The Role of Shariah Auditor in Islamic Banks: The Effect of Shariah Governance Framework (SGF) 2011

This paper ascertains the current roles and responsibilities of Shariah auditor in the Islamic banking industry in Malaysia. To explore further, we identify the changes in these roles, especially after the introduction of the Shariah Governance Framework (SGF) 2011. The study employs a qualitative method by utilizing in-depth interviews with nine (9) key individuals in Malaysian Islamic banks. Our findings support the notion that Shariah auditors' roles and responsibilities are still under the jurisdiction of the banks' internal audit unit. More importantly, Shariah auditors play their roles as the third line of defense by giving assurance to the shareholders and stakeholders that all businesses and operations comply with Shariah precepts. Also, Shariah auditors need to look at the internal control elements of whether effective and efficient enough to alleviate any possible Shariah breaches. In terms of changes in its roles after the SGF implementation, most of the interviewees assert that the approach has been changed from compliance audit to risk-based audit. Our findings guide us to propose more structured and specific guidelines about Shariah auditors' roles and responsibilities in the Islamic banks. This guideline eventually could provide stimulus to improve governance and strengthen market as well as stakeholder's confidence. Finally, this study stipulates some precious recommendations to further enhance the Shariah auditor roles not only in the Malaysian Islamic banking industry but also in similar contexts.