Evaluating the Effectiveness of Senior Management Support for Shariah Audit Function in Malaysian Islamic Financial Institutions

Senior management holds crucial responsibility to ensure Shariah compliance over the daily operations and business activities in Islamic financial institutions (IFIs), at all times. This underscores an urgent need to strengthen the effectiveness of senior management function in managing Shariah non-compliance risks in the business activities of IFIs as mandated by Bank Negara Malaysia (BNM) in the Shariah Governance Policy Document (SGPD). Prior studies have demonstrated that various types of IFIs exhibit different levels of Shariah governance practices. However, extensive involvement of the senior management to effectively integrate Shariah compliance across all levels has been adequately examined. The main objective of this study is to evaluate the effectiveness of senior management support for Shariah audit function in Malaysian IFIs. The study employs quantitative methodology to gather the data using survey questionnaire distributed to the Head of Shariah audit in IFIs in Malaysia. Based on the findings, majority IFIs has established effective level of senior management support for the Shariah audit function especially in Islamic banks. However, the senior management support can be enhanced in terms of its function to establish the Shariah compliance culture and to provide adequate human resource for the Shariah audit function. The outcome of this study could enhance effective senior management support to ensure robust management of Shariah non-compliance risks in IFIs. The findings also contribute to further enhance the effectiveness of Shariah governance arrangement in various IFIs and encourage rigorous implementation of the Shariah compliance risk culture at all levels.