Accounting and Auditing Organization for Islamic Financial Institutions - AAOIFI

AAA

DEFINITION of 'Accounting and Auditing Organization for Islamic Financial Institutions - AAOIFI'

A not-for-profit organization that was established to maintain and promote Shariah standards for Islamic financial institutions, participants and the overall industry. The Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) was created on February 26, 1990 to ensure that participants conform to the regulations set out in Islamic finance.

The founding and associate members, as well as the regulatory and supervisory authorities of the AAOIFI, define the acceptable standards for various functions. This includes areas such as accounting, governance, ethics, transactions and investment.

INVESTOPEDIA EXPLAINS 'Accounting and Auditing Organization for Islamic Financial Institutions - AAOIFI'

In Islamic finance there are unique rules, restrictions and requirements regarding business and investing. In order to be considered acceptable, transactions must adhere to the principals under Shariah. The Accounting and Auditing Organization for Islamic Financial Institutions sets compliance standards for institutions that wish to gain access to the Islamic banking market.

The AAOIFI is continually updating its scope to include the various new financial instruments entering markets around the world. For example, new hedging mechanisms would first need to be discussed and accepted by the AAOIFI before any member would offer these services.

RELATED TERMS
  1. Association of Latino Professionals ...

    A not-for-profit organization created to enhance opportunities ...
  2. Accounting

    The systematic and comprehensive recording of financial transactions ...
  3. Savings Account

    A deposit account held at a bank or other financial institution ...
  4. Liability

    A company's legal debts or obligations that arise during the ...
  5. Generally Accepted Accounting Principles ...

    The common set of accounting principles, standards and procedures ...
  6. International Accounting Standards ...

    An older set of standards stating how particular types of transactions ...
RELATED FAQS
  1. What is an Islamic investment policy?

    Islamic investments are a unique form of socially responsible investments because Islam makes no division between the spiritual ... Read Full Answer >>
  2. What are some benefits of a mixed economic system?

    In economic theory, a mixed economic system is a combination of capitalism and socialism, allowing for private property along ... Read Full Answer >>
  3. How is minimum transfer price calculated?

    A company that transfers goods between multiple divisions needs to establish a transfer price so that each division can track ... Read Full Answer >>
  4. What is the effective interest method of amortization?

    The effective interest method is an accounting practice used for discounting a bond. This method is used for bonds sold at ... Read Full Answer >>
  5. What does an unfavorable variance indicate to management?

    In managerial accounting, an unfavorable variance is discovered when a company's management performs a comparison between ... Read Full Answer >>
  6. What regulations exist to protect infant industries?

    There are far more protections of once-infant and now-dominant industries in the United States than regulations designed ... Read Full Answer >>
Related Articles
  1. Insurance

    The Rise Of The Modern Investment Bank

    Get to know a little bit about the institutions whose actions help to guide free markets.
  2. Entrepreneurship

    Social Finance Careers: Creating A Better World

    A financial career can be used to do more than just bring in profits. Find out how to get a career with a more social objective.
  3. Options & Futures

    Extreme Socially Responsible Investing

    Make your money work for you without putting it into ventures that don't support your values.
  4. Retirement

    Working With Islamic Finance

    There is no division between the spiritual and the secular in this type of socially responsible investing.
  5. Economics

    What is a Resident Alien?

    A resident alien is a foreigner who is a permanent resident of the country in which he or she resides but does not have citizenship.
  6. Economics

    Calculating Net Realizable Value

    An asset’s net realizable value is the amount a company should expect to receive once it sells or disposes of that asset, minus costs from its disposal.
  7. Economics

    Whole Foods, Price Gouging And Sky-High Margins

    Over the years Whole Foods Market has grown to have more than 360 stores in the US and abroad. However, this company is not without its critics.
  8. Entrepreneurship

    Employment Negotiations: What To Ask For & How

    Improving their first offer: What you should know
  9. Investing Basics

    Calculating Unlevered Free Cash Flow

    Unlevered free cash flow (UFCF) is the free cash flow of a business before interest payments.
  10. Taxes

    Understanding Write-Offs

    Write-off has different meanings depending on the context in which it is used, but generally refers to a reduction in value due to expense or loss.

You May Also Like

Hot Definitions
  1. Social Security

    A United States federal program of social insurance and benefits developed in 1935. The Social Security program's benefits ...
  2. American Dream

    The belief that anyone, regardless of where they were born or what class they were born into, can attain their own version ...
  3. Multicurrency Note Facility

    A credit facility that finances short- to medium-term Euro notes. Multicurrency note facilities are denominated in many currencies. ...
  4. National Currency

    The currency or legal tender issued by a nation's central bank or monetary authority. The national currency of a nation is ...
  5. Treasury Yield

    The return on investment, expressed as a percentage, on the debt obligations of the U.S. government. Treasuries are considered ...
  6. Bund

    A bond issued by Germany's federal government, or the German word for "bond." Bunds are the German equivalent of U.S. Treasury ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!