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Shari’ah Audit and Supervision in Shari’ah Governance Framework: Exploratory Study of Islamic Banks in Pakistan

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  • Muhammad Asghar Shahzad

    (International Islamic University, Islamabad)

  • Syed Kashif Saeed

    (Pakistan Institute of Engineering and Applied Sciences, Islamabad)

  • Asim Ehsan

    (International Islamic University, Islamabad)

Abstract

Shari’ah governance in Islamic banking institutions is as essential and significant as corporate governance in modern corporate organizations. It consists of arrangements ensuring the compliance of Shari’ah rules and principles in Islamic banking transactions. The objective of this paper is to investigate the Shari’ah audit mechanism and the challenges faced by Islamic banking institutions after the implementation of Shari’ah governance framework issued by the State Bank of Pakistan (SBP). Our findings suggest that although Shari’ah audit is considered as a distinctive activity from conventional audit, still more training will be required for external audit firms and employees of IFIs. Our study also concludes that the idea of SBP Shari’ah board is a right step towards the future conflict resolution; however, this governance framework may have certain financial implication for IFIs

Suggested Citation

  • Muhammad Asghar Shahzad & Syed Kashif Saeed & Asim Ehsan, 2017. "Shari’ah Audit and Supervision in Shari’ah Governance Framework: Exploratory Study of Islamic Banks in Pakistan," Business & Economic Review, Institute of Management Sciences, Peshawar, Pakistan, vol. 9(1), pages 103-118, March.
    • Handle: RePEc:bec:imsber:v:9:y:2017:i:1:p:103-118
    DOI: dx.doi.org/10.22547/BER/9.1.6
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    References listed on IDEAS

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    1. Shleifer, Andrei & Vishny, Robert W, 1997. "A Survey of Corporate Governance," Journal of Finance, American Finance Association, vol. 52(2), pages 737-783, June.
    2. Shafii, Zurina & Abidin, Ahmad Zainal & Salleh, Supiah, 2015. "Integrated Internal-External Shariah Audit Model: A Proposal towards the Enhancement of Shariah Assurance Practices in Islamic Financial Institutions," Working Papers 1436-7, The Islamic Research and Teaching Institute (IRTI).
    3. John, Kose & Senbet, Lemma W., 1998. "Corporate governance and board effectiveness1," Journal of Banking & Finance, Elsevier, vol. 22(4), pages 371-403, May.
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