ANALYZING THE RELIABILITY AND INDEPENDENCE OF EXTERNAL SHARIAH AUDIT PRACTICES IN ISLAMIC FINANCIAL INSTITUTIONS OF PAKISTAN

Abstract

This thesis is aimed at generating qualitative understanding of the external Shariah audit practices of Islamic Financial Institutions (IFIs) in Pakistan. The core purpose is to analyze the reliability and independence of these audits. Literature suggests that certain guidelines are being followed by IFIs to conduct such audits. These audits, however, typically rely on the opinion of Shariah Supervisory Boards. For this study, to understand the reliability and independence of Shariah audits in IFIs qualitative research approach has been adopted. Data collection is performed through semi-structured interviews. Non-probability approach has been used as sampling method, and target population were practitioners working in regional offices of the audit firms operating in Pakistan. Data analysis is conducted through Ritchie and Lewis framework method. This analysis approach depends on explanatory and/or descriptive conclusions around the identified themes within the data collected. The findings suggest that there is a need for Shariah audit framework/standards in order to lessen the reliance on the Shariah Supervisory Board. Inclusion of curriculum related to Shariah audit should be ensured in order to enhance the competency of external auditors so that the audit report they produce can be relied on. It is very important that the Shariah auditors have both accounting and Shariah knowledge to remain independent while conducting an audit assignment. Moreover, the study contributes to an understanding of the factors that facilitate improved external Shariah audit practices. This will ensure the compliance of IFIs audit with Shariah principles. It also highlights the factors that contribute to understand the need of a reliable and independent external Shariah audit practices in IFIs.