Last week's column described how all four Islamic schools of thought (madhabs) are equally correct. A Muslim who adopts any one of them does not come any closer to the Holy Quran and Sunnah than does any other Muslim.

Based on this, Sharia scholars belonging to all four schools of thought have created a unified Sharia platform intended to help Islamic financial institutions achieve obstacle-free growth.

This platform is called Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI). It was registered in Bahrain in 1991.

AAOIFI is a non-profit organisation, supported by 108 member Islamic financial institutions and observers from 26 countries.

AAOIFI's core objectives are as follows:

a) To develop the accounting, auditing and banking standards on Islamic principles

b) To provide necessary guidance and training to Islamic financial institutions on how to apply these standards

c) Tto prepare auditing procedures for external auditors charged with the task of auditing Islamic financial institutions

d) To constantly refine existing standards and practices in the wake of ever changing business environment

e) To introduce guidelines for Islamic insurance (takaful)

f) To liaise with different regulatory bodies, central banks, audit firms, etc and increase their awareness of Sharia standards.

AAOIFI comprises a general assembly, an executive committee, board of trustees, Sharia board, accounting and auditing board and a general secretariat.

The general assembly comprises all member institutions and a panel of observers, including accounting firms such as Ernst & Young, PriceWaterhouseCoopers and KPMG.

The assembly holds at least one session a year to approve a new Sharia, accounting, auditing or governance standard, or promulgate an improvement in an existing standard. This by majority vote.

The executive committee comprises the chairmen of the above boards. It manages the administrative affairs of AAOIFI. The board of trustees is appointed by the general assembly.

It comprises 15 part-time members from entities such as regulatory and supervisory bodies, Sharia boards of different Islamic financial institutions, accountants and auditors.

Scholars from Sharia supervisory boards in different Islamic financial institutions form AAOIFI's Sharia board. The board has 15 members. This could be termed AAOIFI's "nerve centre".

Board

The Sharia board's members include: Shaikh Mohammad Taqi Usmani from Pakistan (chairman), Shaikh Abdullah Bin Sulaiman Al Manea from Saudi Arabia (deputy chairman), Shaikh (Dr.) Hussain Hamid Hassan from UAE (member), Shaikh Ajeel Jasim Al Nashmi from Kuwait (member), Shaikh Nizam Yaquby from Bahrain (member), Dr. Mohammad Daud Baker from Malaysia (member) and Shaikh Abdul Sattar Abu Ghudda from Syria (member).

The board's primary responsibilities include helping member and non-member scholars achieve consensus, critical review of questions referred by member institutions, arbitration of disputes, and researching ways to improve existing standards and practices.

The accounting and auditing board has 15 part-time members. The board includes accountants, auditors, university professors, regulators, lawyers and financial experts.

This board prepares, interprets, and adopts accounting and auditing standards for Islamic financial institutions. It also conduct periodical reviews and comparisons of Islamic accounting standards with the International Accounting Standards (IAS).

I wish to draw the reader's attention to the highly professional way that AAOIFI conducts its business. It has placed itself on a footing that is clearly on par with international regulatory standards.

It enjoys enormous credibility among international financial and regulatory circles, despite having existed for only 14 years.

AAOIFI's professionalism and ethics have also been acclaimed by the likes of the World Bank in one of their recent reports.

The writer is vice-president and head of Sharia structuring, documentation and product development, Dubai Islamic Bank.

(To be continued)