The basics of accounting standards for Islamic financial institutions

Abstract

] The accounting and auditing organization for Islamic financial institutions (AAOIFI) has taken the proper initiative to develop accounting, auditing, governance, ethics, and Shari'ah standards for Islamic Financial Institutions (IFIs). The AAOIFI standards serve as a guideline that may reflect the unique characteristics of IFIs and become a useful tool to meet the various needs of IFIs. Currently, one the major challenges facing Islamic Financial Institutions (IFSs) lies in the preparation of financial statements under different accounting standards and which may result to problem of comparability, reliability and compliance level's measurement. This has, however, resulted in a heated debate among scholars that has hitherto translated to the evolving existing literature surrounding the interpretation of the level of compliance with the Islamic accounting standards. This paper, therefore, discusses the Islamic accounting standards through a review of the literature. Overall, the evidence reviewed suggests that the need of the Islamic accounting standards to fill the gap in the Organization of Islamic Conference (OIC) countries. This paper concludes with various recommendations for future research, the most important of which is the need for future studies to be done to implement the Islamic accounting standards, such as the AAOIFI accounting standards. The current paper, therefore, contributes to a better understanding and acceptability of the Islamic accounting standards, such the AAOIFI.