CASE 1 (GROUP 1) Alif is the Head of Shariah Audit Department in Ikhlas Islamic bank. He was re-considering the Shariah Audit plan that has been approved by the Shariah Committee and the Board Audit Committee of the Bank. The re- considering of the plan was brought to the attention of Alif pursuant to the changes of situations brought by pandemic. Alif needs proper and solid justification if he decides to modify the approved Shariah audit plan. The Shariah Audit Department consists of four (4) staff including a Head of Department, Alif, who reports directly to the Chief Internal Auditor. Alif has two managers (team leaders) that directly reported to him named Luqman and Syafiqah. The remaining staff is an executive. With regard to the Shariah audit report, it will be escalated to the Shariah Committee for approval and the Board Audit Committee for final approval. Following the directions on the practice by BNM, Shariah audit in Ikhlas Islamic Bank adopts a series of processes as above. The Shariah audit plan for Ikhlas Islamic Bank for the year 2020 has been approved by the Shariah Committee in November 2020. The plan was approved by the Board Audit Committee in December 2020. The details of approved plan are as follows: No. Auditable Areas A. Governance Audit 1. Reporting of Shariah Non-Compliance Events Total No. of Audits Planned 1 B. Products Review 2 Home-Financing-i 2. Ar-Rahnu Products C. Services & Processes 3 1. Purification Process on Non-Halal Income 2. Calculation on Profit Distribution 3. Managing Bank's Media Communication Tool D. Functional Audit 1 1. Shariah Review Department D. Ad-Hoc Assignments 2 1. Ad-hoc assignment 1 2. Ad-hoc assignment 2 Total Auditable Area 9 The plan was made referring to the risk rating validated by the Shariah risk management function as well as the rating from the previous Shariah audit exercise. The details on both are provided in Exhibit I contains the Audit Universe with the associated ratings. After a few weeks on work from home mode, Alif is having a conversation with the Shariah audit team members contemplating the need to revisit the current audit plan for 2021 due to the pandemic. The revised plan needs to be re-tabled to the Shariah Committee and Board Audit Committee for approvals. The submission paper needs to address how the revised plan is adequate for the Shariah Committee to provide Shariah compliance assurance at the end of the year as the scope of Shariah audit will be smaller and possibly will be taking less samples. In addition, Shariah auditors may face restrictions to access certain documentations that are not digitised. In addition, Shariah auditors may face resistance by the business to pursue our audit as the business are busy with changes of operations from payment holiday initiative and their efforts to expedite business to cope up with the impacted revenue due to the crisis. List of Audit Universe and Risk Level as at 30 November 2019 Exhibit I AUDIT UNIVERSE Conducted Previous Audit Rating Risk Profile 2020 2017 2018 2019 A. Governance Audit Shariah Governance Framework (SGF) Moderate Medium 2. Product Transparency and Disclosure Above Medium Average 3. Reporting of Shariah Non-Compliance Event ' Above Medium Average 4. Management of Non-Halal Income Above Medium Average 8. Products 5. Qard Not rated Medium Basic Saving-i 6. Murabahah (Deposit) Moderate Medium Fixed Return Investment Account- 7. Tawarruq Financing Moderate Medium Cash Line-i Working Capital Financing-/ (WCF- Education Financing-i Home Financing-i Approved by BNM in 2019 High 8. Wakalah In-progress Medium Letter of Credit (LC-) 9. Murabahah (Trade) Low Medium Murabahah Trust Receipt (MTR-) 10. Kafalah In-progress Medium Shipping Guarantee (SG-) Bank Guarantee (BG-) 11. Ad-Dayn Low Medium Trade Working Capital Financing (TWCF-) 12. Ar Rahn na High Ar Rahnu Product Trade Working Capital Financing (TWCF-) 12. Ar Rahn n/a High Ar Rahnu Product 13. Ujrah na Medium Safe Deposit Box- C. Services and Process Audit 14. Fees and Charges 15. Zakat Management 16. Rebate (Ibra) for Islamic financing 17. Review on Tanazul 18. Accounting Treatment 19. Restructuring & rescheduling of financing 20. Purification Process on Non-Halal Income 21. Calculation on Profit Distribution 22. Managing Bank's Media Communication Tool D. Functional 23. Shariah Department 24. Shariah Risk Management Section 25. Shariah Review Section TOTAL Low Low Above Medium Average Moderate Medium Moderate Medium Moderate Medium In-progress Medium Moderate High n/a High na Medium Moderate Medium Above Medium Average Moderate Medium Medium-21, High-3, Low-1 Note: Risk Profile: High, Medium and Low risk Audit Rating: High, Above Average, Moderate, Low DISCUSSION QUESTIONS 1. Identify the THREE (3) incidences that could drive the revision to the original audit plan. 2. Identify THREE (3) justifications to defend the revision of the Shariah audit plan to be tabled to the Shariah Committee. 3. Provide recommendations to Alif on the modification of the Shariah audit plan to feature only SIX (6) auditable areas. Justify your recommendations