Accounting, Auditing and Governance for Takaful Operations

The Takaful industry is booming. In the past two years alone it has experienced an astonishing 30% growth, making it the fastest growing sector in the worldwide insurance industry. As the demand for Islamic insurance products continues to soar among Muslims and non–Muslims alike, new companies are springing up to meet that demand, while many established, conventional insurance companies have begun to open Takaful windows of their own.

To survive and thrive in today s dynamic, rapidly evolving Islamic insurance market, you need access to the most up–to–date, expert information and guidance on Takaful principles and practices. Written by experts from the International Islamic University Malaysia, the leading Islamic finance research organization, this book supplies you with that, and much more. It covers all the essentials, including:

 Takaful terms, concepts and foundational principles
 Takaful and retakaful accounting principles and practices
 Takaful and retakaful cash reserve requirements
 Revenue and expenditure management
 Segregation of assets, liabilities, income, and expenditures between operators and participants
 Bases for recognition of revenue and expenditure (cash vs. accrual)
 Accounting for qard hasan
 Accounting for ratakaful
 Accounting for investment
 Takaful financial statements analysis

Packed with real–world case studies, practical examples and crystal–clear explanations, Accounting, Auditing and Governance for Takaful Operations is an indispensable working resource for accountants, auditors, and business leaders.

Foreword  ix

Preface  xi

Acknowledgments  xv

1 Introduction to Takaful and Retakaful  1

2 Takaful Companies and Their Accounting Environment  33

3 Prevailing Accounting Standards and Accounting Entries for Takaful Operators  53
  
4 Financial Statement Analysis  103 

5 Zakat Computation and Distribution for Takaful and Retakaful Companies  115

6 Auditing and Governance for Takaful Operators  125

Appendix 1: Sample Audit Proposal  155

Appendix 2: Audit Plan Timeline  167

Appendix 3: Audit Program  169

Appendix 4: Report on Shariah Compliance Audit for Takaful X Shd. As of 31 March 2011  171

About the Authors  197

Index  199

Dr. Sheila Nu Nu Htay, PhD is PhD Programme Coordinator at the Institute of Islamic Banking and Finance, International Islamic University Malaysia (IIUM).

Mohamed Arif was CEO of Takaful Indonesia from 2001 to 2004. From 1985 to 2000, he was General Manager Finance and Administration/Company Secretary of Takaful Malaysia

Assoc. Prof. Dr. Younes Soualhi, PhD, is an Associate Professor at the International Islamic University Malaysia (IIUM), Chairman of the Shariah Board of HSBC Amanah Malaysia and Chairman of the Shariah board of Munich Re Takaful. He is also a founding member of the French Council of Islamic Finance (COFFIS), Paris.

Hanna Rabittah Zaharin is an audit assistant with AFTAAS Corporate Advisory

Ibrahim Shaugee is a consultant in Islamic finance, accounting systems and taxation, based in the Republic of Maldives.