The perceptions of depositors on the auditor`s report of Islamic banks

Abstract

This dissertation examined depositors’ perceptions of the assurance of financial statements including Shariah compliance, particularly in terms of the auditor’s report. The concern is whether the Islamic Banks’ (IBs) audit reports provide ample reference that the financial statements of IBs are in accordance with the financial reporting framework as well as assurance on Shariah compliance. By proposing an expanded auditor’s report based on suggestions found in the literature, the dissertation identified the potential application of the expanded auditor’s report within the Islamic banking context. More importantly, the proposed auditor’s report adopts no wordings that could be misconstrued as increasing the auditor’s responsibility or exposure to legal liability. As the study was exploratory, the experiments were conducted to final-year accounting undergraduates as the focus group that could provide preliminary insights into the overall stakeholders’ perceptions. The students, who were also depositors in IBs, were selected from two public universities in Malaysia. The findings showed significant differences in the students’ perceptions of the proposed expanded auditor’s report as compared to the existing auditor’s report. Secondly, it also proved that certain information could significantly enhance perceptions of the IBs’ auditor’s report. Finally, pertaining to Islamic education background, the depositors did not significantly differ in their perceptions of both reports. While the study did not find that general Islamic education background affected users’ perceptions of the auditor’s report, it provided an opportunity for further evaluations of other stakeholders’ perceptions, especially those with different educational background and experience. It is believed that this exploratory study could provide useful insights for IB auditors and management in their decision making, as well as the regulators, to meet users’ demands for clear audit reports and increase the clarity and information of Shariah compliance.