Adopting AAOIFI corporate Governance standards in Saudi Islamic Banks

Abstract

In 1990, the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) established, and the primary target was to develop and issue accounting, auditing, and governance standards. In Saudi Arabia AAOIFI standards are not adopted. This study attempts to explore and examine the effect of adapting sharia governance strategies and harmonizing sharia corporate governance standards in enhancing confidence and preferences to adopt AAOIFI Governance Standards. For assembling primary data, the research utilizes a qualitative research method, namely questionnaire survey. However, in analyzing the data assembled through questionnaire survey, it utilizes quantitative research methods, interpretation and statistical analysis respectively. In addition, it utilizes a descriptive research method in collecting secondary data information for literature survey. The results show that adopting Sharia`h governance strategies is very important to influence confidence in Saudi Islamic banks and stress on the positive impact and the objective that will be achieved for harmonizing Sharia`h governance standards. Those results confirm a statistical relationship between the effects of harmonizing sharia corporate governance standards and the preference of adopting AAOIFI governance standard.For that reason, the study concludes that the majority of participants prefer to adopt AAOIFI Governance Standards to enhance confidence in Saudi Islamic banks. The study recommends that SAMA should give attention to Sharia`h Governance Model implemented in Saudi Arabia and elaborate the minimalist approach that accomplish AAOIFI standards.