Roles of Stakeholders’ Awareness, Understanding and Perception of Shari’ah Audit on the Relationships between Institutional Mechanisms and Audit Shari’ahness in Nigeria

Abstract

The dire need for Shari’ah audits at the organizational and administrative levels has not been realized or appreciated until recently with the emergence of Islamic financial institutions (IFIs) across the world. Islamic banking is becoming more popular in Nigeria among the vast Muslim population; however, weaknesses do exist in the institutional mechanisms such as legal and regulatory framework, inadequate educational and a professional certifications and mimicking conventional auditing. Therefore, this study investigates the relationship between institutional mechanisms and audit shari’ahness with stakeholders’ awareness, understanding, and perception of shari’ah audits as moderators among stakeholders of Islamic banks in Nigeria. The study adapts a survey research design; in which a total of 142 questionnaires were administered to stakeholders of Nigerian Islamic banks. The Partial Least Squares (PLS) and the Structural Equation Modelling techniques were used to test the hypotheses. The findings
supported all three hypothesized direct effects of institutional mechanisms of "Coercive", "Normative”, and "Mimetic" on audit shari’ahness. Furthermore, "Stakeholders' Awareness" moderated the relationship between the mimetic institutional mechanism and audit shari’ahness. The results showed that Islamic banks in Nigeria are responsive to institutional pressures stemming from shari’ah principles and rules, and other local laws and regulations. To ensure optimal audit shari’ahness in Nigeria, regulators such as the Central Bank of Nigeria (CBN), National Deposit Insurance Corporation (NDIC) and Financial Reporting Council of Nigeria (FRCN) should provide adequate specific shari’ah audit framework and/or Act.