Role of Accounting Standards for the Future of Islamic Financial Institutions

Abstract

One of the most important challenges faced by the Islamic financial Institutions (IFI’s) is ensuring that financial statements are properly presented. The IFI’s prepare financial statements under different accounting standards which results in the problem of reliability, comparability, understanding and transparency. The Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) have taken a right step in developing the accounting and sharia standards for the IFI’s. Against such a backdrop, this paper analyses whether there is requirement for specific Islamic accounting standards to make financial institution’s practices compliant with the Islamic Standards. This paper also analyses the role of AAOIFI in developing the accounting, auditing and ethical standards asper the sharia principle.

Keywords: AAOIFI, Accounting Standards, Financial Statement, IFI’s, Interest, Islamic Financial Institutions, Sharia Accounting

DOI: 10.7176/RJFA/10-22-12

Publication date: November 30^th 2019