• 14 Aug

    PRESS RELEASE:14th August 2017, Manama, Kingdom of Bahrain

    CIBAFI Submitted Comments to the AAOIFI on Auditing Standard for Islamic Financial Institutions No. 6: External Shariah Audit


    14th August 2017, Manama, Kingdom of Bahrain | Aligned with its role as advocate of the Islamic Financial Services Industry (IFSI), the General Council for Islamic Banks and Financial Institutions (CIBAFI), the global umbrella of Islamic financial institutions, announced that it has provided its comments on 14th August 2017 to the Accounting & Auditing Organization for Islamic Financial Institutions (AAOIFI) on its Exposure Draft (ED) of an Auditing Standard for Islamic Financial Institutions No. 6: External Shariah Audit (Independent Assurance Engagement on an Islamic Financial Institution’s Compliance with Shariah Principles and Rules).

    The Exposure Draft has been issued on 20th June 2017 and was open for public consultation until 15th August 2017.
    In its submission, CIBAFI thanked the AAOIFI for giving the opportunity to the Islamic financial services industry stakeholders to comment on Auditing Standard for Islamic Financial Institutions No. 6: External Shariah Audit before its issuance and provided comments comprising three key points.

    Firstly, CIBAFI noted that the reference point in this standard is the International Standard on Assurance Engagements (ISAE) 3000. However, the standard does not refer to any of other AAOIFI auditing standards unlike the previous AAOIFI auditing standards, which make reference to the audit standards approved by AAOIFI for IFIs (ASIFIs). This seems to undermine the previous work of AAOIFI, and may pose the question about the framework of other auditing standards. It is therefore recommended to clarify the relationship between this standard and other previously issued AAOIFI auditing standards.

    Secondly, the ED established a hierarchy of standards which auditors must apply. AAOIFI standards come at the top, two places ahead of rulings by the Shariah board of the jurisdiction. CIBAFI perceives that the adoption of this standard in any jurisdiction would therefore automatically apply to all AAOIFI Shariah standards in the jurisdiction, and ahead of any national standards, which might not be appropriate for many jurisdictions and may hamper the adoption and implementation of the whole standard. In addition, this seems to contradict other AAOIFI standards that make the Shariah Supervisory Board of the Islamic financial institution as the reference point for the institution.

    Thirdly, the ED suggested for Islamic Financial Institutions (IFIs) to implement the standard effective 1st January 2018. CIBAFI believes the proposed time is not enough to do so, especially as the standard will not be issued immediately. CIBAFI members also emphasised the need for having the ED issued in Arabic language to increase the number of banks’ responses and to engage more interested parties including the Shariah scholars.
    In its submission to the AAOIFI, CIBAFI expressed its appreciation of the work that the AAOIFI does to maintain sound practices of the IFSI.

    Full comments to the AAOIFI are available on CIBAFI website http://www.cibafi.org

    In addition to policy and regulatory advocacy, CIBAFI continues to support the IFSI through various activities and initiatives. These include providing industry stakeholders with a platform to discuss emerging issues, representing the industry at major global financial events, and sharing knowledge through specialized publications and comprehensive professional development programmes.

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