The Performance of Internal Shariah Auditor in Islamic Financial Institutions

The purpose of this paper is to examine the conceptual relationship between Shariah audit independence, qualifications and performance of internal Shariah auditor in Islamic financial institutions (IFIs). This paper is theoretical in its approach; whereby it also undertakes an extensive literature review. From a general agency theory, an Islamic agency theory is articulated and applied to ascertain the attributes of internal Shariah auditor performance revolving around the concept of independence and qualifications. Performance of internal Shariah auditing, as a mechanism of assuring Shariah compliance by IFIs, varies directly with the degree of independence and qualifications enjoyed by internal Shariah auditors themselves. The study finds that in evaluating the independence and qualifications of internal Shariah auditor performance, Islamic agency theory can potentially serve as the theoretical foundation in developing a multi-dimensional conceptual framework. Evidence is drawn strictly from secondary sources. To ensure that internal Shariah auditor is performance, IFIs ought to improve the degree of independence and qualifications of the auditors. Both the studies on external Shariah auditors’ performance in IFIs, and internal auditor’s performance in conventional financial institutions have been extensively researched. However, research on the performance of internal Shariah audit in IFIs is yet to be conducted extensively.