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Accounting and Auditing Organization

For Islamic Financial Institutions

STATUTE

2008

Accounting and Auditing Organization For Islamic Financial Institutions

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CHAPTER I PRELIMINARY PROVISIONS

Article 1 Title and Definition

The Accounting and Auditing Organization for Islamic Financial Institutions (hereinafter referred to as AAOIFI) is an Islamic international autonomous not-for-profit corporate body that prepares accounting, auditing, governance, ethics and Shari’a standards for Islamic financial institutions. Article 2 Headquarters

The headquarters of AAOIFI shall be located in the Kingdom of Bahrain. AAOIFI may establish branch offices outside Bahrain, if deemed necessary, in accordance with the laws in force in the host country. Article 3 Membership

The membership of AAOIFI shall comprise the following:

3/1 Founding Members

The founding members are the Islamic financial institutions that are signatories to the Agreement establishing AAOIFI in 1989, and those that have been subsequently accepted as founding members. These are: The Islamic Development Bank, Dallah Al Baraka, Faysal Group (Dar Al Maal Al Islami), Al Rajhi Banking & Investment Corporation, Kuwait Finance House., and Albukhary Foundation.

3/2 Associate members

3/2/1The associate members shall comprise:


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(a) Islamic financial institutions and companies that comply with Islamic Shari’a rules and principles in all their transactions.

(b) Islamic Fiqh academies and learning institutions.

Associate members shall have the right to participate and vote in the meetings of the General Assembly but without a right to vote. They shall also have the right to take part in AAOIFI’s events and receive AAOIFI's publications at AAOIFI’s members’ rates.

3/2/2 An associate member shall be entitled to enjoy the

rights of the founding members provided the following terms are satisfied:

(a) File an application in this respect.

(b) Obtain an initial approval by the Board of Trustees of this application.

(c) Fulfil all the financial obligations of the founding members from the date of the initial approval.

(d) Issuance of a final resolution on this application by the General Assembly.

3/3 Members representing regulatory and supervisory

authorities

These members shall comprise regulatory and supervisory authorities that supervise Islamic financial institutions. Members representing regulatory and supervisory authorities shall have the right to participate and vote in the meetings of the General Assembly. They shall also have the right to take part in AAOIFI’s events and


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receive AAOIFI's publications at AAOIFI’s members’ rates.

3/4 Observer members

The observer members shall comprise:

(a) Organizations and associations responsible for regulating the accounting and auditing profession and/or those responsible for preparing accounting and auditing standards.

(b) Practicing certified accounting and auditing firms that have interest in the accounting and auditing practices of Islamic financial institutions.

(c) Financial institutions engaged in financial activities of Islamic institutions.

(d) Users of financial statements of Islamic financial institutions.

Observer members shall have the right to participate in the meetings of the General Assembly but without a right to vote. They shall also have the right to take part in AAOIFI’s events and receive AAOIFI's publications at AAOIFI’s members’ rates.

3/5 Supporting members

The supporting members shall comprise financial institutions and other institutions that have relationship with Islamic financial institutions. Supporting members shall have the right to participate in the meetings of the General Assembly but without a right to vote. They shall also have the right to take part in AAOIFI’s events and receive AAOIFI's publications at AAOIFI’s members’ rates.


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Article 4 Objectives and Means

AAOIFI shall within the Islamic Shari’a rules and principles, have the following objectives:

4/1 Develop accounting, auditing, governance and ethical thought relating to the activities of Islamic financial institutions taking into consideration the international standards and practices which comply with Islamic Shari’a rules.

4/2 Disseminate the accounting, auditing, governance and ethical thought relating to the activities of Islamic financial institutions and it’s application through training seminars, publication of periodical newsletters, preparation of reports, research and through other means.

4/3 a) Harmonize the accounting policies and procedures

adopted by Islamic financial institutions through the preparation and issuance of accounting standards and the interpretations of the same to the said institutions.

b) Improve the quality and uniformity of auditing and governance practices relating to Islamic financial institutions through the preparation and issuance of auditing and governance standards and the interpretation of the same to the said institutions.

c) Promote good ethical practices relating to Islamic financial institutions through the preparation and issuance of codes of ethics to these institutions.

4/4 Achieve conformity or similarity -to the extent possible- in concepts and applications among the Shari’a supervisory boards of Islamic financial institutions to avoid contradiction and inconsistency between the fatwas and the applications by these institutions, with a view to activate the role of the Shari’a supervisory boards of Islamic financial institutions and central


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banks through the preparation, issuance and interpretations of Shari’a standards and Shari’a rules for investment, financing and insurance.

4/5 Approach the concerned regulatory bodies, Islamic financial institutions, other financial institutions that offer Islamic financial services, and accounting and auditing firms in order to implement the standards, as well as the statements and guidelines that are published by AAOIFI.

4/6 Offer educational and training programs, including professional development programs on accounting, auditing, ethics, governance, Shari’a, and other related areas, so as to promote knowledge on, and to encourage greater professionalism in, Islamic banking and finance. Training, examination and certification shall be carried out by AAOIFI itself and/or in coordination with other institutions.

4/7 Carry out other activities, including certification of compliance of AAOIFI’s standards, so as to gain wider awareness and acceptance of AAOIFI’s standards on accounting, auditing, ethics, governance, and Shari’a.

Article 5 Financial Year and Calendar

The financial year of AAOIFI shall commence on the first day of January and shall end on the last day of December. All dates shall be computed according to the Gregorian calendar.


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CHAPTER II ORGANIZATION STRUCTURE

Article 6 Organization Structure

AAOIFI shall consist of the following:

6/1 The General Assembly, the Board of Trustees, the Executive Committee and the General Secretariat.

6/2 The Accounting and Auditing Standards Board and the Shari’a Board.

General Assembly Article 7 Composition of the General Assembly

The General Assembly is AAOIFI's supreme authority and shall be composed of the members listed in Article 3 of this Statute. Article 8 Conditions for Membership

8/1 A member shall be from amongst the categories of organizations listed in Article 3 of this Statute.

8/2 A member shall pay the prescribed membership fee and the annual subscription fee subject to paragraph 16/6 of Article 16 of this Statute.

8/3 A member shall comply with AAOIFI's Statute and by-laws.

8/4 A member shall satisfy any other conditions that may be laid down by the Board of Trustees.

Article 9 Powers of the General Assembly

9/1 Approval of the amendments of the Statute of AAOIFI.


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9/2 Approval of applications for admission of new members of the General Assembly.

9/3 Appointment of the members of the Board of Trustees.

9/4 Approval of the Board of Trustees’ report, AAOIFI's financial statements and external auditor's report.

9/5 Approval of the appointment of the external auditor and fixing his fees.

9/6 Subject to the provision of paragraph 16/3 of this Statute, the General Assembly shall determine the basis for reimbursing members of the Board of Trustees for costs incurred by them in the course of discharging their duties as members of the Board of Trustees.

Article 10 General Assembly Meeting

10/1 The General Assembly shall convene at least once a year at the invitation of the Chairman of the Board of Trustees, or at the request of 25% of the members who have the right to vote. Such request shall be submitted to the Chairman. The General Assembly shall elect, from among its founding members, a Chairman for its meeting for a period of one year.

10/2 The quorum necessary for convening a valid meeting of the General Assembly shall be the presence or proxy of at least 51% of the members who have the right to vote and who have paid their subscriptions.

10/3 Each founding member, associate member and members representing regulatory and supervisory authorities shall have a number of votes for each membership fee or the multiple thereof but shall not exceed twenty votes. Resolutions in respect of all items on the agenda shall be adopted by the absolute majority of the votes of the members in person, or by


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proxy except for resolutions for amending AAOIFI's Statute which shall be adopted by a majority of two-thirds of the votes of the members in person or by proxy.

10/4 Any member may give a written proxy to another member to attend and vote on his behalf.

10/5 Where no quorum is available, the General Assembly shall be called for another meeting to be convened within not more than three months. This other meeting shall be valid by the presence or proxy of at least 25% of the members who have the right as vote and who have paid their subscriptions.

Board of Trustees

Article 11 Composition of the Board of Trustees

The Board of Trustees shall be composed of up to nineteen members to be appointed by the General Assembly every five years, and including the Secretary General, and they shall continue in office until members of the succeeding Board are appointed. The members of the Board of Trustees shall be elected from among the following categories, taking into account their geographical distribution:

11/1 Up to ten members representing Islamic financial institutions, including a maximum of five from the founding members and those who exercise the same rights as the founding members.

11/2 Up to two practicing members in accounting and auditing whose professional work relates to Islamic financial institutions.

11/3 One member from the users of financial statements of Islamic financial institutions.


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11/4 Up to three members representing regulatory and supervisory authorities referred to in paragraph 3/3 of Article 3 of this Statute.

11/5 Up to two members from Shari’a Fiqh scholars.

Article 12 Appointment of Members to Fill Vacancies on the Board of Trustees

In the event that the term of office of a member of the Board of Trustees expires by reason of death, resignation, disability or removal from office, the General Assembly shall appoint a successor to fill the vacancy(s) subject to the following:

12/1 A member shall be appointed to fill a vacant office by a majority of the votes of the General Assembly, and shall belong to the same category of the member whose office has become vacant.

12/2 The term of office of a member appointed to fill a vacancy shall terminate upon the expiry of the original term of the member whose office had become vacant.

Article 13 Reappointment of Members of the Board of Trustees

A member may be re-appointed, including the members appointed to fill a vacant post, for a second term but may not be re-appointed for more than two successive terms, except for founding members. For the purposes of this provision, the completion of the remaining period of a term of office by a member appointed to fill a vacancy shall be considered a full term of office. Article 14 Appointment of the Chairman and Deputy Chairman of the Board of Trustees

The Board of Trustees shall elect, by secret ballot, a Chairman from amongst its founding members or the


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members who enjoy the rights of the founding members. The Board of Trustees shall also elect a Deputy Chairman. The election of the Chairman and the Deputy Chairman shall be by the majority of the votes of the members in person or by proxy. Article 15 Powers and Duties of the Chairman of the Board of Trustees

The Chairman of the Board of Trustees shall have the power to convene the General Assembly. The Chairman or in his absence the Deputy Chairman shall have the following powers and duties:

15/1 He shall chair the meetings of the Board of Trustees.

15/2 He shall chair the meetings of the Executive Committee

15/3 He shall give initial approval of the membership applications before presenting them for final approval by the General Assembly.

Article 16 Membership Rules of the Board of Trustees

16/1 Except for the representatives of Islamic financial institutions, the regulatory and supervisory authorities, the organizations and associations responsible for regulating the accounting and auditing profession, the membership of the Board of Trustees shall be personal for the Board member and no member may delegate his powers to another person, nor shall he ask another person to replace him.

16/2 No member may combine between the membership of the Board of Trustees or its sub-committees and the membership of the other Boards in AAOIFI.


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16/3 All members of the Board of Trustees shall be part-time members and shall render their service without remuneration.

16/4 Subject to the provision of paragraph 15/3 of this Statute, a member shall be entitled to be reimbursed for the costs incurred in the course of discharging his duties on the Board in accordance with the terms determined by the General Assembly pursuant to paragraph 9/6 of this Statute.

16/5 A member shall forfeit his membership in case of failure to pay the annual subscription dues.

16/6 The Board of Trustees may exempt any member from payment of all or part of the annual subscription dues for any period determined by the Board.

Article 17 Termination of Membership of the Board of Trustees

Membership of the Board of Trustees, including its Chairman, may be terminated by a resolution of the General Assembly of AAOIFI based on a vote of 2/3 (two-thirds) of the members of the Board of Trustees in any of the following cases:

17/1 If the member abuses his office on the Board.

17/2 If the member behaves in a manner considered by the Board to be harmful to the objectives and reputation of AAOIFI or the Board.

17/3 If the member loses capacity or is convicted for an offence affecting his honour or integrity.

17/4 If the member fails to attend three successive Board meetings without a reason acceptable to the Board.

Article 18 Powers of the Board of Trustees

18/1 The Board of Trustees shall have the following powers:


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(a) Appointment of members of AAOIFI’s Boards and termination of membership, in accordance with the provisions of this Statute.

(b) Arrangement of sources of finance for AAOIFI and investing those resources.

(c) Nomination of the external auditor and recommending his fee each year to audit the annual financial statements.

(d) Approvals of AAOIFI’s work plan and the annual budget.

(e) Approval of the Board of Trustees’ annual report, financial statements, external auditor’s report and submission of the same to the General Assembly for approval.

(f) Proposing amendments to the Statute of AAOIFI’s.

(g) Determination of the rules for remunerating members of AAOIFI’s Boards and sub-committees for the costs incurred in the course of discharging their duties, taking into account that members of these Boards and sub-committees perform their work free of charge.

(h) Appointment of the Secretary General and specifying terms and conditions of his services.

(i) Approaching the concerned authorities responsible for the implementation of standards in countries in which Islamic financial institutions operate in order to adopt the statements, standards and guidelines issued by AAOIFI.

18/2 Notwithstanding the provisions of this Statute

concerning the Board of Trustees' powers and authorities, neither the Board of Trustees nor any of its sub-committees including the Executive Committee, shall not interfere directly or indirectly in


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the work of the other Boards of AAOIFI or direct them in any manner.

Article 19 Meetings of the Board of Trustees

The Board of Trustees shall meet at least once a year on the invitation of its Chairman, or on the request of 25% of the members submitted to the Chairman. Invitations for a meeting shall be sent along with the agenda at least one month before the date of the meeting. The presence or proxy of the majority of the members will be necessary to convene the meeting. With the exception of proposals to amend the Statute of AAOIFI, which requires the vote of three-quarters of the members in person or by proxy, decisions in all other matters before the Board shall be adopted by the majority of the members voting in person or by proxy. In case of a tie, the Chairman shall have a casting vote.

Article 20 Sub-Committees

The Board of Trustees may form sub-committees from among its members or from others and shall determine their terms of reference, powers and the manner in which they shall conduct their business as well as the determination of their remuneration.

Executive Committee

Article 21 Composition of the Executive Committee

The Executive Committee shall be composed of up to six members as follows:

21/1 The Chairman of the Board of Trustees or, in his absence, the Deputy Chairman as Chairman of the Committee.


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21/2 The Secretary General of the Organization as member and rapporteur.

21/3 Up to two members to be appointed by the Board of Trustees from among its members.

21/4 Chairman of the Accounting and Auditing Standards Board and the Chairman of the Shari’a Board or their deputies.

Article 22 Powers of the Executive Committee

The Executive Committee shall have the following powers:

22/1 To discuss the work plan and the annual budget of AAOIFI and submit them to the Board of Trustees for approval.

22/2 To discuss AAOIFI’s annual report prepared by the General Secretariat to the Board of Trustees, financial statements and the report of the external auditor and submit them to the Board of Trustees for review before they are approved by the General Assembly.

22/3 Approval of the review and determination of the Secretary General’s salary increases and bonus.

22/4 Undertaking any other functions assigned by the Board of Trustees.

22/5 The Executive Committee may delegate any of its powers to its Chairman. It may also delegate any of its powers, except that referred to in paragraph 22/3, to the Secretary General of AAOIFI.

Article 23 Meetings of the Executive Committee

23/1 The Executive Committee shall meet at least once a year at the request of the Secretary General, or as and when required at the request of either its Chairman or the Secretary General.


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23/2 The presence or proxy of the majority of the members will be necessary to convene the meeting, provided that the Chairman of the Board of Trustees, or the Vice Chairman in case of the Chairman’s absence, is present at the meeting. The resolutions of the Committee shall be passed by the majority of the votes of the members in person or by proxy. In case of a tie, the Chairman of the Committee shall have the casting vote.

General Secretariat

Article 24 Composition of the General Secretariat

The General Secretariat of AAOIFI shall consist of the Secretary General, the Deputy Secretary General, the technical and administrative units and others. Article 25 Conditions for Appointment of the Secretary General

The Board of Trustees shall appoint a full-time Secretary General for AAOIFI. The Secretary General shall be domiciled in the headquarter country. To be eligible for appointment as Secretary General, a person should fulfil the following conditions:

25/1 He shall hold a suitable academic qualification in a discipline related to economics, finance or accounting.

25/2 He shall have published publications relating to economics, finance or accounting.

25/3 He shall have vast working or teaching experience in economics, finance or accounting.

25/4 He shall be capable of carrying out his duties in both Arabic and English.


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Article 26 Powers and Duties of the Secretary General

The Secretary General of AAOIFI is the chief executive and shall perform the following duties:

26/1 Coordinating the activities of the General Assembly and the Boards of AAOIFI and their subcommittees. He shall take measures to ensure the implementation of the resolutions adopted by any of these bodies and follow up their implementation;

26/2 Running of the day-to-day affairs and activities of AAOIFI.

26/3 Coordinating and supervising the studies related to the preparation of statements, standards and guidelines that are promulgated by AAOIFI.

26/4 Preparing and publishing a newsletter about the activities of AAOIFI.

26/5 Strengthening ties between AAOIFI and other organizations having similar objectives as well as between AAOIFI and Islamic financial institutions.

26/6 Appointing the Deputy Secretary General and approving terms and conditions of services in consultation with the Chairman of the Board of Trustees.

26/7 Employing members of the technical and administrative units according to the plan approved by the Board of Trustees.

26/8 Supervising the technical and administrative units of the General Secretariat and setting up committees to perform such work.

26/9 Preparing AAOIFI’s work plans and its annual budget and submitting them to the Executive Committee prior to their approval by the Board of Trustees.


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26/10 Approval of the employment by-laws and financial regulations of AAOIFI, and approval of employees’ salaries and bonus.

26/11 Preparing the annual report of the Board of Trustees and AAOIFI’s annual financial statements and submitting them to the Executive prior to their discussion by the Board of Trustees.

26/12 Acting as a rapporteur for the General Assembly, other Boards of AAOIFI and attending their meetings and taking part in discussing the topics listed on their agendas. The Secretary General may delegate this function to the Deputy Secretary General or any other person that he deems appropriate.

26/12 Legal representation of AAOIFI before other parties and representing AAOIFI at conferences, seminars and technical meetings.

26/13 Undertaking any other functions assigned to him by the General Assembly or any of AAOIFI’s other Boards and their sub-committee.

Accounting and Auditing Standards Board

Article 27 Composition of the Accounting and Auditing Standards Board

The Accounting and Auditing Standards Board shall be composed of up to twenty one members who shall be appointed by the Board of Trustees for a four-year term as follows:


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27/1 Up to eight members from Islamic financial institutions, including up to five from the founding members or those who enjoy the rights of founding members as specified in the Statute.

27/2 Up to four members representing regulatory and supervisory authorities.

27/3 Up to three practicing members in an accounting and auditing profession that relates to the work of Islamic financial institutions.

27/4 One member from the users of financial statements of Islamic financial institutions.

27/5 Up to three members from Shari'a Fiqh scholars.

27/6 One member from among university professors in accounting and financial studies.

27/7 The Secretary General of AAOIFI. Article 28 Appointment of Members to Fill Vacancies on the Accounting and Auditing Standards Board

In the event that the term of office of a member of the Accounting and Auditing Standards Board expires for reason of death, resignation, disability or removal from office, the Board of Trustees shall appoint a successor to fill the vacancy(s) subject to the following:

28/1 A member shall be appointed to fill a vacant office by a majority of votes of members of the Board of Trustees, and shall belong to the same category of the member whose office had been vacated.

28/2 The term of office of a member appointed to fill a vacancy shall terminate upon the expiry of the original term of the member whose office had become vacant.


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Article 29 Reappointment of Members of the Accounting and Auditing Standards Board

A member may be re-appointed, including the member appointed to fill a vacant post, for a second term of office and may be re-appointed for more than two successive terms, provided that this reappointment is only up to fifty percent of the board and by the decision from the Board of Trustees. For the purposes of this provision, the completion of the remaining period of a term of office by a member appointed to fill the vacancy shall be considered a full term of office. Article 30 Appointment of the Chairman and Deputy Chairman of the Accounting and Auditing Standards Board

The Accounting and Auditing Standards Board shall elect, by secret ballot and by the majority of the votes of its participating members, a Chairman and a Deputy Chairman. In the absence of the Chairman, the Deputy Chairman shall replace him. Article 31 Membership Rules for the Accounting and Auditing Standards Board

31/1 With the exception of members representing Islamic financial institutions, companies and associations responsible for organizing the accounting and auditing profession and supervisory authorities, membership of the Accounting and Auditing Standards Board shall be personal and no member shall have the authority to delegate his powers to another person nor ask another person to replace him.

31/2 All members of the Accounting and Auditing Standards Board shall be part-time members and


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shall render their service as members of the Board free of charge.

31/3 Notwithstanding the provisions of paragraph 31/2 of this Article, a member of the Accounting and Auditing Standards Board shall be entitled to be reimbursed for the costs incurred in the course of discharging his duties on the Board in accordance with the terms determined by the Board of Trustees in pursuance of paragraph 18/1/(g) of Article 18 of this Statute.

Article 32 Termination of Membership of the the Accounting and Auditing Standards Board

Any member of the Accounting and Auditing Standards Board, including its Chairman, may be removed from office by a vote of two-thirds of the members of the Board of Trustees on the recommendation submitted by two-thirds of the members of the Accounting and Auditing Standards Board in any of the following events:

32/1 If he misbehaves in a manner considered by the Board of Trustees to be harmful to the objectives and reputation of the AAOIFI or the Accounting and Auditing Standards Board.

32/2 If he loses capacity or if he is convicted of any offence affecting his honour or integrity.

32/3 If he fails to attend three successive meetings of the Accounting and Auditing Standards Board without an excuse acceptable to the Accounting and Auditing Standards Board.

Article 33 Powers of the Accounting and Auditing Standards Board

The Accounting and Auditing Standards Board alone shall have the following powers:


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33/1 To review the short and long term plans for the activities of the Accounting and Auditing Standards Board.

33/2 To prepare, adopt and interpret accounting, auditing and governance statements, standards and guidelines for Islamic financial institutions.

33/3 To prepare and adopt a code of ethics and educational standards related to the activities of Islamic financial institutions.

33/4 To review with the aim of making additions, deletions or amendments to any accounting, auditing, governance and ethical statements, standards and guidelines for Islamic financial institutions prepared by the Accounting and Auditing Standards Board, to cope with the development in the activities of Islamic financial institutions in order to meet the needs of the users of the financial statements of these institutions.

33/5 To prepare and adopt the due process for the preparation of standards, as well as the regulations and by-laws of the Accounting and Auditing Standards Board.

33/6 To assist in approaching the authorities responsible for implementing accounting, auditing, governance and ethical standards in countries where Islamic financial institutions operate in order to adopt the accounting, auditing, governance and ethical statements, standards and guidelines prepared by the Accounting and Auditing Standards Board.

33/7 To propose amendments to the provisions of the Statute pertaining to the Accounting and Auditing Standards Board, subject to the approval of at least two-thirds of the members of the Accounting and Auditing Standards Board, whether the votes are cast in person or by proxy. No amendment shall be deemed effective before its approval by the General Assembly.


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Article 34 Powers and Duties of the Chairman of the Accounting and Auditing Standards Board

The Chairman of the Accounting and Auditing Standards Board or in his absence the Deputy Chairman shall have the following powers and duties:

34/1 To chair the meetings of the Accounting and Auditing Standards Board.

34/2 To approve the Accounting and Auditing Standards Board's agenda prepared by the Secretary General and to call for the meetings of the Board.

34/3 To attend meetings of the Board of Trustees, or his deputy, by invitation from the Chairman of the Board of Trustees, and participate in the discussion of topics included in the agenda in the manner which the Board of Trustees deems appropriate, without having the right to vote at meetings.

Article 35 Meetings of the Accounting and Auditing Standards Board

The Accounting and Auditing Standards Board shall convene at least twice a year on the invitation of its Chairman or at the request of 25% of its members submitted to the Chairman. The Accounting and Auditing Standards Board’s meetings shall be deemed valid if the majority of its members are present in person or by proxy. The Accounting and Auditing Standards Board's resolutions shall be adopted by the majority of the votes of the members present in person or by proxy. In case of a tie, the Chairman of the Board shall have the casting vote.

Invitations for the meeting of the Accounting and Auditing Standards Board shall be sent together with the agenda at least one month before the date of the meeting.


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Article 36 Sub-Committees

The Accounting and Auditing Standards Board may form sub-committees or technical work teams from among its members or from others, and shall determine their terms of reference, powers and manner in which they shall conduct their business.

Shari’a Board

Article 37 Composition of the Shari’a Board

37/1 The Shari’a Board shall be composed of up to twenty one members to be appointed by the Board of Trustees for a four-year term from among Fiqh scholars including those who represent Shari’a supervisory boards in the Islamic financial institutions that are members of AAOIFI and Shari’a supervisory boards in regulatory and supervisory authorities, and including the Secretary General. The Shari’a Board shall make use of experts in different specialization.

Article 38 Appointment of Members to Fill Vacancies on the Shari’a Board

Provision of Article 28 shall apply to the members of the Sharia Board. Article 39 Reappointment of Members of the Shari’a Board

Provision of Article 29 shall apply to the members of the Shari’a Board. Article 40 Appointment of the Chairman and Deputy Chairman of the Shari’a Board

Provision of Article 30 shall apply to the Shari’a Board.


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Article 41 Membership Rules for the Shari’a Board

Provision of Article 31 shall apply to the members of the Shari’a Board. Article 42 Termination of Membership of the Shari’a Board

Provision of Article 32 shall apply to the members of the Shari’a Board. Article 3943 Powers of the Shari’a Board

The Shari’a Board shall have the following powers:

43/1 Achieving harmonization and convergence in the concepts and application among the Shari’a supervisory boards of Islamic financial institutions to avoid contradiction or inconsistency between the fatwas and applications by these institutions, thereby providing a pro-active role for the Shari’a supervisory boards of Islamic financial institutions and central banks.

43/2 Preparation and adoption of Shari’a standard and Shari’a rules for investment, financing and insurance instruments, and financial services and the interpretation thereof.

43/3 Helping in the development of Shari’a approved instruments, thereby enabling Islamic financial institutions to cope with the developments taking place in instruments and formulas in fields of finance, investment and other banking services.

43/4 Examining any inquiries referred to the Shari’a Board from Islamic financial institutions or from their Shari’a supervisory boards, either to give the Shari’a opinion in matters requiring collective Ijtihad (reasoning), or to


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settle divergent points of view, or to act as an arbitrator.

43/5 Reviewing the accounting, auditing, governance and ethical standards and related statements which AAOIFI shall issue throughout the various stages of the due process, to ensure that these issues are in conformity with the Islamic Shari’a rules and principles.

Article 44 Powers and Duties of the Chairman of the Shari’a Board

Provision of Article 34 shall apply to the Shari’a Board. Article 45 Meetings of the Shari’a Board

Provision of Article 35 shall apply to the Shari’a Board. Article 46 Sub-Committees

Provision of Article 36 shall apply to the Shari’a Board.


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CHAPTER III AAOIFI's SOURCES OF FINANCE AND THE

INVESTMENT AND APPLICATION OF ITS FUNDS Article 41 AAOIFI's Sources of Finance and the Investment and Application of its Funds

41/1 AAOIFI's sources of finance

AAOIFI's sources of finance shall include membership fees, annual subscription fees, grants, donations, bequests, Waqf and the proceeds thereof, the proceeds of the sale of AAOIFI’s publications and any other sources of finance to be approved by the Board of Trustees.

41/2 Investment and Application of AAOIFI’s Funds

AAOIFI’s funds shall be invested and used as follows:

41/2/1 The liquid and in-kind Waqf funds and other sources of finance shall be invested in accordance with AAOIFI’s objectives and the conditions stipulated by the party donating the Waqf.

41/2/2 Annual subscription fee, proceeds of Waqf investments and ongoing charity as well as other revenues shall be allocated for financing the activities of AAOIFI.

41/2/3 Subject to a resolution by the Board of Trustees, an amount not exceeding 25% of the invested ongoing charity fund may be borrowed to cover AAOIFI’s deficit in its annual budget.

41/3 AAOIFI shall maintain a membership register in which shall be entered the amount of membership fee of each member and the amount paid for annual subscription.


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41/4 Membership fees paid by each member are non-transferable and non-refundable


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CHAPTER IV GENERAL PROVISIONS

Article 42 Language of the Statute

This Statute was drawn up in both Arabic and English languages. In case of any discrepancy between the two languages, the Arabic text shall prevail. Article 43 Interpretation of the Statute

The Board of Trustees is the body responsible for the interpretation of the provisions of this Statute. Article 44 Devolution of the Organization’s Assets in Case of Dissolution or Liquidation

In case AAOIFI is dissolved or liquidated, the General Assembly of AAOIFI shall specify the charitable party upon whom AAOIFI’s assets shall devolve. It is a condition that these assets shall always remain in the form of Waqf, as is the case now. The proceeds of the Waqf shall be paid to the charitable party to which AAOIFI’s assets shall devolve. The General Assembly shall name the individual who shall be in charge of the Waqf. Article 45

45/1 None of the Boards of AAOIFI shall be entitled to adopt any resolution which falls outside the scope of the objective of the AAOIFI as laid down in this Statute or does not serve those objectives.

45/2 None of the Accounting and Auditing Standards Board or the Shari’a Board shall be entitled to adopt any resolution if its execution will result in financial costs other than the costs specified in the AAOIFI’s budget.


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Article 46 Entry to Force

This Statute shall come into effect from the date it is approved and registered by government authorities in the Kingdom of Bahrain, and shall replace the previous Statute.


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Accounting and Auditing Organization for Islamic Financial Institutions

P.O.Box 1176 - Manama – Kingdom of Bahrain

Tel: +973 – 17244496 Fax: +973 – 17250194

E.mail: [email protected]

Web site : www.aaoifi.com

mailto:[email protected]

http://www.aaoifi.com/

statute - accounting and auditing organization for islamic ... statute 2008 (english).pdf · in...

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