Shariah Internal Audit Service
Independent verification of your Islamic finance compliance. We review contracts, investments, marketing, staff training, and operations.
Independent Shariah Compliance Review for Your Business
If your business offers Islamic products or services, you need regular Shariah audits. This is not optional. It is essential for maintaining customer trust and regulatory compliance. Customers need to know that your Murabaha contracts are really Murabaha, not disguised interest. Regulators like the Hong Kong Monetary Authority expect robust Shariah governance. Your Shariah board requires independent verification that their fatwas are being followed.
Our Shariah Internal Audit service provides a comprehensive review of your organization Shariah compliance. We are independent. We are not your internal compliance team. We provide an outside perspective that catches things your team may miss.
We examine everything. We review your financing contracts to ensure they follow the correct Islamic structures. We review your investment portfolios to ensure they only hold halal securities. We review your operational procedures to ensure they do not inadvertently violate Shariah rules. We review your marketing materials to ensure you are not making false claims about your products being Islamic. We review your customer disclosures to ensure they are accurate and transparent. We interview your staff to assess their understanding of Islamic finance principles.
You receive a detailed audit report that identifies any non compliant areas. Each finding is rated for risk level from low to critical. We provide clear recommendations for remediation. We give you a practical action plan with timelines. We work with you to fix any issues we find.
We follow AAOIFI auditing standards which are the international benchmark for Islamic financial institutions. Our auditors are trained in both Shariah and conventional auditing. We speak the language of your finance team and your Shariah board.
Do not wait for a regulator to find a problem. Conduct a Shariah audit proactively. Protect your reputation. Protect your customers. Protect your business.
What's Included
Full Compliance Review
We conduct a comprehensive audit of all your Islamic finance operations. This includes every contract you have signed with customers for Murabaha, Ijarah, Mudarabah, Musharakah, or any other Islamic structure. It includes every investment you have made on behalf of customers or for your own treasury. It includes every product approval process to ensure new products went through proper Shariah review before launch. It includes every customer communication including marketing materials, website content, and disclosure documents. It includes your internal Shariah compliance procedures and how they are implemented. Nothing is outside the scope of our audit.
Contract Audit
We examine a sample of your active customer contracts. For Murabaha contracts we verify that the bank actually purchased the asset before selling it to the customer. We verify that the profit margin is disclosed upfront. We verify that there are no hidden interest clauses. For Ijarah contracts we verify that the lease terms are fair. We verify that the bank retains ownership of the asset. For Mudarabah and Musharakah contracts we verify that the profit sharing ratio is clear. We verify how losses are allocated. We also check that contracts are properly signed and dated and stored. Missing documentation is a compliance risk. We flag it.
Investment Portfolio Screening
We screen your entire investment portfolio for Shariah compliance. This includes your bank own investments such as liquidity holdings and treasury assets. It includes any customer investments you manage such as Islamic funds or discretionary accounts. We apply the same screening criteria we use for individual investors. We check each holding business activity for any haram revenue. We check financial ratios for acceptable debt levels. We identify any non compliant holdings. We calculate any purification amounts needed for impermissible income received. We provide a report that you can share with your Shariah board and with your customers.
Marketing and Disclosure Review
We review all your customer facing communications. This includes your website content, your product brochures, your social media posts, your email newsletters, and any other marketing materials. We check for accurate claims about your products being Islamic. We check for proper disclosure of risks and costs. We check for any language that could mislead customers about how your products work. We also review your customer contracts for plain language disclosures. Customers should understand what they are signing. If your contracts are too complex or hide important terms, we flag that as a compliance risk.
Staff Interviews and Training Assessment
We interview a sample of your staff across different departments. We talk to customer service representatives about what they tell customers when questions arise. We talk to sales staff about how they explain Islamic products to potential customers. We talk to operations staff about how they process transactions. We talk to compliance staff about how they monitor Shariah compliance. These interviews help us understand whether your staff truly understands Islamic finance or whether they are just following procedures without comprehension. We also review your staff training materials. If training is inadequate we recommend improvements.
Detailed Audit Report
You receive a comprehensive audit report within 10 to 15 business days of completing our fieldwork. The report is typically 30 to 50 pages long. It includes an executive summary of overall compliance rating. It includes a detailed findings table with each finding categorized by risk level. For each finding we describe the issue, reference the relevant Shariah standard or regulatory requirement, explain why it is a problem, and provide a specific recommendation for remediation. We also provide a recommended timeline for fixing each issue with priority levels. The report is suitable for sharing with your Shariah board, your management team, and your regulator if requested.
How It Works
Scoping Meeting
We meet with your management and your Shariah board to define the audit scope. We discuss which products and departments to include. We discuss whether this is a full audit or a limited scope audit. We discuss your timeline and any regulatory deadlines. We agree on the fee and sign an engagement letter.
Document Collection
We provide you with a list of required documents. This includes all customer contract templates, a sample of executed contracts, investment portfolio reports, product approval committee minutes, Shariah board minutes, marketing materials, customer disclosure documents, internal compliance policies, staff training materials, and any previous audit reports. You upload documents to our secure portal.
Document Review
Our audit team reviews all documents over five to seven business days. We identify potential compliance issues. We prepare a preliminary findings list. We note areas where we need additional information or clarification.
On Site or Remote Interviews
We schedule interviews with your staff. We can conduct these interviews at your office in Hong Kong or via video call. We ask questions about how processes actually work, not just how they are documented. We look for gaps between policy and practice. The interviews typically take one to two days.
Draft Report
We prepare a draft audit report. We share it with you for management response. You have the opportunity to provide additional context or to correct factual errors. You can also propose remediation plans for the findings.
Final Report and Presentation
We issue the final audit report. We schedule a presentation to your management and Shariah board. We walk through each finding. We answer questions. We provide guidance on remediation. We remain available for follow up questions as you implement our recommendations.
Frequently Asked Questions
We recommend conducting a full Shariah audit at least once per year. This is the minimum frequency to maintain customer trust and regulatory compliance. Some businesses conduct audits semi annually or quarterly especially if they have high transaction volumes or complex products. Regulated entities like banks may be required by HKMA to have quarterly Shariah reviews. Your Shariah board may also require more frequent audits. We can help you determine the appropriate frequency based on your business size, product complexity, transaction volume, and regulatory requirements. Even if you are not required to audit frequently, doing so provides value. It catches small problems before they become big problems. It gives your Shariah board confidence that their fatwas are being followed. It gives your customers confidence that your products are truly Islamic.
Yes. Our audit methodology follows AAOIFI which stands for the Accounting and Auditing Organization for Islamic Financial Institutions. AAOIFI is the international standard setting body for Islamic finance. Their Shariah standards are used by Islamic banks and financial institutions in over 45 countries. Their auditing standards provide a framework for conducting Shariah audits. We also consider local regulatory requirements. For clients in Hong Kong we ensure our audit also meets HKMA expectations for Islamic banking governance. For clients in other jurisdictions we adapt to local requirements. We are flexible but we always anchor our work in AAOIFI because it is the most rigorous and widely accepted standard.
Finding non compliance is not a disaster. It is an opportunity to improve. Most issues we find are minor and can be fixed quickly. For example we may find that a contract template uses incorrect language that could be interpreted as interest. We recommend corrected language. You update the template. The issue is resolved. For more serious issues such as a product that was launched without proper Shariah approval, we work with you to develop a remediation plan. You may need to suspend the product, communicate with affected customers, and seek retrospective approval from your Shariah board. In rare cases where the non compliance involves impermissible income, we calculate the purification amount that must be donated to charity. We guide you through the entire remediation process. Our goal is not to punish you. Our goal is to help you become more compliant.
Absolutely. We sign strict confidentiality agreements with every client. Your audit findings are shared only with authorized personnel you designate. This typically includes your management team, your internal compliance team, and your Shariah board. We do not share your audit report with any third party without your explicit written permission. This includes regulators. If a regulator requests our audit report you would need to provide it to them directly. We would not provide it without your consent. Our auditors also sign internal confidentiality agreements. Your data is stored on encrypted servers. We delete audit files after the engagement is complete unless you request ongoing storage.
Yes upon successful completion of the audit and after you have implemented our remediation recommendations, we provide a Shariah Compliance Certificate. This certificate states that your organization operations have been reviewed and found to be compliant with Shariah principles based on our audit. The certificate is valid for one year from the date of issue. You can share this certificate with your customers to build trust. You can share it with your bank to facilitate financing. You can share it with your regulator to demonstrate good governance. The certificate includes the scope of the audit, the methodology used, and any limitations or exceptions. We do not issue certificates if we found serious non compliance that has not been remediated.
The cost of a Shariah audit depends on the size of your organization, the complexity of your products, and the scope of the audit. For a small Islamic finance company with limited products and customers, an annual audit typically costs HKD 5,000 to HKD 10,000. For a medium sized institution with multiple products and a significant customer base, the cost is typically HKD 10,000 to HKD 20,000. For a large bank or financial institution with complex products and high transaction volume, the cost can range from HKD 20,000 to HKD 50,000 or more. Our fee includes the scoping meeting, document collection, document review, staff interviews, draft report, final report, and presentation. Travel expenses if needed are billed separately. We provide a fixed price quote before you engage us. No surprises. You know exactly what you will pay.