The Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) is a not-for-profit body based in Bahrain that writes Shariah, accounting, auditing, ethics and governance standards for Islamic finance. Established in 1991, it has issued 131 standards and technical pronouncements, and 47 regulators in 42 countries adopt or recognise them in some form, according to AAOIFI’s own description.
AAOIFI at a glance
| Established | 1991 |
| Headquarters | Manama, Kingdom of Bahrain |
| Members | Over 187 institutional members from more than 45 countries |
| Standards issued | 131 standards and technical pronouncements |
| Adoption | 47 regulatory and supervisory authorities in 42 countries |
What does AAOIFI do?
Islamic financial products such as murabaha (cost-plus sale), ijarah (leasing) and sukuk (Islamic certificates backed by assets or business activities) do not fit neatly into conventional accounting rules. A lease that transfers ownership, or a bank account that shares profit and loss, needs its own treatment in the financial statements. AAOIFI exists to provide that treatment and to set out how such contracts should be structured to meet Shariah requirements.
Its standards cover five areas:
- Shariah standards, which describe the permissible structure of contracts such as murabaha, mudarabah, musharakah and sukuk.
- Accounting standards, known as Financial Accounting Standards (FAS), for recognising and reporting Islamic transactions.
- Auditing standards for external auditors of Islamic financial institutions.
- Governance standards, including the role of Shariah supervisory boards.
- Ethics standards for professionals working in the industry.
AAOIFI’s Shariah standards are drafted and approved by its own Shariah Board, made up of scholars from several jurisdictions. Islampreneur reports on these standards and does not issue its own rulings on them.
Who uses AAOIFI standards?
Adoption varies. Some regulators make AAOIFI standards mandatory for Islamic banks, others apply them partially, use them as guidelines or as the basis for local rules. AAOIFI counts 47 authorities across 42 countries in one of these categories. Its members include central banks and regulators, Islamic financial institutions, accounting and audit firms and law firms.
Beyond banks, its Shariah standards influence the sukuk market. Investors and arrangers often check whether a sukuk structure aligns with the relevant AAOIFI standard, which is why proposed changes to the sukuk standard draw wide comment from market participants.
How is AAOIFI different from the IFSB?
AAOIFI and the Kuala Lumpur based Islamic Financial Services Board are complementary. AAOIFI focuses on how transactions are structured, accounted for and audited. The IFSB focuses on prudential regulation: capital, liquidity, risk management and supervisory practice. A regulator can adopt AAOIFI accounting standards and IFSB prudential standards at the same time, and many do.
Does AAOIFI offer professional qualifications?
Yes. AAOIFI runs professional certification programmes for accountants, auditors and Shariah advisers, including the Certified Islamic Professional Accountant (CIPA) and the Certified Shari’a Adviser and Auditor (CSAA). These are aimed at practitioners who want a recognised credential in applying its standards.
How do you connect with AAOIFI?
Institutions can apply for membership through AAOIFI’s official website, and individuals can register for its certification programmes. Exposure drafts of new standards are published for public comment before final approval, which is the most direct way for practitioners to take part in the standard-setting process.
FAQ
Accounting and Auditing Organization for Islamic Financial Institutions.
In the Kingdom of Bahrain. It was established in 1991.
Only where a national regulator makes them so. Other countries apply them partially, as guidance or as a basis for local rules.
AAOIFI reports 131 standards and technical pronouncements across Shariah, accounting, auditing, ethics and governance.
See our profile of the Islamic Financial Services Board and other bodies in the Organizations section.
