A Study on the Integration of Islamic Social Finance through Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI)

Abstract

Purpose: Islamic social finance presents a new avenue as a novel alternative to the conventional financial
set-up in existing world. This paper aims to examine the alternative performance indicator of Islamic
financial institutions with the information provided from financial statements prepared in accordance with
the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) standards.
Design/Approach: In evaluating performance of organizations, it has observed that the profit earned and
recorded for the year is the main indicator of the organizations success. Islamic banks performance also
falls under this perception as the Islamic banking industry produce financial statement, which is similar to
some extent to the financial statement of their conventional counterparts. However, the AAOIFI provides
additional statement and disclosure for the financial statement for Islamic banks.
Discussion/Finding: It is observed that some disclosures are not satisfied through the normal financial
statement as produced traditionally. Hence, the financial analysis and evaluation are more meaningful if
information extracts from the financial statements in accordance with the AAOIFI standards.
Originality of work: The primary objective of this study is to realize the importance of Islamic Social
Finance through AAOIFI standards. This study has taken several Islamic mode of financing to address
these issues.