This study aims to examine audit shari’ahness among Nigerian Islamic banks (IBs). This study, upon drawing the institutional and Maqasidil shari’ah theories, investigated the relationship between institutional mechanisms and audit shari’ahness.
The study used a survey research design through the administration of a questionnaire using both nominal and Likert-scale measurement scales on a sample study of regulators financial regulation advisory council of experts (FRACE), managers of IBs, Shari’ah scholars (Advisory committee of experts ACE), internal Shari’ah auditors and other stakeholders, which include staff of the supervisory department at Central Bank of Nigeria (CBN) and Nigeria Deposit Insurance Corporation (NDIC), respectively. Also, 150 samples were identified based on the population of 210, and statistical package for the social sciences (SPSS) version 25 was used to analyze the data to ensure that it is suitable for the partial least squares-structural equation modeling.
The findings supported all three hypothesized direct effects of institutional mechanisms of “Coercive”, “Normative” and “Mimetic” as having direct positive influences on audit shari’ahness among IBs in Nigeria.
This research was unable to cover other crucial stakeholders such as customers of IBs and Halal industry, investors, local Islamic finance community (such as Islamic micro-finance banks and Islamic co-operative societies), Islamic public sectors (such as Hajj commission, Hisbah boards, Zakat and Waqaf agencies), community members, etc.
Practically, this investigation confirmed that coercive institutional mechanisms such as shari’ah principles and rules, and regulations have a significant influence on audit shari’ahness, thereby improving the managerial efficiency of IBs and thus effectively serving different sectors of the economy based on the Shari’ah rules and principles..
The role of institutional mechanisms (coercive, normative and mimetic) in ensuring audit shari’ahness is scantily studied generally, and none in the case of Nigeria. Therefore, to the best of the authors’ knowledge, this study is the first to examine the country’s three-way relationship between institutional mechanisms (coercive, normative and mimetic) and audit shari’ahness in the context of Nigeria. Hence, this study answers the previous literature’s gaps with three independent variables (coercive, normative and mimetic) and audit shari’ahness as the criterion variable.
