Purpose

The existence of internal control for Sharīʿah-compliance promotes reasonable assurance that the Islamic financial institution’s (IFI’s) objectives are achieved in the following categories, namely, the effectiveness and efficiency of operations, the reliability of financial reporting and the level of compliance with applicable laws and regulations, as well as accounting and auditing standards. Sharīʿah non-compliant income (SNCI) is an important issue in IFIs’ operations. Thus, the purpose of this paper is to identify issues related to governance and internal control of SNCI in selected IFIs in Malaysia.

Design/methodology/approach

This research uses a case study approach to gather data on the measures of governance and risk management in relation to the internal control for SNCI in IFIs. Interviews were conducted with officers of the Sharīʿah and internal audit departments on internal control practices regarding SNCI.

Findings

Regulator’s guidelines on SNCI are simple and brief, lacking rigour in terms of governance, risk management and audit procedures. The section on SNCI is only a brief statement within the Bank Negara Malaysia’s Guidelines on Financial Reporting for Islamic Banking Institutions and also in the Operational Risk Integrated Online Network system operated by IFIs. Most of the respondents in the interviews suggested that there should be a proper guideline in determining the classification of SNCI. Second, although IFIs have established the purification account to manage SNCI, the real practice varies from one IFI to another. Third, although there are supposedly documented procedures established in relation to management and administration of SNCI, the following events still occur in practice, namely, no authorisation from the Sharīʿah Committee (SC) on various types of income channelled to the SNCI account; unauthorised use of SNCI for other purposes; SNCI not being reported in the annual financial reports; and distribution of SNCI prior to obtaining the SC’s consent. Fourth, there is an absence of Sharīʿah risk assessment conducted on operational risk by IFIs to identify any potential Sharīʿah non-compliant event.

Research limitations/implications

This research contributes to the importance of Islamic corporate governance theory and Sharīʿah risk management, as well as strengthening the case for reporting SNCI to shareholders. It also contributes to the body of knowledge on the capability of the management in managing the internal control system of IFIs’ SNCI.

Originality/value

A new internal control assessment matrix is proposed for Sharīʿah-compliance in IFIs.

中文翻译：

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伊斯兰金融机构的内部控制，风险和伊斯兰教规违规收入

目的

遵守伊斯兰教法的内部控制措施可以合理保证伊斯兰金融机构（IFI）的目标在以下类别中得以实现，即运作的有效性和效率，财务报告的可靠性以及对适用法律的遵守程度法规，会计和审计标准。伊斯兰教规违规收入（SNCI）是国际金融机构运作中的重要问题。因此，本文的目的是确定与马来西亚某些IFI中SNCI的治理和内部控制有关的问题。

设计/方法/方法

这项研究采用案例研究的方法来收集有关国际金融机构SNCI内部控制的治理和风险管理措施的数据。就SNCI的内部控制做法，与伊斯兰基金会的官员和内部审计部门进行了访谈。

发现

监管机构关于SNCI的指南既简单又简短，在治理，风险管理和审计程序方面缺乏严格性。SNCI部分仅是马来西亚国家银行的伊斯兰银行机构财务报告准则以及国际金融机构运营的操作风险综合在线网络系统中的简短说明。访谈中的大多数受访者建议，在确定SNCI的分类时应该有适当的指南。其次，尽管IFI已经建立了净化帐户来管理SNCI，但实际做法因一个IFI而异。第三，尽管据称已经建立了与SNCI的管理有关的程序化文件，但在实践中仍会发生以下事件，即：沙里亚委员会（SC）未授权将其转入SNCI帐户的各种类型的收入；未经授权将SNCI用于其他目的；SNCI未在年度财务报告中报告；在获得SC同意之前，对SNCI进行分配和分发。第四，国际金融机构缺乏针对运营风险的伊斯兰教法风险评估，以识别任何潜在的伊斯兰教法不合规事件。

研究局限/意义

这项研究有助于提高伊斯兰公司治理理论和伊斯兰教法风险管理的重要性，并加强向股东报告SNCI的理由。它还有助于提高管理层在管理IFI SNCI内部控制系统方面的能力。

创意/价值

提出了一个新的内部控制评估矩阵，供国际金融机构遵守《伊斯兰教法》。