AAOIFI
AAOIFI, the Accounting and Auditing Organization for Islamic Financial Institutions, is a Bahrain-based international standard-setter whose Sharia, accounting, auditing, governance and ethics standards are widely used in Islamic finance.
Also called: Accounting and Auditing Organization for Islamic Financial Institutions
AAOIFI was established in the early 1990s and publishes several families of standards. Its Shari'ah Standards set out the conditions for contracts such as murabaha, ijarah, sukuk and tawarruq, and are among the most cited references in the industry. Its accounting standards address how Islamic contracts are recognised and reported, and its governance standards cover Sharia Supervisory Boards and Sharia audit.
Whether AAOIFI's standards are binding depends entirely on the jurisdiction. Some regulators, Bahrain among them, require institutions to apply them in whole or in part. Others treat them as guidance, apply their own standards, or require IFRS for accounting. Within a single institution, the SSB may follow AAOIFI on some points and depart from it on others.
In practice
AAOIFI standards are influential, but they are not automatically law anywhere. They bind only where a regulator, a contract or an institution's own governance adopts them.
Commonly confused with
| Term | How it differs |
|---|---|
| IFSB | AAOIFI focuses on Sharia, accounting, auditing and governance standards. The IFSB sets prudential and supervisory standards — capital, liquidity, risk management — for regulators. |
See also
- IFSBThe IFSB, the Islamic Financial Services Board, is a Kuala Lumpur-based international body that issues prudential and supervisory standards for Islamic banking, Islamic capital markets and takaful, much as the Basel Committee does for conventional banks.
- Sharia Supervisory BoardA Sharia Supervisory Board is the panel of scholars responsible for reviewing and overseeing an Islamic financial institution's compliance with Sharia — approving products and contracts, issuing rulings and reviewing whether operations follow them.
- FatwaA fatwa is a scholarly legal opinion on a question of Islamic law. In finance it is the ruling — from an individual scholar, an institution's Sharia board or a national authority — that a product, structure or transaction is or is not compliant.
- ShariaSharia is the broad body of Islamic norms and law derived from the Qur'an and the Sunnah; in finance it supplies the principles that jurists turn into concrete rules for contracts, ownership, debt and exchange.