Title: EVALUATION OF THE ROLE OF INTERNAL AUDITORS IN ASSESSING BANKING BUSINESS RISKS IN SYARIAH BPR: Case study on BPRS Baktimakmur Indah and BPRS Baktisumekar
Authors: Habiburrochman
Affiliations: Master of Accounting Study Program, Faculty of Economics and Business, Universitas Airlangga Surabaya
Publisher: Universitas Airlangga
Abstract
The implications of the public's desire for sharia-compliant transactions have given rise to various types and forms of financial institutions. One such institution is the Rural Credit Bank (BPR). The primary concept of a sharia financial institution is that its rules and operations are based on Islamic sharia. As a relatively new financial institution, managing bank risk must be a priority for management and all parties involved. In this regard, the role of internal auditors is necessary to provide adequate assurance regarding risks in bank operations.
The purpose of this study is to gain insight into the role of internal auditors in Islamic rural banks (BPR Syariah). An interesting aspect of this case study is the different positions of internal auditors, namely, under the board of directors and under the board of commissioners. Furthermore, developments in internal auditing are shifting toward preventive audits rather than curative audits, through the understanding and application of risk management in audits. These two contexts are interesting to further examine the role of internal auditors in minimizing business risk in the banking sector, particularly in Islamic rural banks.
This type of research is explanatory research, explaining phenomena occurring within the companies being studied. This research was conducted at two BPRSs: Baktimakmur Indah Sidoarjo (BMI) and Bakti Sumekar, Sumenep (BS).
The research findings show that the role of internal auditors aligns with the broad job description. Internal auditors at BS focus on operational risk. Internal auditors verify transaction documents, including checking the accuracy, accuracy of calculations, validity, bookkeeping, completeness of signatures, and other supporting documents. This pattern often leads to the assumption that internal auditors are tasked with finding fault with others. Internal auditors at BMI have a broader job description, encompassing all functions within the bank. In carrying out their duties, internal auditors are required to regularly report their audit findings. Given that internal auditors are organizationally responsible for the commissioners, although their position is subordinate to the board of directors, reports on audit findings are directed to both the board of directors and the commissioners. Internal auditor reports that are technical in nature are directly followed up by the board of directors, while for strategic findings, the board of directors usually requests discussion by the board of directors. This pattern makes internal auditors a means of ensuring and providing input to management and the board of commissioners. The impression ultimately arises that internal auditors are searching for or discovering errors in order to find the best solution. This situation creates a check and balance between the board of directors and the board of commissioners.
This checks and balances between the board of directors and the board of commissioners make the internal auditor's report more meaningful. The internal auditor's role is merely as a functional staff member, not the executor or decision-maker of the follow-up to audit findings. Therefore, if the audit report is submitted solely to the board of directors, all findings, reprimands, and suggestions ultimately go to the board. Under checks and balances, the board of commissioners can inquire about the extent to which the board has followed up on audit findings. In this case, the board of directors will strive to continuously monitor and follow up on audit findings so that when asked by the board of commissioners, they can provide a detailed and comprehensive picture. This ensures that the goal of minimizing business risk in the bank can be continuously monitored.
Keywords: Sharia BPR, internal auditor role, assurance and consultancy, watch dog, check and balance
Sources: http://repository.unair.ac.id/34643/