Chapter 5 SHARIAH AUDIT PRACTICES IN MALAYSIAN ISLAMIC BANKS: AN AUDIT EXPECTATION- PERFORMANCE GAP ANALYSIS Supiah Salleh, Mustafa Mohd Hanefah, Zurina Shafi & Muhammad Iqmal Hisham Kamaruddin Universiti Sains Islam Malaysia (USIM) INTRODUCTION Shariah audit practices strengthen Shariah-compliance and enhance the integrity of the IFIs. They emerged to cater to the different natures and characteristics of Islamic banking practices. Many Islamic banking scholars require that the nature of Islamic banking should be distinct from conventional banks. Islamic banking and fnance should differ from conventional banking practices in terms of: (i) striving for a just, fair and balanced society as envisioned by Islamic economics; (ii) being constructed upon the principle of brotherhood and cooperation, which calls for a system of equity-sharing, risk-sharing and stake-taking; (iii) being characterised by ethical norms and social commitments as a system grounded in the ethical and moral framework of the Shariah community; (iv) being oriented and entrepreneur-friendly, emphasising productivity and the physical expansion of economic production and services; and (v) and operating within limits that ensure stability in the value of money and that curtail destabilising speculation (Dusuki, 2011; Iqbal & Mirakhor, 2007; Chapra & Ahmed, 2002). The motivation of this study is to ensure Shariah-compliance issues are properly addressed since Shariah non-compliance is a risk to all IFIs. This can be done through developing proper guidance on Shariah audit practices regarding framework, scope, independence, competence processes, reporting, responsibilities and performance. With the expanding global Islamic banking and fnance industry, there is a need for developing professional Shariah auditing practices. In Layout Syariah Governance.indd 113 05/08/2019 4:02 PM