Relationship between internal Shariah audit characteristics and its effectiveness

Abstract

Purpose This paper aims to examine the characteristics influencing internal Shariah audit effectiveness in Islamic financial institutions (IFIs) in Bahrain. Design/methodology/approach Data were collected from 76 internal Shariah auditors, 23 Shariah supervisory board and 16 audit and governance committee from 52 IFIs in Bahrain. The data were analyzed using structural equation method via SmartPLS 2.0 to examine the relationship between characteristics and effectiveness of internal Shariah audit. Findings It was found that competency and work performance were positively significant with internal Shariah audit effectiveness. The findings revealed that the main competency of internal Shariah audit to influence effectiveness were to have professional certification and skills, while work performance to influence effectiveness were engagement planning, performing the engagement and communicating results with management and having sufficient information to provide sound opinion formed by Shariah audit. Originality/value From the research perspective, this is the first study that examines the relationship between internal Shariah audit characteristics and its effectiveness in Bahraini IFIs.