The Auditor’s Responsibility to Consider Fraud and Error in an Audit of Financial Statements.
The Accounting and Auditing Organization for Islamic Financial Institutions established on Safar 1, 1410 Hijri (February 26, 1990) at Algiers and registered in Bahrain on Ramadan 11, 1411 Hijri (March 27, 1991) has so far (April, 2004) set the following Financial Accounting Standards, Auditing Standards, Governance Standards & Code of Ethics for Accountants & Auditors of Islamic Financial Institutions:
□ Financial Accounting Standard:
General Presentation and Disclosure in the Financial Statements of Islamic Banks and Financial Institututions 2.
Murabaha and Murabaha to the Purchase Orderer
Disclosure of Bases of Profit Allocation Between Owners’ Equity and Investment Account Holders 6.
Equity of Investment Account Holders and Their Equivalent 7.
Salam and Parallel Salam
Ijarah and Ijarah Muntahia Bittamleek
Istisna’a and Parallel Istisna’a
Provisions and Reserves
General Presentation and Disclosure in the Financial Statements of Islamic Insurance Companies 13.
Disclosure of Bases for Determining and Allocating Surplus or Deficit in Islamic Insurance Companies 14.
Provisions and Reserve in Islamic Insurance Companies
Foreign Currency Transactions and Foreign Operations
Islamic Financial Services Offered by Conventional Financial Institutions 19.
Contributions in Islamic Insurance Companies
Deferred Payment Sale
□ Auditing Standard:
Objective & Principles of Auditing
The Auditors Report
Terms of Audit Engagement
Testing for compliance with Shari’a Rules and Principles by an external Auditor 5.
The Auditor’s Responsibility to consider Fraud & Error in an Audit Financial Statements.
□ Governance Standard:
Shari’a Supervisory Board: Appointment, Composition & Report. 2.
Internal Shari’a Review
Audit & Governance Committee for Islamic Finance Institutions □ Code of Ethics for Accountants and Auditors of Islamic Financial Institutions
Code of Ethics for Accountant and Auditors of Islamic Financial Institutions
Code of Ethics for the Employees of Islamic Financial Institutions.
‘The Auditor’s Responsibility to consider Fraud and Error in an Audit of Financial Statements’ is Auditing Standard Number 5 prepared by the AAOIFI which is produced below for discussion:
The purpose of this Auditing Standard for Islamic Financial Institutions (ASIF) is to establish guidance on the auditor’s responsibility when considering the risk of fraud and error in an audit of financial statements of an Islamic Financial Institution (IFI). The primary responsibility for the prevention and detection of fraud and error rests with those responsible for the corporate governance and management of the IFI. However, the auditor, when planning and performing the audit procedures and evaluating the results thereof, shall consider the risk of material misstatements resulting from fraud and error.
The standard shall provide the following
guidance on the characteristic of fraud and error and the limitation of the auditor’s responsibility in relation thereto;
define the minimum procedures that shall be applied by an auditor in case of indication, inquiries and discussions relating to any fraud and error in the financial statement of an IFI;
guidance to the auditors relating to management representations considering fraud and error in an IFI;
The standard shall be read in conjunction with all ASIFI’s issued by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI). This standard complements the standards issued by the International Federation of Accountants on the consideration of fraud and error by fulfilling specific...
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