New Auditing Standard To Enhance Islamic Finance, Says S&P Global Ratings

The latest auditing standard set out by AAOIFI will help to strengthen governance and growth of the Islamic finance market, S&P Global Ratings has said.

In a review of the new standard, S&P Global ratings stated that external auditing of Sharia compliance will strengthen governance in Islamic finance. According to the global rating agency, the new standard sets out criteria for external auditing of a financial institution’s Sharia compliance and provides some guidance on the key considerations, when performing this exercise.

Global Head, Islamic Finance, S&P Global Ratings, Dr. Mohamed Damak, noted that while there were no unified Sharia rules that Islamic financial institutions must follow, the new standard by AAOIFI addresses this gap by creating a hierarchy of the existing standards and regulations. “In our view, enforcing the new auditing standard should enhance Sharia governance and market discipline in Islamic financial institutions,” Damask stated.

He pointed out that while AAOIFI does not specify if the standard will apply to market instruments issued by entities that are not subject to internal Sharia audit, such as corporate or sovereign sukuk issuers, extending the practice of external audits to these instruments could also help strengthen their credibility. Global Islamic finance assets are expected to rise to $3.69 trillion by 2024 as latest data showed a major surge in Islamic finance activities.

Source: THE NATION

By Taofik Salako, Deputy Group Business Editor