IFAC FOCUS AREAS
- Accountability. Now.
- Adoption of International Standards
- Developing the Global Profession
- Global Representation and Advocacy
- Professional Accountants in Business
- Small and Medium Practices
Independent Standard-Setting Boards
The International Auditing and Assurance Standards Board sets high-quality international standards for auditing, assurance, and quality control that strengthen public confidence in the global profession.
The International Accounting Education Standards Board establishes standards, in the area of professional accounting education, that prescribe technical competence and professional skills, values, ethics, and attitudes.
The International Ethics Standards Board for Accountants sets high-quality, internationally appropriate ethics standards for professional accountants, including auditor independence requirements.
The International Public Sector Accounting Standards Board develops standards, guidance, and resources for use by public sector entities around the world for preparation of general purpose financial statements.
|Global Knowledge Gateway||
What Do We Mean by Islamic Finance?
Islamic finance—or perhaps more accurately, “Sharia-compliant finance”—is a form of finance in which the financing activity is in accordance with the principles of Sharia law, the moral and ethical code of the Islamic religion. Unlike conventional finance, Islamic finance prohibits all forms of interest for lending money (that is, usury), investments in businesses that provide goods or services considered contrary to Islamic principles (such as gambling, pornography, alcohol, and drugs), and selling things that one does not own (that is, short-selling). While these prohibitions are tied to the basic tenets of Islam, and so have been applied for hundreds of years by Muslims, Islamic finance has only more recently manifested itself in financial products, services, and institutions. In the broadest sense, Islamic finance principles are intended to place some consideration on society as a whole—the impact that all financial activity has on the welfare of people and their community. Today there are a number of banks and other financial institutions, as well as units within conventional banks and financial institutions, that apply these principles.
Why Is Islamic Finance Important?
Globally, there is increasing demand, from both Muslims and non-Muslims, for more information on Islamic finance. From a commercial standpoint, more institutions are seeking guidance on the regulations, standards, compliance, and legal processes used to conduct business activities in accordance with Islamic finance. Within primarily Islamic societies, there is increased interest in best practices, trends, and research. In addition, the regulatory institutions of both Western and non-Western countries are seeking to work more closely together to facilitate greater international trade and investment.
The Economist reported that, according to the UK Islamic Finance Secretariat, the global market for Islamic finance at the end of 2011 was worth around $1.3 trillion and, despite the Global Financial Crisis, Sharia-compliant assets have grown significantly over the past ten years. According to the same Economist article, globally banks hold over 90% of Islamic assets and, together with funds, are big investors in Sharia-compliant bonds known as sukuk.
The Islamic Development Bank (IDB) is a major issuer of sukuk. The IDB is an international financial institution established by the finance ministers of several Muslim countries; its purpose is to foster the economic development and social progress of member countries and Muslim communities, individually as well as jointly, in accordance with the principles of Islamic Law.
A large and fast-growing number of Muslims, as well as many non-Muslims perceiving Islamic finance as a safer and more ethical alternative, use Islamic financial products. As a result, the Islamic finance market looks set to continue its fast-paced growth.
Islamic Accounting, Auditing, and Governance
As Islamic finance has grown in size and stature, so have the expectations around the industry’s governance, accountability, conduct, and capacity. This has resulted in the emergence of organizations like the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) and Islamic Financial Services Board (IFSB).
The AAOIFI prepares accounting, auditing, governance, ethics, and Sharia standards for Islamic financial institutions and the industry, and offers professional qualification programs to enhance the industry’s human resources base and governance structures. The IFSB, meanwhile, promotes and enhances the soundness and stability of the Islamic financial services industry by: issuing global prudential standards and guiding principles for the industry, conducting research, coordinating initiatives on industry-related issues, and organizing events for regulators and industry stakeholders.
The Role of Accountants and the Accountancy Profession
Accounting standards for financial reporting by Islamic financial institutions have been developed to help Islamic financial institutions address challenges arising from the application of accounting standards such as IFRS, which were developed based on conventional institutions, product structures, and practices and which are perceived to be insufficient to account for and report Islamic financial transactions. Furthermore, the Islamic finance industry is under pressure to enhance practices, improve risk management systems, and protect investors.
Professional accountants working in business, especially those in the finance sector, are often involved in finance and investment decisions and may be required to apply Sharia principles or wish to consider it as an alternative to traditional methods. Similarly, many accounting firms provide advice to organizations and individuals to support Sharia-compliant finance, including investment decisions and financial planning.