ISSN: 2226-3624
Open access
The evolution of virtual audits in Islamic finance presents a complex landscape of Shariah compliance challenges requiring industry-matured analysis. A primary concern involves verifying the Shariah conformity and physical existence of commodities as subject matter, adhering to stringent Islamic commercial law. The Shariah governance framework mandates a comprehensive assessment of asset integrity, financial viability, technological readiness, digital auditing, auditor credibility, and inclusivity. These multifaceted criteria introduce hurdles in achieving end-to-end Shariah compliance within a rapid financial ecosystem. This study critically analyzes challenges associated with Shariah virtual auditing, specifically the validity of sale contracts regarding the existence of the subject matter. It highlights operational challenges for auditors inspecting commodities at sites like factories or plants. Auditors face a dilemma: conduct physical site visits, which may expose them to hazards or rely on Shariah pronouncements issued by the commodity provider’s Shariah authority. This raises questions regarding the flexibility of Shariah applications in industry practice. Employing a qualitative research methodology including content analysis and thematic analysis, the study evaluates the regulatory frameworks governing virtual audits. The findings suggest that existing virtual audit frameworks within the Islamic finance industry may have significant implications if they do not fully align with Shariah principles. This study contributes possible Shariah solutions through technologies such as robots, virtual reality, and drones for on-site inspections. Addressing these challenges through tailored Shariah-compliant solutions is crucial to ensuring the integrity, transparency, and sustainability of virtual audits in Islamic finance.
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