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Islamic Banking, Accounting and Finance International Conference - The 10th iBAF 2022 18

THE 10th ISLAMIC BANKING, ACCOUNTING AND FINANCE

INTERNATIONAL CONFERENCE 2022

(iBAF 2022) Internal Control Practices in Malaysian Higher Learning Institutions: An

Exploratory Study on Education Waqf Reporting

Norhanizah Johari

Faculty of Management and Muamalah, Kolej Universiti Islam Antarabangsa Selangor (KUIS), Bandar Seri

Putra, 43000 Kajang, Selangor Malaysia

Tel: +603 8911 7000 Ext 2103 E-mail: norhanizah@kuis.edu.my

Nazifah Mustaffha

Faculty of Management and Muamalah, Kolej Universiti Islam Antarabangsa Selangor (KUIS), Bandar Seri

Putra, 43000 Kajang, Selangor Malaysia

Tel: +603 8911 7000 Ext 6327 E-mail: nazifah@kuis.edu.my Latifa Bibi Musafar Hameed Faculty of Management and Muamalah, Kolej Universiti Islam Antarabangsa Selangor (KUIS), Bandar Seri

Putra, 43000 Kajang, Selangor Malaysia

Tel: +603 8911 7000 Ext 6319 E-mail: latifabibi@kuis.edu.my

Ahmad Yani Ismail

Faculty of Management and Muamalah, Kolej Universiti Islam Antarabangsa Selangor (KUIS), Bandar Seri

Putra, 43000 Kajang, Selangor Malaysia

Tel: +603 8911 7000 Ext 6320 E-mail: ahmadyani@kuis.edu.my Abstract

According to the Ministry of Higher Education, Waqf is one of ten shifts highlighted in the Malaysia Education Blueprint

2015-2025 (MoHE). The goal of these changes is to reduce the reliance of higher learning institutions (HLI) on government

funding sources. Several universities have already implemented education waqf on their campuses. However, implementation

differs by institution. Because the waqf is a public fund, it is critical to investigate the internal control practices used by waqf

managers in HLIs in or

der to meet the waqf's true objectives. The goal of this study is to gain a better understanding of the

current state of internal control practices in Malaysian HLIs for waqf management. Library searches and documentation

reviews on relevant documents on education waqf will be conducted as part of this study. Internal control is essential in all

organizations because it has evolved into one of the most important financial management practice mechanisms. Its functions

include risk mitigation, coordination of organizational activities, and decision support for management. Previous research has

u

nderstated the significance of internal control in managing waqf at HLIs. This study is expected to lay the groundwork for

the d evelopment of a guideline on internal control practices in Malaysian HLIs. Keywo rds: Education waqf; waqf management; internal control practices; public funding 1.Introduction

Most universities currently have mechanisms in place to support revenue generation activities. Fundraising for

waqf is one type of income generation activity. In order to realise this goal, the Malaysian Ministry of Higher

Education (MoHE) created the Purple Book on Enhancing University Income Generation, Endowment, and Waqf,

which serves as a useful guide for navigating university income generation activities. One of the Purple Book's

goals is to promote and improve the implementation of the waqf model as a viable and sustainable source of

funding for universities (MoHE, 2017). In line with MoHE efforts, universities need to have their own policies on

all income generation activities to uphold good governance, integrity and reputation of the universities. Public

universities must accept that under the existing Malaysian legal provisions, the State Islamic Religious Council

(SIRC) is the sole trustee of waqf in its respective state. Thus, in establishing a waqf, universities must acquire the

legal status as waqf administrators from the respective SIRC. In other words, the SIRC will act as a sole trustee

Islamic Banking, Accounting and Finance International Conference - The 10 th iBAF 2022 19

(Mutawalli) and universities as the waqf administrator on behalf of the waqf giver (al-waqif) before it is distributed

to the waqf beneficiaries (Mauquf Alaihi).

Waqf is a type of Islamic socioeconomic fund-raising that serves as a source of funding and a catalyst for

community development. Waqf assets can take the form of cash or real estate (such as land or buildings) and are

used to fund Shariah-compliant projects (such as mosques, learning institutions, hospitals or public amenities).

Waqf is distributed in accordance with the wishes of the giver. Waqf is divided into four tenets: (1) the Givers, (2)

the Clear Statement, (3) the Designated Assets, and (4) the Beneficiaries. Once established, a waqf cannot be given

as a gift, inherited, or sold (MoHE, 2017)

One of the key success factors for sustainable waqf is an assurance that the documentation of all waqf activities

must be reported on a regular basis. Of which, the Waqf Management Committee must demonstrate transparency

and accountability to uphold the waqf objectives. The development of waqf in higher education can be intensified

by effective fund management, strong legislation, good governance, marketing efforts and identify appropriate

waqf management model to be applied (Mustaffa & Muda, 2014). In that case the management of waqf has to

make sure that the internal control mechanism is in place and well-functioning at the institutions level. Internal

controls are the mechanisms, rules, and procedures that a company implements to ensure the integrity of financial

and accounting information, as well as to promote accountability and prevent fraud. As a result, this study is being

carried out to investigate one aspect of internal control practise, namely the reporting of education waqf in Higher

Learning Institutions (HLIs).

2. The History of Waqf in Education

Waqf in education began with the establishment of religious schools such as Sekolah Agama Rakyat (SAR),

the School of Religious Affairs (SAN), madrasah, and cottages (Asmak, 2009; Mustaffa & Muda, 2014, Ahmad,

Baharuddin, Wan Yusoff, Syed Abdullah & Soon, 2016). Waqf in education is not a new concept, as it has been

practised in both Muslim and Western countries (Ahmad et al., 2016). Waqf in education is rapidly expanding,

and it has now reached HLIs. Several studies have revealed that higher education institutions are now committed

to implementing waqf activities at their institutions (Mustaffa & Muda, 2014; Ahmad et al., 2016 & Hussin &

Abdul Rahman, 2018). Education is becoming more expensive due to rising costs of operating quality education

(Mujani, Mohd Taib, & Rifin, 2016), which will be exacerbated by the arrival of pandemic COVID-19 in early

2020, causing many to suffer for survival.

There are various types of waqf instruments available in which cash waqf is more conveniently used for

various types of activities such as; education, food, justice, maintenance of waqf buildings and mosques, social

services, water and workers (Mat Nor, Omar, Abd Aziz & Abdul Hamid, 2021). Cash waqf is believed to be more

efficient then the immoveable waqf as it would be able to fulfill the current needs of the waqf receivers.

2.1. Internal Control Framework

The Committee of Sponsoring Organizations of the Treadway Commission (COSO, 2013) has developed a

framework to meet three cate gories of internal control ob jectives: (1) operations, (2) reporting, and (3)

compliance. The framework al so addresses five integrated internal control components: (1) the control

environment, (2) risk assessment, (3) control activities, (4) information and communication, and (5) monitoring

activities. Internal controls are an important mechanism for increasing accountability in any organisation (Ayedh,

Jamil & Zainuddin, 2021). A lack of internal controls may result in fraudulent activities, which may impede the

achievement of organisational goals (Islamiyah, Siraj & Osman, 2020). This study will look into reporting, which

is one of the internal control objectives. In which related information reported will be observed through the HLI

Education Waqf websites.

Table 1. Internal Control Mechanism.

Control Environment Risk Assessment Control Activities Information &

Communication

Monitoring Activities

1. Commitment to

integrity & ethical values

6. Specifies suitable

objectives

10. Select & develop

control activities

13. Uses relevant

information

14. Communicates

internally

16. Conducts ongoing

evaluations

2. Exercise oversight

responsibility

7. Identifies & analyses

risk

11. Selects & develops

control over IT

15. Communicates

externally

17. Evaluates &

communicates deficiencies

3. Establishes structure,

authority & responsibility

8. Assesses fraud risk 12. Deploys through

policies & procedures

4. Commitment to

competence

9. Identifies & analyses

significant change

5. Enforces

accountability Islamic Banking, Accounting and Finance International Conference - The 10 th iBAF 2022 20

2.2. Reporting Education Waqf by the Malaysian Higher Learning Institutions

One of the goals of internal control, according to The Committee of Sponsoring Organizations of the Treadway

Commission (COSO, 2013) is reporting. In which reporting is one of the mechanisms used to improve an

organization's accountability and transparency. In this case , reporting education waqf to stakeholders and

interested parties via reporting or communication channels on the development and use of donated waqf funds by

HEIs is critical (Bahari & Ahmad Shukor, 2017). According to a recent study by Kamaruddin, Mohd Hanefah, &

Masruki (2021), the reasons for poor waqf reporting practises include the absence of standardised waqf reporting

standards, a lack of reporting or disclosure awareness among waqf management, limited reporting channels from

state authorities to national authorities, diversification in the governance structure, and the reluctance of waqf

administration to disclose waqf reporting in Malaysia.

The implem entation of education waqf should be addres sed throu gh reporting so that the rela ted waqf

administrator, the university community, the SIRCs, and the waqf givers can monitor it. Reporting, on the other

hand, ensures that internal controls of financial reports are trustworthy and consistent with existing standards, as

well as that the organization's activities are carried out effectively and efficiently (Radianto & Laturette, 2020).

As a result, it is recommended that the institution periodically report and disclose the performance and progress

of their fund (Johan et al., 2016).

3. Research Methodology

The waqf education report published on the website by Malaysian HLIs was observed and analysed to achieve

the research objectives. Waqf education was chosen for this study at four HLIs: Universiti Kebangsaan Malaysia

(UKM), Universiti Putra Malaysia (UPM), Universiti Islam Antarabangsa Malaysia (UIAM), and Universiti Sains

Islam Malaysia (USIM). As of July 31, 2022, their websites had been visited and observed.

4. Findings and Discussion

The results of the observation on the four HLIs' websites (UKM, UPM, UIAM and USIM) are tabulated in

Table 2 overleaf:

Table 2. Results of observation on waqf education in HLIs websites.

Name of HLIs: UKM UPM UIAM USIM

1. Website address https://give2ukm.ukm.

my https://wazan.upm.edu .my https://www.iium.edu. my https://pwz.usim.edu .my

2. Name of trustee

Available Available Available Available

3. Collection method(s)

Available Available Available Available

4. Amount Collected

Available Available Available Not Available

5. Amount Disbursed

Available

Not Available

Available

Not Available

6. Waqf Education Activities Available

Available Available Available

According to the observations, all of the HLIs in this study published an annual report on their waqf education

information and activities. However, the information provided on the websites varies in content. In their website,

UIAM has transparently reported information on waqf collection methods, amount collected, amount disbursed,

total number of recipients, and waqf education activit ies. Unfortunately, USIM's w ebsite does not include

information on waqf amounts collected and disbursed. Some information may not be available on the website

because it is only accessible to their relevant stakeholders.

The study proposed that the information listed in Table 2 be made available on the HLI websites because it is

an effective platform for disseminating information to potential waqf givers and the general public. It is one form

of free marketing used by HLIs to promote waqf education to potential waqf givers or the HLIs community.

Indeed, it demonstrates the HLIs' transparency and accountability in reporting their waqf education fund collection

and distribution for the benefit of potential and current recipients. As a result, it indicates that the HLI's internal

control system for waqf is in place and well-functioning.

5. Conclusion and Recommendations

As an assurance to key success factors of sustainable waqf, all waqf activities must be reported on a regular

basis. To uphold the waqf objectives, the waqf administrator must ensure that the internal control mechanism is

Islamic Banking, Accounting and Finance International Conference - The 10 th iBAF 2022 21

in place and functioning properly at the institution level. Waqf is public money, so it must be reported in a

transparent manner. Anyone should be able to access it through a published report. A published report on waqf

collection methods, amount collected, amount disbursed, total number of recipients, and waqf education activities

demonstrates how transparent and accountable HLIs are in reporting their waqf education fund for the benefit of

potential and current recipients. As a result, it encourages the waqf administrator to implement a sound internal

control system in the HLIs. Future study should investigate how the waqf administrator practices other mechanism

of internal control in their institutions.

Acknowledgements

This work is supported by Ministry of Higher Education (MoHE) under Fundamental Research Grant Scheme

(FRGS) FRGS/1/2021/SS02/KUIS/03/1.

References

Ahmad, A. R., Baharuddin, A., Wan Yusoff, W. Z., Syed Abdullah, S. M. D. & Soon, N. K. 2016. Transformation of Waqf Implementation

at Malaysian Public Universities. Advanced Science Letters All rights reserved Vol. 22(9). Adv. Sci. Lett. 22, 2184-2186, 2016. American

Scientific Publishers.

Asmak A.R. 2009. Peranan Wakaf Dalam Pembangunan Ekonomi Umat Islam dan Aplikasinya di Malaysia. Jurnal SyariahVol. 17, Bil. 1.

Ayedh, M. M. A., Jamil, N. N. & Zainuddin, M. T. 2021. The Impact of Internal Control System on the Accountability Practices in Waqf

Institutions: Evidence from Al Rahma International Waqf. Research Journal of Finance and Accounting www.iiste.org. ISSN 2222-1697

(Paper) ISSN 2222-2847 (Online). Vol.12, No.16, 2021.

Bahari, Z. & Ahmad Shukor, A.S.A. 2017. Pemerkasaan Tadbir Urus Wakaf Pendidikan Tinggi Malaysia. Proceeding of International

Conference on Social, Political, Governmental & Communication Scienses (ICSPGCS) 2017.

Hussin, R. & Abdul Rashid. R. 2018. Pelaksanaan Wakaf di Universiti Awam: Cabaran dan Cadangan Penambahbaikan. Voice of Academia.

VoA, Volume 13, Issue 2, 2018 pp. 23-34.

Islamiyah, N., Siraj, S.A. & Osman, A. Z. 2020. Internal Control Practices of Mosques in Java,

Indonesia. Jurnal Akuntansi dan Keuangan Indonesia: Vol. 17: Iss. 1, Article 5. DOI: 10.21002/jaki.2020.05

Johan, J. Yusof, A. & Omar, I. 2016. Waqf for Financial Sustainability of Higher Education in Malaysia: Issues and Challenges. World

Applied Sciences Journal 34(9):1167-1172. DOI: 10.5829/idosi.wasj.2016.34.9.15716

Kamaruddin, I.H., Mohd Hanefah, M. & Masruki, R. 2021. Empirical Investigation on Awqaf and Its Socio-Economic Impact in Malaysia

(2021). Waqf Led Social Finance: Innovative Solutions to Modern Applications (pp. 218-233). London: Routledge (2021), Available at

SSRN: https://ssrn.com/abstract=3848285

Mat Nor, U.A., Omar, H. H., Abd Aziz, N. & Abdul Hamid, S. 2021. The Waqf Institution Funds Management at Public Universities in Perlis,

Malaysia. Jurnal Hadhari 13 (2) (2021) 245 - 256 ejournals.ukm.my/jhadhari. ISSN 1985-6830. eISSN 2550-2271

MoHE. 2017. Enhancing University. University Transformation Programme, Purple Book Income Endowment & Waqf Generation. ISBN

978-967-0888-22-4

Mujani, W.K., Mohd Taib, M.S. & Rifin, M. K. I. 2016. Waqf Higher Education in Malaysia. Proceedings of the 2016 International Conference

on Education, E-learning and Management Technology. https://dx.doi.org/10.2991/iceemt-16.2016.100

Mustaffa, N. & Muda, M.Z. 2014. Pengurusan Wakaf Pendidikan di Institusi Pengajian Tinggi Malaysia: Satu Sorotan Literatur. International

Journal of Islamic and Civilizational Studies. 01 (2014) pp. 45-57 | www. http://jurnalumran.utm.my/index.php/umran

Radianto, W.E. & Laturette, K. 2020. Increasing Accountability Through Internal Control Mechanism in Religious Organization. Humanities

& Social Sciences Reviews. eISSN: 2395-6518, Vol 7, No 6, 2019, pp 1204-1209. https://doi.org/10.18510/hssr.2019.76170

The Committee of Sponsoring Organizations of the Treadway Commission (COSO). 2013. The 2013 COSO Framework & SOX Compliance.

One Approach to An Effective Transition. 1234567890 PIP 198765432 Islamic Banking, Accounting and Finance International Conference - The 10th iBAF 2022 22

THE 10th ISLAMIC BANKING, ACCOUNTING AND FINANCE

INTERNATIONAL CONFERENCE 2022

(iBAF 2022)

Bibliometric Analysis and Review of Shariah Audit

Sari Nuzullina Rahmadhani

Faculty of Economics and Business, Universitas Medan Area (UMA) Jl. Setia Budi No.79 Kota Medan,

Sumatera Utara, Indonesia

Tel: +628 2277629797 E

-mail: sarinuzullina@staff.uma.ac.id

Rana Fathinah Ananda

Faculty of Economics and Business, Universitas Medan Area (UMA) Jl. Setia Budi No.79 Kota Medan,

Sumatera Utara, Indones

ia

Tel: +628 2233414446 E

-mail: rana@staff.uma.ac.id

Fauziah Rahman

Faculty of Economics and Business, Universitas Medan Area (UMA) Jl. Setia Budi No.79 Kota Medan,

Sumatera Utara, Indonesia

Tel: +628 1260005263 E

-mail: fauziahrahman@staff.uma.ac.id

Putri Tamara Raudhatul Jannah

Faculty of Economics and Business, Universitas Medan Area (UMA) Jl. Setia Budi No.79 Kota Medan,

Sumatera Utara, Indonesia

Tel: +628 7798030955 E

-mail: putritamararj23@gmail.com Abstract

The aim o

f this research is to draw a map on shariah audit since 2009 to 2022. The potential citations, keywords, authors,

affiliations, country will be exposed in this paper. A content analysis are used in this study from 78 articles related to shariah

audit which

published by Scopus Database as a reference to derive imperative findings. This study finds that Darmadi, S. is

the most authors, Journal of Humanomics is the most published journal, Malaysia is the most published country, corporate

g

overnance disclosure in the annual report: An exploratory study on Indonesian Islamic banks is the most cited article, and

Universiti Putra Malaysia is the most affiliated institutions. This analysis addresses the literature gaps on measuring the

compliance, determinants and the growth of shariah audit. Future research is expected to include articles which published by

WoS (Web of Science) database. A root on shariah audit discipline is exposed and can be used as reference for practitioners

in various Islamic financial institutions. To the best of the authors' knowledge, this is the first article that discuss on shariah

audit f ield using a systematic literature review. Keywo rds:

Shariah Audit; Islamic Finance; Bibliometric

1.Introduction

The conduct of a Shariah Audit (SA) must be in accordance with all applicable laws and regulations in

Malaysia as well as the fatwas, regulations, and guidelines issued by the Shariah Supervisory Board (SSB), the

Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI ), and national accounting

standards and practices. This means that in addition to complying with Islamic law, the SA must also do so in

accordance with civil law. Without compromising the criteria of the conventional, SA techniques are primarily

intended to boost the institution's financial element that emphasizes shariah compliance and improve the report's

credibility (Kasim & Sanusi, 2013). Thus, strengthening shariah compliance and enhancing the integrity of Islamic

Financial Institutions (IFI) are the primary goals of the need for SA techniques.

Since the early 2000s, the Islamic banking sector has quickly expanded (Safiullah and Shamsuddin, 2018).

Global investment in assets subject to Sharia law climbed from $1.4 trillion in 2014 to $1.5 trillion in 2015 (IFSB,

2017). It is assumed that this increase happened since the growing up of people's awareness of practisoners

/bankers on the importance of adopting shariah audit. The evolution of Islamic finance across 60 countries of 14

Islamic Banking, Accounting and Finance International Conference - The 10 th iBAF 2022 23

jurisdictions has concomitantly amplified its complexity in size and activities (Shabsigh et al., 2017). With this

positive development, Shariah audit could play crussial role in supporting the development of Islamic finance

institution.

1.1. The Importance of Shariah Audit (SA)

The existing empirical studies have mainly focused on countries such as Malaysia (Mohd Ali et al., 2018;

Najeeb and Ibrahim, 2014) and Indonesia (i.e., Suryanto and Ridwansyah, 2016). The existing review research

discussed shariah auditing from various aspects based on the narrative theoretical and critical review (Alahmadi

et al., 2017; Khalid and Sarea, 2021; Najeeb and Ibrahim, 2014). Recently, to the best of the authors' knowledge,

there is a previous study on Shariah audit by Handoko, Luqman Hakim and Mardian, Sepky (2021), which

acknowledge about a "Mapping the Knowledge of Islamic Accounting Studies on Shariah Audit: A Bibliometric

Analysis". Therefore, we want to make further research related to SA and explore the sustainability of research

related to SA.

To get intended, the result of this study will conduct bibliometrics to analyze 78 articles derived from Scopus

database. Expectedly, the study will expose the continuity of research since 2009.

2. Literature Review

According to AAOIFI's Auditing Standard for Islamic Financial Institutions No. 1 (ASIFI 1), the objective of

an audit of financial statements of IFIs "... is to enable the auditor to express an opinion as to whether the financial

statements are prepared, in all material respects, in accordance with the Sha riah Rules an d Principles, the

accounting standards of the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI)

and relevant national accounting standards and practices in the country in which the financial institution operates"

(AAOIFI, 2010).

The research on SA would be interesting to analyze since it has been a recent subject to discuss. On the other

hand, the regulation in SA has a different perspective to conventional audit. However, the differences emerge

based on some SA standards (Yahya, 2018). To achieve the objectives of the study, a systematic literature review

approach was used. For example, the conventional audit uses International financial reporting standards (IFSB)

and IAS (broadly any set of generally accepted accounting principles - GAAP), while the SA using Islamic finance

standards as the shariah principles and rules.

The literature extensively deals with shariah scrutiny from the perspective of agency, while it has not given

sufficient consideration to other theories such as the Maqasid al Shariah and Islamic accountability theory.

The previous study reveals that the current review provides a comprehensive systematic evaluation of the

growing literature on shariah auditing from various aspects such as geographical distribution and theoretical lens.

The study presents many opportunities for researchers to fill the gaps in the future by accurately identifying

research gaps and presenting future proposals to researchers.

The SA performs the developing, monitoring and evaluating the organization's compliance with the provisions

and principles of Islamic shariah and related controls (Khalid et al., 2017). SA can be interpreted as a process to

ensure that the activities carried out by Islamic financial institutions do not violate shariah or a comprehensive

shariah compliance test for shariah activities. Every shariah financial institution that operates must of course be

in accordance with sharia principles and good governance according to the rules that have been set. SA is one of

ways to maintain and ensure the integrity of sharia financial institutions in implementing sharia principles.

Therefore, if there is a failure in the SA, there will have a bad impact on the fulfillment of sharia principles itself.

Numerous investigations have noted that the words "Shariah review", "Shariah auditing", and "Shariah

supervision" are frequently used interchangeably with little distinction made between their technical distinctions

(Sultan, 2007; Alomrani, 2015). By obscuring the distinctions between the terminologies, it may cause concepts

to become unclear, which may then result in a misinterpretation of the requirements for the position of the Shariah

auditor. By distinguishing the concepts, shariah auditing will be defined more fully and precisely, allowing for an

accurate evaluation of its efficacy.

The effectiveness of SA refers to the extent to which the auditors can achieve the objectives of institutions

through the process of verifying their commitment to the provisions of Islamic shariah. It is, therefore, crucial to

have factors such as independence and efficiency to enhance the effectiveness of the audit process. Shafii et al.

(2014a) focused on the need to build the auditor's competency through training courses. This is in line with Khalid

et al. ( 2017), who str essed that efficiency in shariah audit ing enhances audit quality through profes sional

certificates providing the shariah auditor with skills that improve the ability to perform tasks more professionally.

Aziz et al. (2019) suggested that shariah auditing does not completely reject all of the methods and procedures

of conventional auditing because they can be applied to gauge compliance with shariah. Furthermore, Yahya

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