ISLAMABAD: The Securities and Exchange Commission of Pakistan (SECP) has published a consultation paper to seek comments and feedback of stakeholders on implementation of a new strategy for adoption of AAOIFI’s Shariah, accounting, auditing and governance standards.

The proposed new strategy aims to enhance the adoption of Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) standards by introducing a more comprehensive and interactive approach, with a phased implementation of all standards to ensure effective compliance. By considering the maturity level of industry and practical difficulties in adopting all standards at once, the proposed strategy suggests a staggered approach to implementation.

Presently, only 7 Shariah standards have been adopted, whereas the adoption of 10 more Shariah standards is in process. However, the existing approach, which includes picking standards based on necessity, produces an inadequate framework since many significant and consequential features offered in accounting, auditing, governance, and other Shariah-related standards may be missed out.

Therefore, a new strategy has been envisaged emphasizing comprehensiveness, integration, interaction, feedback, and preparedness for global and domestic Islamic finance growth. All of AAOIFI’s standards shall be adopted as non-binding guidelines, and institutions will be encouraged to voluntary adopt them while conducting Islamic financial transactions. After a period of general sensitization, compliance will shift to a “comply or explain” approach with penal action for non-compliance (not less than three years; the period will be announced later).

Copyright Business Recorder, 2024