Assessing the effectiveness of internalSharīʿahaudit structure and its practices in Islamic financial institutions: a case study of Islamic banks in Yemen

Purpose - This study aims to explore and assess the keySharīʿahgovernance factors that may have an influence on the internalSharīʿahaudit structure and its practices in Islamic financial Institutions in Yemen, particularly in the Islamic banking sector. Design/methodology/approach - To do so, the study adopts a qualitative approach employing case study analysis, and both primary and secondary data are used to formulate the appropriate interview questions and achieve the objectives of the study. Findings - The authors observed that the key factors that help in assessing the internalSharīʿahaudit structure and its practices areSharīʿahauditor charter, audit plan and audit manual. In addition, the authors observed that, in general, internalSharīʿahaudit tends to be subjective in Yemeni banks because they depend on the internalSharīʿahauditor’s qualifications and experience more than formal guidelines and regulations. This is because there are no detailed internalSharīʿahaudit plans or detailed audit manual. Moreover, the internalSharīʿahauditor charter is not comprehensive in explaining the duties required of the internalSharīʿahauditor, and it is mixed with theSharīʿahSupervisory Board (SSB) duties. This means the internalSharīʿahauditor lacks the critical tools that enable him to achieve the desired audit manual objectives where the effectiveness of internalSharīʿahaudit can be measured. Practical implications - One of the important implications of this study is providing very important guidance about enhancing the areas where shortfalls are found within theSharīʿahgovernance process in the Yemeni banking system. This enhancement process of the internal factors ofSharīʿahgovernance can be achieved by increasing the awareness of the enhancing internalSharīʿahaudit structure as it reflects ultimately on the internalSharīʿahauditor’s role and his practices. Originality/value - Understanding the effectiveness of internalSharīʿahaudit structure among internal auditors will improve theSharīʿahaudit framework standards, enhance theSharīʿahknowledge among internal auditors and provide general guidelines to design audit programmes forSharīʿahgovernance auditing process.