Factors Influencing Internal Shariah Audit Effectiveness: Evidence From Bahrain

Abstract

It is this research’s objective to analyze factors that cause an effective internal Shariah audit among the Islamic Financial Institutions (IFIs) in Bahrain. The questionnaire method has been employed to examine the said topic. The questionnaire’s primary source of information was the Accounting and Auditing Organizations for Islamic Financial Institutions (AAOIFI) Governance Standards. Meanwhile, the respondents are consisted of 52 IFIs’ head of internal Shariah audit department. These IFIs are registered with the Central Bank of Bahrain. To analyze those relationships the structural equation method (SEM) via SmarPLS3.0 has been adopted. The study has found that the effective execution of internal Shariah audit is positively linked with the competency and performance of internal Shariah audit. Meanwhile, the other two variables, i.e. being independent and Shariah supervisory board have been discovered to be positively related with internal Shariah audit effectiveness. Nonetheless, there is no significant contribution. Overall, all the variables contribute 63.2% to IFIs’ internal Shariah audit effectiveness. The regulatory and professional bodies may benefit from this study in their assessment of factors that result in a successful and meaningful internal auditing of Shariah matters.