Comparative compliance status of AAOIFI and IFSB standards by Islami Bank Bangladesh Limited

What is it about?

This paper aims to examine the compliance status of Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) Financial Accounting Standards-1 and Islamic Financial Services Board (IFSB) Standard-4 by Islami Bank Bangladesh Limited (IBBL), recognizing the regulatory influence for complying with AAOIFI and IFSB standards and identifying the factors influencing the compliance with these standards.

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Why is it important?

The study found that IBBL on an average complied 46.31 percent of AAOIFI and 52.50 percent of IFSB standards during the period, and importantly, IBBL did not comply with some of the categories of required disclosures. The study also observed that size, as measured by total asset and number of branches, has a significant influence on compliance with IFSB standard, but not AAOIFI. The findings of the study depicted that IBBL did not reasonably recognize the importance of complying with AAOIFI and IFSB standards. Poor compliance or non-compliance with AAOIFI and IFSB accounting and reporting standards by IBBL exposed that the bank is not efficient in managing Shari`ah compliance risks, operational risks, and transparent financial reporting. Therefore, recognition of the Shari`ah standards by the respective IFIs and a “regulatory push” is vital for improving the level of compliance with these standards.

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