Audit Processes of Interest-Free Financial Institutions in Turkey: Harmonization of AAOIFI and KGK Standards and Improvement of Audit Practices

Abstract

Purpose – This study aims to evaluate the auditing processes of interest-free financial institutions in Turkey and their compliance with AAOIFI (Accounting and Auditing Organization for Islamic Financial Institutions) and KGK (Public Oversight, Accounting, and Auditing Standards Authority) standards. The fundamental principles and history of the interest-free financial system have been addressed, and practices in Turkey and auditing standards have been compared. Design/methodology/approach – The document analysis method was used in this study. The discrepancies between AAOIFI and KGK standards and their impact on auditing processes were examined. Findings – The findings indicate that additional auditing procedures are required to ensure compliance with Shariah, and the education and awareness of auditors are essential. Moreover, it was determined that the lack of international alignment in existing auditing standards negatively affects the efficiency of auditing processes. Discussion – To enhance the effectiveness of auditing processes in interest-free financial institutions, it is necessary to strengthen the alignment between national and international standards. The active involvement of Shariah advisors and the continuous education of auditors can make auditing processes more effective. The findings were compared with relevant literature and discussed accordingly. Various recommendations have been proposed to improve the efficiency of auditing processes and to align them with international standards. These recommendations have the potential to enhance the competitiveness of interest-free financial institutions in Turkey in international markets.