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.

BREAKING DOWN '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. Islamic Banking

    Islamic Banking is a banking system that is based on the principles ...
  2. Murabaha

    An Islamic financing structure, where an intermediary buys a ...
  3. Riba

    Riba is a concept in Islamic banking that refers to and forbids ...
  4. Auditing Evidence

    Auditing evidence is information collected to review a company's ...
  5. Islamic Financial Services Board ...

    An international organization that issues guiding principles ...
  6. Statutory Audit

    A legally required review of the accuracy of a company's or government's ...
Related Articles
  1. Insights

    The 3 Most Dangerous Terrorist Organizations

    A brief look at the Islamic State, Al Qaeda and Boko Haram. What are they? What do they want? Where did they come from?
  2. Taxes

    Your Chance of a Tax Audit Is the Lowest in Years

    The risk of a tax audit, for you or your company, is the lowest in years, but that doesn’t mean you should skirt the law or stop keeping records.
  3. Taxes

    How Does An IRS Audit Work?

    It doesn't automatically mean an IRS agent will be ringing your doorbell. Here are the different types of IRS audits and how to handle them.
  4. Taxes

    Surviving The IRS Audit

    Keeping thorough records and knowing the penalties make this experience easier than you'd expect.
  5. Investing

    Who Funds ISIS?

    Faced with the high costs of running and defending a state, ISIS has been resourceful, resorting to just about any way of earning revenue.
  6. Tech

    Wahed Invest: A Look at the New Islamic Robo-Advisor

    For religious Muslims governed by Sharia, Wahed Invest Inc. is likely a welcome platform in the robo-advisor environment.
  7. Insights

    Examining A Career As An Auditor

    Stricter government regulations have put auditing professionals in demand.
  8. Insights

    A Look At Accounting Careers

    More than just crunching numbers, this career blends detective work with trouble shooting.
  9. Investing

    The Wall Street Reform Act: What You Need To Know

    What is in the Act, how will it impact most Americans, and what should investors do?
  10. Investing

    How Saudi Arabia Benefits From Cheap Oil

    Since the middle of last summer oil prices have dropped significantly and many have wondered why the traditional "swing producer" Saudi Arabia has not intervened by cutting production.
RELATED FAQS
  1. Can the IRS audit you after a refund?

    Learn how the U.S. Internal Revenue Service (IRS) can conduct a tax audit even after a taxpayer was issued a tax refund in ... Read Answer >>
  2. Who enforces GAAP?

    Take a deeper look at the private enforcement mechanisms behind the generally accepted accounting principles for American ... Read Answer >>
  3. How Can Institutional Holdings Be More Than 100%?

    No entity can own more than 100% of a company's outstanding shares, but it can be reported that way. Read Answer >>
  4. How does financial accounting help decision making?

    Read a brief overview of some areas where financial accounting helps in decision making for investors, lending institutions ... Read Answer >>
  5. Are IRS audits random?

    Learn about how the U.S. Internal Revenue Service (IRS) conducts its tax audits based on random selection, document matching ... Read Answer >>
  6. Why does financial accounting have to comply with GAAP?

    Read about the roles of the FASB and the SEC as it relates to generally accepted accounting principles for publicly traded ... Read Answer >>
Hot Definitions
  1. Fibonacci Retracement

    A term used in technical analysis that refers to areas of support (price stops going lower) or resistance (price stops going ...
  2. Ethereum

    Ethereum is a decentralized software platform that enables SmartContracts and Distributed Applications (ĐApps) to be built ...
  3. Cryptocurrency

    A digital or virtual currency that uses cryptography for security. A cryptocurrency is difficult to counterfeit because of ...
  4. Financial Industry Regulatory Authority - FINRA

    A regulatory body created after the merger of the National Association of Securities Dealers and the New York Stock Exchange's ...
  5. Initial Public Offering - IPO

    The first sale of stock by a private company to the public. IPOs are often issued by companies seeking the capital to expand ...
  6. Cost of Goods Sold - COGS

    Cost of goods sold (COGS) is the direct costs attributable to the production of the goods sold in a company.
Trading Center