Islamic Finance – Islamic Capital Market - The function of AAOIFI
The AAOIFI has four governance criteria covering: No. 1: Appointment, Comprising, and Report of the Shari'ah Supervision Board Shari'ah Review, No. 2, and Internal Shari'ah Review, No. 3 Number 4: IFIs' Audit and Governance Committee The definition of an SSB is provided in Standard No. 1, which also addresses the selection, appointment, compensation, and makeup of the board. Additionally, it clarifies what is covered in an SSB report that has an immediate impact on the governance of an IFI. The standards Nos. 2 and 3 lay out guidelines and create guiding principles for the internal Shari'ah review in an IFI. The main goal of the internal review is to make sure that an IFI's administration fulfils its obligations with regard to putting Shari'ah norms and principles into practise as decided by the SSB. Depending on the size of the IFI, these guidelines specify that the review shall be carried out by a separate division or department or a portion of the internal audit department. The review functions in accordance with the IFI's set policies and is an essential component of its governance processes. The responsibilities and duties of an Audit and Governance Committee (AGC) in ensuring that an IFI meets its goals are outlined in Standard No. 4. This is necessary to ensure increased financial reporting openness and disclosure and to raise public trust in the IFI's sincere adherence to Shari'ah norms and principles.
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