Email this article 
Disclosure of Internal Audit Functions of Islamic Banks in Indonesia
Abstract
Research aims: In the massive emerging development of the Islamic financial industry, the role of the internal audit function is in the spotlight as governance is the main issue of this industry’s sustainability. This study, therefore, aims to reveal the role of the internal audit function of Islamic banks in Indonesia.
Design/Methodology/Approach: The study employed secondary data from annual and Good Corporate Governance (GCG) reports from Islamic banks in Indonesia to be analyzed with the qualitative content analysis by Schreier.
Research findings: The researchers highlighted that the GCG and annual reports could uncover the role of internal audits in Islamic banks. The scope of an internal audit is divided into three essential activities: preparation of work program plans, implementation, monitoring, and follow-up on findings. In comparison, the authority is to communicate with the board of directors, board of commissioners, and audit committee, including the Sharia Supervisory Board (SSB), regarding sharia compliance.
Theoretical contribution/Originality: Sharia compliance ensures the soundness and credibility of the Islamic finance industry. This study identified the role of the internal audit functions of Islamic banks using qualitative content analysis for the first time. Therefore, this study is unique in how the disclosure of internal audit function is presented.
Research limitation/Implication: This study was limited in a deeper understanding of the findings as it was based on secondary data analysis. However, the researchers provide vital insights on control conduct of the role played by internal auditors of Islamic banks to satisfy every qualification needed as the role played by internal auditors is vital to pursue GCG principles.
Keywords
Full Text:
PDFReferences
Abdullah Saif Alnasser, S., & Muhammed, J. (2012). Introduction to corporate governance from Islamic perspective. Humanomics, 28(3), 220–231. https://doi.org/10.1108/08288661211258110
Ahmed Abdel Karim, R. (1990). The Independence of Religious and External Auditors: The Case of Islamic Banks. Accounting, Auditing & Accountability Journal, 3(3), 09513579010004097. https://doi.org/10.1108/09513579010004097
Algabry, L., Alhabshi, S. M., Soualhi, Y., & Alaeddin, O. (2020). Conceptual framework of internal Sharīʿah audit effectiveness factors in Islamic banks. ISRA International Journal of Islamic Finance, 12(2), 171–193. https://doi.org/10.1108/IJIF-09-2018-0097
Algabry, L., Alhabshi, S. M., Soualhi, Y., & Othman, A. H. A. (2020). Assessing the effectiveness of internal Sharīʿah audit structure and its practices in Islamic financial institutions: a case study of Islamic banks in Yemen. Asian Journal of Accounting Research, 6(1), 2–22. https://doi.org/10.1108/AJAR-04-2019-0025
Ardi, M. (2017). Peran audit internal terhadap pelaksanaan good governance di perbankan syariah. DIKTUM: Jurnal Syariah Dan Hukum, 15(2), 169–176. https://doi.org/10.35905/diktum.v15i2.433
Arif, M. I. A. M., Markom, R., & Hanapi, H. (2018). The Principles of Shariah Governance in Statutory Duties of Shariah Advisory Council in Malaysian Islamic Banking System: A Way Forward. International Journal of Business Marketing and Management, 3(2), 2456–4559. Retrieved from www.ijbmm.com
Baehaqi, A., & Suyanto, S. (2019). Audit Internal Lembaga Keuangan Syariah dalam Perspektif Al-hisbah. Jurnal Riset Keuangan Dan Akuntansi, 4(2). https://doi.org/10.25134/jrka.v4i2.1694
Baklouti, I. (2020). Is the Sharia supervisory board a friend or an enemy of Islamic banks?. Journal of Islamic Marketing. https://doi.org/10.1108/JIMA-04-2020-0118
Bank-Aceh-Syariah. (2020). The Annual and GCG Reports. Retrieved from https://www.bankaceh.co.id/?cat=9
Bank-Mega-Syariah. (2020). The 2020 Annual and GCG Reports. Retrieved from https://www.megasyariah.co.id/#article5
Bank-Muamalat. (2020). The 2020 Annual and GCG Reports. Retrieved from https://www.bankmuamalat.co.id/hubungan-investor/laporan-tahunan
Bank-Net-Syariah. (2020). The 2020 Annual and GCG Reports. Retrieved from https://www.maybanksyariah/laporan-tahunan-2020.pdf
Bank-Nusa-Tenggara-Barat-Syariah. (2020). The 2020 Annual and GCG Reports. Retrieved from https://www.bankntbsyariah.co.id/Perusahaan/laporan
Bank-Panin-Dubai-Syariah. (2020). The 2020 Annual and GCG Reports. Retrieved from https://www.paninbanksyariah.co.id/index.php/mtentangkami/laporankeuangan?id=205
Bank-Syariah-Bukopin. (2020). The Annual Report. Retrieved from https://www.syariahbukopin.co.id/id/laporan/2020
Bank-Victoria-Syariah. (2020). The 2020 Annual and GCG Reports. Retrieved from https://bankvictoriasyariah.co.id/page/sub/tahunan
BCA-Syariah. (2020). The 2020 Annual and GCG Reports. Retrieved from https://www.bcasyariah.co.id/laporan-tahunan
Bello Dogarawa, A. (2013). Hisbah and the promotion of ethical business practices. International Journal of Islamic and Middle Eastern Finance and Management, 6(1), 51–63. https://doi.org/10.1108/17538391311310743
BJB-Syariah. (2021). The 2020 Annual and GCG Reports. Retrieved from https://bjbsyariah.co.id/annual-report
BNI-Syariah. (2020). The 2020 Annual and GCG Reports. Retrieved from https://www.ir-bankbsi.com/misc/AR/AR2020-BNIS-ID.pdf
Botez, D. (2012). Internal Audit and Management Entity. Procedia Economics and Finance, 3, 1156–1160. https://doi.org/10.1016/S2212-5671(12)00289-4
BRI-Syariah. (2020). The 2020 Annual and GCG Reports. Retrieved from https://www.ir-bankbsi.com/annual_reports.html
BSM. (2020). The 2020 Annual and GCG Reports. Retrieved from https://www.ir-bankbsi.com/misc/AR/AR2020-BSM.pdf
BTPN-Syariah. (2020). The 2020 Annual and GCG Reports. Retrieved from https://btpnsyariah.com/documents/20182/21371/2020.pdf/94d2aca8-62b6-4f63-8299-00c1314ab4b3?version=1.3
Choiriyah. (2015). Good Corporate Governance dalam Lembaga Keuangan Islam. Islamic Banking: Jurnal Pemikiran Dan Pengembangan Perbankan Syariah, 1(1), 31–38. https://doi.org/10.36908/isbank.v1i1.12
Cioban (Lucan), A. N., Hlaciuc, E., & Zaiceanu, A. M. (2015). The Impact and Results of the Internal Audit Activity Exercised in the Public Sector in Romania. Procedia Economics and Finance, 32, 394–399. https://doi.org/10.1016/S2212-5671(15)01409-4
Czerny, M. (2020). Muslim auditors’ ethics. Zeszyty Teoretyczne Rachunkowości, 108(164), 229–240. https://doi.org/10.5604/01.3001.0014.3604
Daniela, P., & Attila, T. (2013). Internal Audit versus Internal Control and Coaching. Procedia Economics and Finance, 6, 694–702. https://doi.org/10.1016/S2212-5671(13)00191-3
Endraswati, H. (2017). Struktur Islamic Corporate Governance Dan Kualitas Pengungkapan Laporan Keuangan Pada Bank Syariah Di Indonesia. Endraswati, Hikmah.
Faozan, A. (2013). Implementasi Good Corporate Governance Dan Peran Dewan Pengawas Syariah Di Bank Syariah. La_Riba, 7(1), 1–14. https://doi.org/10.20885/lariba.vol7.iss1.art1
Flick, U. (2020). The SAGE Handbook of Qualitative Data Analysis. In U. Flick (Ed.), Defending Qualitative Research. https://doi.org/10.4324/9780429464232-6
Franita, R. (2019). Mekanisme Good Corporate Governance dan Nilai Perusahaan: Studi untuk Perusahaan Telekomunikasi. Lembaga Penelitian Dan Penulisan Ilmiah Aqli.
Gioia, D. A., Corley, K. G., & Hamilton, A. L. (2013). Seeking Qualitative Rigor in Inductive Research. Organizational Research Methods, 16(1), 15–31. https://doi.org/10.1177/1094428112452151
Hanefah, M. M., Kamaruddin, M. I. H., Salleh, S., Shafii, Z., & Zakaria, N. (2020). Internal control, risk and Sharīʿah non-compliant income in Islamic financial institutions. ISRA International Journal of Islamic Finance, 12(3), 401–417. https://doi.org/10.1108/IJIF-02-2019-0025
Haniffa, R. (2010). Auditing Islamic Financial Institutions, in Islamic Finance: Instruments and Markets. QFinance.
Hidayah, A. A. (2020). Aset keuangan syariah Indonesia peringkat 7 dunia, Iran nomor 1. Lokadata. Retrieved from https://lokadata.id/artikel/aset-keuangan-syariah-indonesia-peringkat-7-dunia-iran-nomor-1
Ibrahim, S. H. M., Wirman, A., Alrazi, B., Nor, M. N. B. M., & Pramono, S. (2004). Alternative Disclosure and Performance Measures for Islamic Bank. Second Conference on Administrative Sciences: Meeting the Challenges of the Globalization Age, King Fahd University of Petroleum & Minerals, Dhahran, Saudi Arabia.
Injas, M. M. Y., Haron, M. S., Ramli, R., & Injas, R. A. (2016). The Importance of the Shari’ah Supervisory Boards (SSBS) in the Islamic Banking System. South East Asia Journal of Contemporary Business, Economics and Law, 9(2), 25–31.
Kamla, R., & Haque, F. (2019). Islamic accounting, neo-imperialism and identity staging: The Accounting and Auditing Organization for Islamic Financial Institutions. Critical Perspectives on Accounting, 63, 102000. https://doi.org/10.1016/j.cpa.2017.06.001
Kasi, B. R., & Mahmood, N. (2019). Composition and Working of the Sharia Supervisory Boards in Bahrain’s Islamic Banks. Economy, 6(2), 76–81. https://doi.org/10.20448/journal.502.2019.62.76.81
Kasim, N. (2010). Auditing from the Islamic Perspective. Accountants Today, 3, 28.
Kasim, N., Ibrahim, M., Hameed, S., Ibrahim, M., & Sulaiman, M. (2009). Shariah Auditing in Islamic Financial Institutions: Exploring the Gap Between the “Desired” and the “Actual.” Global Economy & Finance Journal, 2, 127–137.
Khalid, A. A., Haron, H. H., & Masron, T. A. (2017). Relationship between internal Shariah audit characteristics and its effectiveness. Humanomics, 33(2), 221–238. https://doi.org/10.1108/H-11-2016-0084
Khalid, A., & Sarea, A. (2018). The role of shariah supervisory board on internal Shariah audit effectiveness: Evidence from Bahrain. Academy of Accounting and Financial Studies Journal, 22(5).
Kooskusumawardani, N., & Birton, M. N. A. (2016). Pengaruh Kompetesi Dan Independensi Auditor Dalam Pelaksanaan Sharia Compliance Di Lembaga Keuangan Syariah (LKS). Simposium Nasional Akuntansi XIX, 1–20. Retrieved from http://mvdw.org/images/arsip/akuntansi/Nadia_Kooskusumawardani__M_Nur_A_Birton.pdf
Lannoo, K. (1995). Corporate Governance in Europe: Report of a CEPS Working Party (K. Lannoo (ed.)). Centre pour l’Etude des Politiques Publiques Europ ennes.
Lewis, M. K., & Algaoud, L. M. (2001). Islamic Banking. Edward Elgar Publishing.
Mardiyah, Q., & Mardian, S. (2016). Praktik Audit Syariah di Lembaga Keuangan Syariah Indonesia. Akuntabilitas, 8(1). https://doi.org/10.15408/akt.v8i1.2758
Mohd Ali, N. A., Shahimi, S., & Shafii, Z. (2018). Knowledge, Skills and Characteristics Requirements for Shari’ah Auditors. Asian Journal of Accounting and Governance, 9, 171–185. https://doi.org/10.17576/AJAG-2018-09-15
Najib, H., & Rini, R. (2019). Sharia Compliance, Islamic Corporate Governance Dan Fraud Pada Bank Syariah. Jurnal Akuntansi Dan Keuangan Islam, 4(2), 131–146. https://doi.org/10.35836/jakis.v4i2.23
Nguyen, Q. K. (2021). Oversight of bank risk-taking by audit committees and Sharia committees: conventional vs. Islamic banks. Heliyon, 7(8). https://doi.org/10.1016/j.heliyon.2021.e07798
OECD. (2016). G20/OECD Principles of Corporate Governance. In OECD Publishing. OECD Publishing. https://doi.org/10.1787/9789264257443-tr
Peraturan Bank Indonesia Nomor 11/33/PBI/2009 tentang Pelaksanaan Good Corporate Governance Bagi Bank Umun Syarian dan Unit Usaha Syariah, (2009) (testimony of Bank-of-Indonesia).
Prabowo, M. S. (2019). Good Corporate Governance Dalam Perspektif Islam. QISTIE, 11(2). https://doi.org/10.31942/jqi.v11i2.2592
Prastiwi, I. E. (2017). Pengaruh Independensi Dewan Pengawas Syariah dalam Mewujudkan Good Corporate Governance untuk Meningkatkan Kinerja BMT. Jurnal Ilmiah Ekonomi Islam, 3(01), 77. https://doi.org/10.29040/jiei.v3i01.101
Sari, A. P., & A. Birton, M. N. (2019). Contextualization of Al Hisbah to Build A Government Internal Control System. KnE Social Sciences. https://doi.org/10.18502/kss.v3i26.5416
Schreier, M. (2012). Qualitative Content Analysis in Practice. In Qualitative Content Analysis in Practice.
Shafii, Z., Ali, N. A. M., & Kasim, N. (2014). Shariah Audit in Islamic Banks: An Insight to the Future Shariah Auditor Labour Market in Malaysia. Procedia - Social and Behavioral Sciences, 145, 158–172. https://doi.org/10.1016/j.sbspro.2014.06.023
Suryanto, T. (2016). Islamic Work Ethics and Audit Opinions: Audit Professionalism and Dysfunctional Behavior as Intervening Variables. Al-Iqtishad: Jurnal Ilmu Ekonomi Syariah, 8(1), 49–64. https://doi.org/10.15408/aiq.v8i1.2508
Sutaryo, S., & Sinaga, D. (2018). Government Internal Control System Maturity: The Role of Internal Guidance and External Control of Local Government in Indonesia. Journal of Accounting and Investment, 19(1), 24–35. https://doi.org/10.18196/jai.190189
Walsh, J. P., & Seward, J. K. (1990). On the Efficiency of Internal and External Corporate Control Mechanisms. The Academy of Management Review, 15(3), 421. https://doi.org/10.2307/258017
Warner, K. S. R., & Wäger, M. (2019). Building dynamic capabilities for digital transformation: An ongoing process of strategic renewal. Long Range Planning, 52(3), 326–349. https://doi.org/10.1016/j.lrp.2018.12.001
Yahya, Y., & Mahzan, N. . (2012). The role of internal auditing in ensuring governance in Islamic financial institution (IFI). In: International Conference on Business and Economic Research, March, 1108–1134.
Yaya, R., & Suprobo, H. S. (2019). Determinants of Weaknesses in Internal Control of Provincial Government in Indonesia. Journal of Accounting and Investment, 20(3). https://doi.org/10.18196/jai.2003130
DOI: https://doi.org/10.18196/jai.v24i1.16388
Refbacks
- There are currently no refbacks.
Office:
Ruang Jurnal Fakultas Ekonomi dan Bisnis UMY
Gedung Ki Bagus Hadikusuma (E4) Lantai 2, Kampus Terpadu Universitas Muhammadiyah Yogyakarta,
Jalan Brawijaya (Lingkar Selatan), Tamantirto, Kasihan, Bantul, Daerah Istimewa Yogyakarta, Indonesia, 55183
Website: journal.umy.ac.id/index.php/ai - E-mail: jai@umy.ac.id
Journal of Accounting and Investment is licensed under Creative Commons Attribution Attribution-NonCommercial-NoDerivatives 4.0 International License
View My Stats