWM. Thus, future research can be conducted by incorporating new factors and provide new insights for optimizing CWM. Other potential moderator variables should be included into the research model in order to obtain more robust results.Practical implicationsThe findings of this paper will provide a new avenue for waqf institutions to raise funds for developing waqf land, particularly in Malaysia. The present study also has implications for the government and policymakers. Through CWM, it enables to reduce the expenses of the government for the development of waqf land. Indeed, CWM could be applied in other Muslim countries that are facing liquidity constraint in developing waqf land.Originality/valueThis paper offers an additional literature on waqf and crowdfunding, especially in the Malaysian context. The paper proposes a viable alternative model for waqf institutions as a source of financing by using crowdfunding.

On the regulatory changes in government accounting development in Indonesia

2018 ◽  
Vol 8 (3) ◽  
pp. 387-411
Author(s):  
Pran Krishansing Boolaky ◽  
Nitri Mirosea ◽  
Kishore Singh
Keyword(s):  
Local Government ◽  
Practical Implication ◽  
International Standards ◽  
Future Research ◽  
Content Type ◽  
Post Colonial ◽  
Accounting Practice ◽  
Government Accounting ◽  
Regulatory Changes ◽  
History Of

Purpose The purpose of this paper is to inquire into the history of government accounting, using a well-grounded periodisation, in order to provide a chronology of government accounting development (GAD) in Indonesia from 1845 to 2015 focusing on development on accounting regulations and systems and practices in local government in Indonesia. Design/methodology/approach It collects archival data and then uses a descriptive tradition of research to capture mainly regulatory changes affecting GAD from colonial to post-colonial period. Findings The paper reports major regulatory changes, evolution in local government accounting practice, development of government accounting standards (GASt) and converging GASs with international standards. Research limitations/implications This study is important to accounting historians and other academics because it provides a detailed chronicle of accounting regulatory changes in Indonesia which can be used for future research. The limitation(s) of this study is that is data collection which was not easily accessible and as results have to rely on various sources. Practical implications The study has an important practical implication. It has produced a time series register of regulatory changes affecting GAD in Indonesia. It can be used as a reference document in the National Library of Indonesia and also by academics for future research. Originality/value A times series register, for the first time, is produced which provides a comprehensive chronology of accounting development in Indonesia.

A proposed framework for implementing risk-based Shari’ah audit

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Suleiman Dalhatu Sani ◽  
Mustapha Abubakar
Keyword(s):  
Financial Institutions ◽  
Real Life ◽  
Financial System ◽  
Practical Work ◽  
System Stability ◽  
Illustrative Case ◽  
Content Type ◽  
Finance Industry ◽  
Islamic Financial Institutions

Purpose This paper aims to recommend a framework that serves as a practical work tool for conducting risk-based Shari’ah audit (RBSA) in Islamic financial institutions (IFIs). Design/methodology/approach Qualitative research method was used through critical in-depth content analysis of documented literature to generate deep insights, further supported with a hypothetical illustrative case study application of the framework on an Islamic bank, aimed at bringing the framework to a practical, near real-life scenario. Findings A robust RBSA framework has been developed which focuses on Shari’ah non-compliance risks to systematically and practically arrive at a rated opinion on the level of an IFI’s adherence with Shari’ah rules and principles as recommended by the Accounting and Auditing Organization for Islamic Financial Institutions, aimed to safeguard the IFI and promote financial system stability at large. Research limitations/implications Practical realities limited the study to the use of a hypothetical case study bank. Future researchers can apply the framework to a real case study of diverse IFIs for effective contextual recalibration in diverse jurisdictions. Practical implications This paper aids the development of both internal and external Shari’ah audit practice using the risk-based approach. Social implications The RBSA framework contributes to promoting public trust and confidence in the Islamic finance industry. Originality/value This paper has proposed this RBSA framework as a practical work tool for Shari’ah auditors in their engagements and regulators in promoting sound governance and financial system stability. It provides foundation for future researchers in the field.

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