The internal audit function within an organization is no longer confined to the conventional compliance or operational audit. Specialized internal audit has emerged with the rise of certain service sectors including the Islamic financial institutions (IFIs). This specialised audit known as shariah audit is purported to safeguard the welfare of faith-based investors by ensuring a shariah compliant IFIs. Effective shariah audit requires competent internal auditors. Shortage in qualified and competent internal auditors to conduct effective shariah audit has however become one of the challenges for the IFIs. This paper explores these challenges through the perspective of practitioners within the IFI in Malaysia as one of the active players in providing the Islamic banking products and services to the Muslims’ users. This study adopted a multiple case-study to gather the data on challenges of shariah auditors of Islamic bank to perform their duty. Interview was conducted with a representative from the IFIs regulator and 30 internal auditors from four types of IFIs directly involved in conducting the shariah audit. There is currently a lack of standard operating procedure on the recruitment of specialized internal auditors in the IFI from a mixed practice on the composition of specialized internal auditors recruited by the IFIs with most of them being accounting qualified candidates. The IFIs also prefer to hire either internally or externally acquired experienced internal auditors. The main challenge in hiring this type of internal auditors is to have professionals with vast knowledge, skills and experiences in accounting, auditing and shariah related matters. This study contributes to the importance of competency practice among Islamic banking personnel. It also contributes to the management policy in the recruitment or training of shariah auditing professionals of IFIs in Malaysia. This empirical research contributes to the importance of competency practice among Islamic banking personnel besides management policy in the recruitment or training of shariah auditing professionals of IFIs in Malaysia.
Abdolmohammadi, M. J. (1991). Factors affecting auditor’s perceptions of applicable decisions aids for various audit task. Contemporary Accounting Research, 7(2), 535–548.
Abdolmohammadi, M. J., Burnaby, P., & Hass, S. (2006). A review of prior common body of knowledge (CBOK) studies in internal auditing and an overview of the global CBOK 2006. Managerial Auditing Journal, 21(8), 811–821.
https://doi.org/10.1108/02686900610703750
Rahman, A. R. A. (2008). Shari’ah audit for Islamic financial services?: the needs and challenges. The Journal of Muamalat and Islamic Finance, 7(1), 133–145.
Bank Negara Malaysia. (2010). Shariah Governance Framework for Islamic Financial Institutions. Retrieved from https://www.bnm.gov.my/guidelines/05_shariah/02_Shariah
_Governance_Framework_20101026.pdf
Bedard, J. (1989). Expertise in auditing?: myth or reality? Accounting Organizations and Society, 14(1/2), 113–131.
Bedard, J. C., & Chi, M. T. (1993). Expertise in auditing. Auditing?: A Journal of Practice and Theory, 12(Supplement), 21–45.
Boynton, W. C., & Walter, G. K. (2010). Modern Auditing (6th edition). New York: Wiley Publishing.
Burnaby, P., Hass, S., & Abdolmohammadi, M. J. (2006). A survey of internal auditors to establish the scope of the common body of knowledge study in 2006. Managerial Auditing Journal, 21(8), 854–868. https://doi.org/10.1108/02686900610703796
CERT. (2014). International Centre for Research and Training (CERT). Retrieved from http://www.cert.com.my
Cheng, R. H., Engstrom, J. H., & Kattleus, S. C. (2002). Educating government financial managers: University collaboration between business and public administration. Journal of Government Financial Management, 51, 10–15.
Coetzee, P., Erasmus, L. J., & Plant, K. (2015). Global assessment of internal audit competence?: Does one size fi t all?? Southern African Business Review Special Edition Accounting Research, 1–21.
Flint, D. (1988). Philosophy and Principles of Auditing. London, UK: Macmilian Education.
Institute Banking and Finance Institute of Malaysia. (2014). Institute of Banking and Financial Institution (IBFIM). Retrieved from http://www.ibfim.com
International Centre for Education in Islamic Finance. (2014). International Centre for Education in Islamic Finance. Retrieved from http://www.inceif.org
International Federation of Accountants. (2014). International Federation of Accountants - Initial Professional Development. Retrieved from http://www.ifac.org/publications-resources
Islamic Financial Services Act 2013 (2013).
Kaplan, S. E., & Reckers, P. M. J. (1989). An examination of information search during initial audit planning. Accounting, Organizations and Society, 14(5–6), 539–550.
Plant, K., Coetzee, G. P., Fourie, H. B. S. (2013). Internal audit competencies?: skills requirements for internal audit staff in South Africa. Southern African Journal of Accountability and Auditing Research, 15, 65–74.
Konrath, L. F. (2002). Auditing Concepts and Applications?: A Risk-analysis Approach (5th ed.). Ohio, US: West Publishing Company.
Libby, R., & Frederick, D. (1990). Experience and the ability to explain audit findings. Journal of Accounting Research, 28(Autumn), 348–367.
Mills, D. (1993). Quality Auditing (1st edition). London, UK: Capman and Hall.
Mohamed, E. K. A., & Lashine, S. H. (2003). Accounting knowledge and skills and the challenges of a global business environment. Managerial Finance, 29(7), 3–16.
Kasim, N., Ibrahim, S. H. M., & Sulaiman, M. (2009). Shariah auditing in Islamic financial institutions?: exploring the gap between the “Desired ” and the “Actual .” Global Economy & Finance Journal, 2(2), 127–137.
Mahzan, N., & Yahya, Y. (2014). Syariah audit practices in Malaysian Islamic Financial Institutions (IFIs). In National Symposium and Exhibition on Business and Accounting 2014 (NSEBA 2014) 19 March 2014 (pp. 1–9). Bandar Muadzam Shah, Malaysia.
Pickett, S. (2000). Developing internal audit competencies. Managerial Auditi
In-Text Citation: (Ali, 2018)
To Cite this Article: Ali, N. A. M. (2018). Challenges in Recruiting Specialized Internal Auditors: Case Study Evidence of Islamic Financial Institution in Malaysia. International Journal of Academic Research in Business and Social Sciences, 8(1), 60–74.
Copyright: © 2018 The Author(s)
Published by Human Resource Management Academic Research Society (www.hrmars.com)
This article is published under the Creative Commons Attribution (CC BY 4.0) license. Anyone may reproduce, distribute, translate and create derivative works of this article (for both commercial and non-commercial purposes), subject to full attribution to the original publication and authors. The full terms of this license may be seen at: http://creativecommons.org/licences/by/4.0/legalcode
