About Shariah Audit
Shariah Audit refers to the entire process of unbiased critical evaluation and examination of all the policies and operations of an organization in accordance with the Islamic Laws for Business.
It encompasses the timely and periodical review conducted to provide an independent judgment regarding the policies and investments of any firm in the light of the Shariah Standards.
The need for Shariah auditing arises when an organization is keen on continuing its Shariah Compliant products in accordance with the Shariah Principles.
The Shariah Audit is a function of reviewing and assessing the activities and policies of the organization to ensure the conformity with the Shariah guidelines laid down by the Shariah Advisory Board for the product being audited.
A thorough revision and examination need to be carried out to ensure that the products and services are strictly compliant with the Shariah principles.
The basic principles on which the Shariah Audit is based are the Shariah Standards and guidelines as may be prescribed by the Shariah advisory board or Industry bodies such as AOIFI.
Shariah Auditing - Is it Compulsory?
It is mandatory for any organization or firm which intends to continue selling its Shariah Compliant products in adherence to the guidelines of the Shariah principles.
Who Needs Shariah Audit?
Shariah Auditing is compulsory for any organization that runs Shariah-compliant products or services or funds.
The auditing or screening must be done periodically (monthly, quarter, half yearly or annually as per the comfort of the Shariah board and the product) according to the guidelines outlined by the Advisory board in relation to the Shariah-compliant product.
Type of Shariah Audits
An organization that deals with Shariah-compliant funds, services or products need to have either an internal or external Shariah auditor.
Shariah Audit is primarily of two types
Internal Shariah Audit:
Depending upon the nature of operations, some Shariah compliant products and service firms may need an Internal Shariah audit to be done on a concurrent basis to ensure they are in continuous compliance with the Shariah advisory board's mandate.
Such firms may appoint an in-house auditor to carry out such audit procedures who may report directly to the Shariah advisory committee.
External Shariah Audit:
Certain Shariah compliant products such as Insurance, banking and investment management firms may satisfy their Shariah audit requirements by appointing an external independent Shariah Audit and advisory firm which carries out the Shariah Audit and reports to the company's Internal or external Shariah Scholars Board.
Such audits may be conducted in such periodic intervals as may be mandated by the company's Shariah Scholars Board.
Objective of Shariah Auditing
The Shariah audit process is aimed at maintaining and increasing the trust level of stakeholders in relation to Shariah matters and assures them that the product is run in accordance with the Shariah principles outlined in the initial Shariah compliance fatwa issued by the Shariah advisory board.
The objective of auditing is to ensure that all the activities and operations carried out by the organization do not conflict with established Shariah principles.
Additionally, a Shariah Audit is an assurance on the product that it continues to operate without any hindrance as per the Shariah principles.
Further, the whole process of a Shariah audit brings about transparency to stakeholders and enhances the marketability of the Shariah compliant product.
An external Shariah audit saves your time and money. An external Shariah auditor is seen as more credible which in turn enhances the reliability of investors in Shariah compliant products.
Why Ratings Intelligence for Shariah Audit Services
Ratings Intelligence carries out all its Shariah audit mandates in consultation with its renowned Shariah Advisory Board. Having been in this field for about 2 decades, Ratings Intelligence possesses such insights which make the Shariah audit process transparent while ensuring the Shariah guidelines are met.
For Shariah compliant equity funds, we use an in-house proprietary software to monitor compliance of equities as well as manual checks to ensure all tenants of Shariah are adhered to.
Our experience of Shariah audit spans large Shariah compliant hedge funds, equity funds, real estate funds, murabaha funds as well as sukuk funds.
Our capability of conducting audits in Arabic language as well as in English language helps western fund managers to service their clients in the West as well as in the Middle East
Shariah Audit Team
RI Shariah Audit team has proven experience and profound knowledge to perform the Shariah Audit activities.
The team is well qualified and uses proprietary Shariah audit technologies to conduct Shariah audits.
The team always believes in working transparently and honestly.
The Shariah Audit Team gets in touch with the In-house Shariah Advisory Board on regular basis.
Shariah Audit Services We offer
Shariah Audit for Listed Securities, Mutual Funds & Equity Funds
Our audit methodology for securities and stocks encompasses a thorough preliminary analysis of the Shariah structure of the fund.
Ratings Intelligence specialises in audit of equity funds and has developed an in-house Shariah audit software which can continuously monitor the compliance of a Shariah equity fund in real time.
Our audit procedure incorporates:
Verifying all trades
Flagging non-permissible trades
Monitoring whether non-permissible trades are closed within the grace period
Monitoring changes in compliance of trades held
Ensuring negative compliance changes are closed
Monitoring dividend purification ratios
Ratings Intelligence can provide daily, weekly, monthly, quarterly or semi-annual Shariah audit reports.
We can as well have the audit reports presented to our in-house Shariah board and obtain a Shariah Audit Fatwa as per clients requirements.
Shariah Audit for Hedge Funds
Ratings Intelligence has been a pioneer in developing such audit processes which helps Shariah compliant hedge funds remain in continuous Shariah compliance.
We have the experience of setting up and working with third party administrators as well in order to audit Shariah compliant hedge funds.
Shariah Audit for Islamic Banking
At Ratings Intelligence, we understand the seriousness of Shariah compliance issues at Islamic banks to a great extent.
We provide our expertise to Islamic bank managements in auditing their various banking products by helping them devise such processes and checks which help them remain in continuous Shariah compliance.
We provide periodic Shariah board issued audit fatwas upon successful completion of an audit period.
Shariah Audit for REITs
We provide auditing services for Real Estate Investment Funds where we analyse the product, monitor the process and recommend improvements and prescribe the best practices to help your REIT funds stay compliant.
Shariah Audit for Islamic Insurance Companies
Islamic Insurance companies providing Shariah-compliant insurance or takaful products, need to ensure that all their existing and new insurance products are true to the Shariah principles.
Further, they need to ensure that policy holders funds are held in accordance with Shariah principles.
Ratings Intelligence audit services can help Islamic insurers adhere to Shariah principles on a continuous basis.
Shariah Audit for Bond & Sukuk
Ratings Intelligence undertakes review and audit of sukuk's and sukuk fund.
We conduct periodic and annual audit for bonds and sukuks to ensure conformity of transactions with the provisions of the master Shariah compliance fatwa issued to the sukuk.
Shariah Audit for Financial Institutions
Ratings Intelligence provides Shariah Audit services to numerous financial institutions like banks, microfinance institutions and NBFCs that wish to deal with Shariah-compliant products.
We conduct extensive audits that run across the entire breadth of your services, in a periodic manner and deliver and audit fatwa.
Shariah Audit for Financial institutions Converting from Conventional to Shariah
At Ratings Intelligence, we conduct special audits and monitoring services for organizations who wish to convert its existing conventional products to being Shariah Compliant.
Our deep understanding with such transition transactions helps such organizations have a smooth and hassle-free transition and assist them to remain compliant.
Shariah Auditing Process
The fund structure and initial Shariah compliance certificate is obtained.
A comprehensive list of documents and supporting details are requested from the client.
A review of the submitted audit information is studied. This process involves verifying information including market information.
A comprehensive report is submitted to the Shariah Committee (client's own SSB or RI's SSB).
The Shariah committee (SSB) reviews the audit comments and may suggest corrections, if any
A Shariah Audit Fatwa is issued noting the deviations, if any
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Abdul Hadi Shaikh
Head - Equity Screening & Audit
158, Coombe Lane West Kingston-Upon-Thames KT2 7DE, UK
Al Salhiya - Ali Al Salem Str, AL Jawhara Tower - 7th Floor,
P.O. Box 38920 Abdullah Al Salem, Kuwait - 72260
IndiQube Sigma, 7th B Main Road, Koramangala 1A Block, 3rd Floor, Bengaluru, Karnataka - 560034