Audit is a form of assurance that involves an appraisal and examination of the financial statements of an entity with a view to express an opinion that these statements are free from material misstatements or not. This aims to enhance the confidence of users with regards to the subject-matter. It provides an objective independent examination whereby the value and credibility of the financial statements are increased. In short, the audit opinion expressed by an auditor is intended to provide a reasonable level of assurance rather than an absolute level.
Islamic audit (also Shari’ah compliance audit or Shari’ah audit) is a systematic process that involves objectively obtaining and evaluating evidence regarding assertions about a wider set of actions and events (socioeconomic, religious, environmental, etc.). This is to ascertain the extent of association between assertions and Shari’ah, and make the results and findings available to intended users.
The main differences between conventional audit and Islamic audit are illustrated below:
| Conventional audit | Islamic audit | |
| Subject-matter of audit | Financial statement assertions- i.e., opinion on the true representation and fairness of financial statements of a firm. |
Other types of assertions on contracts, processes, systems, transaction flows, personnel, performance, etc, as well as financial statements. |
| Criteria/ basis | International financial reporting standards (IFSB) and IAS (broadly any set of generally accepted accounting principles- GAAP). |
Shari’ah principles and rulings, Islamic finance standards (AAOIFI) and such IFRS and other GAAP that don’t constitute any Shari’ah issues. |
| Sufficient evidence | Documented evidence obtained through rounds of observations, sampling, and verification of documents, etc. |
Rulings issued by Shari’ah supervisory boards (SSBs), Shari’ah verdicts (fatwa) issued by Fiqh academies, in addition to any other conventional evidence. |
| Involved parties | Firm, auditors, and users. | Firm, auditors, and a wider base of users. |
| Written assurance report | Auditors’ report | More comrehensive report: auditor’s and Shari’ah auditors’. |
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