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The Internal Audit of Islamic Finance

This 4 day training event is designed to provide an understanding of the audit techniques appropriate risks within Islamic Banking and how these should be applied in practice.


THE INTERNAL AUDIT OF ISLAMIC FINANCE TRAINING COURSE DURATION 4 DAYS

Course Description
This course covers Islamic finance from both a technical and Sharia’a perspective, reviewing the risks applying and the controls operating within Islamic finance. Aimed at new and existing internal auditors within Sharia’a compliant finance, trade, investment and insurance, this course considers the nature of the risks that are specific to this industry and the internal audit tests which are appropriate.

Learning Objective

  • To equip candidates with a practical understanding of the risks and controls inherent within Islamic finance
  • To provide candidates with an understanding of the audit techniques appropriate to address the risks within Islamic finance
  • To develop a series of internal audit programmes to address the key risks within both the Islamic finance and Takaful (Islamic Insurance) industries.

Who Should Attend
Internal auditors seeking to address the risks within the Islamic finance industry.

Methodologies
Classroom lectures and interactive practical workshops.

Course Content:

Day 1
Session 1:

  • An Introduction to Risk Management within Islamic Finance
  • The principles and concepts which underpin Islamic Finance;
  • The nature of Islamic law and its application;
  • The role and constitution of the Sharia'a Supervisory Board
  • What are the current key risks within the finance industry?
  • How are these different within a Islamic Finance environment?
  • The key risks existing within Islamic Banking
  • Audit planning within an Islamic environment
  • Case Study: Develop an initial analysis of the key risks existing within Islamic Finance
  • Case Study: What are the key elements of the audit planning memorandum?

Session 2:

  • An introduction to Risk Management in Islamic Banking
  • The basis of Islamic banking and finance
  • The main components of the Islamic banking industry and its operating structures.
  • The application of risk appetite within Islamic Finance
  • The development of risk registers within Islamic Finance
    Case Study: What are the key elements that should be included within an Islamic risk register?
  • Case Study: Develop an audit programme to audit risk appetite

Session 3: Islamic Law of Contracts

  • Principles of Islamic business including the avoidance of riba and gharar;
  • The concept of Wa’d (promise);
  • The different types of contract;
  • The purchase and sale of currencies
  • The use of commodities
  • The nature of the control environment applying within the legal functions of Islamic institutions
  • Case Study: What are the key risks arising from the application of Islamic law? How should these be controlled in practice?
  • Case Study: Develop an audit programme to address Islamic Contracts

Day 2
Session 4:

  • Financial Techniques Applied by Islamic Banks
  • The risk and control of Islamic current accounts;
  • The differences in risk and control within the major Islamic contract types:
    • Mudaraba,
    • Musharaka,
    • Murabaha,
    • Ijara,
    • Salam,
    • Istisn'a;
  • The risk and control of letters of credit and guarantees in Islamic finance contracts.
  • Case Study: What are the key risks arising from the application of Islamic law? How should these be controlled in practice?
  • Case Study: Develop an audit programme to address financial techniques within Islamic Finance

Session 5:

  • Basel and Islamic Finance
  • The framework for Basel – does this provide additional challenges to the Islamic firm
  • Credit risk
    • EAD
    • LGD
    • PD
  • Market risk
  • Operational risk
    • Basic indicator approach
    • Standardised approach
    • Advanced measurement approach
  • Liquidity risk
  • Strategic risk
  • Reputational risk
  • Case Study: Develop audit programmes for Basel credit and market risks

Day 3
Session 6:

  • Islamic Asset and Fund Management
  • The purpose of investment in Islam;
  • Prohibited industries and the problems of Groups ;
  • The issues relating to replicating conventional deposit structures using Murabaha and Mudaraba;
  • The Islamic stock selection process and the role of the Sharia'a Supervisory Board.
  • Case Study: What are the key controls that are required over the Islamic asset business?
  • How do these vary from traditional investment companies?
  • Case Study: Develop an audit programme to address Islamic asset and fund management

Session 7: Islamic Bond Market - Sukuk

  • The nature of Sukuk compared with conventional bonds;
  • The risks and controls over the issuance of Sukuk bonds;
  • The different types of Sukuk;
  • How Sukuk issues are rated.
  • How to value Sukuk bonds
  • Case Study: What are the key risks and controls operating within the Islamic bond market? How should these be controlled in practice?
  • Case Study: Develop an audit programme to address sukuk bonds

Day 4
Session 8: Islamic Insurance - Takaful

  • The nature and structure of Takaful compared with conventional insurance;
  • The limitations on products within Islamic insurance
  • How to remunerate the insurance operator
  • The risks and controls within Takaful firms
  • Case Studies: What are the greatest risks within Takaful? How will these be controlled in practice?
  • Case Study: Develop an audit programme to address Takaful

Session 9: Risk Management Techniques within an Islamic Finance environment

  • Control and risk self assessment
  • Key risk, performance indicators and risk appetite
  • Loss databases
  • Stress testing and scenario modelling
  • Case Study: What are the key risks within Islamic Finance and the indicators that should be applied?
  • Case Study: Develop an audit programme to address stress testing and scenario modelling

Session 10: Documenting Audit Findings

  • Prioritising findings – Sharia’a and non-Sharia’a
  • How to report risk management findings
  • What is really important?

State of the art facilities
Delegates can study in our comfortable hi-tech learning environment in London, near Liverpool Street Station.

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The Internal Audit of Islamic Finance

Course Venue: London EC2

information@premiercs.co.uk