IMPACT OF COMPLIANCE LEVELS WITH INTEREST-FREE FINANCE AUDIT STANDARDS ON FINANCIAL PERFORMANCE: A CASE STUDY OF INTERNATIONAL PRACTICE

Abstract

Participation banks, which have seen a substantial growth pattern until now, require healthy audit practices to sustain this growth. Because reliable information requested by accounting information users is only provided through a healthy audit practice. On the other hand, the audit practice being carried out in a healthy manner and yielding quality results is measured with compliance with auditing standards. From this standpoint,  the present study aims to determine whether the participating banks operating in countries that actively apply the Interest-Free Finance Audit Standards published by AAOIFI will experience an improvement in their financial performance if their compliance levels with the Interest-Free Finance Audit Standards are increased. Therefore, an attempt has been made to predict whether or not the financial performance of our country's participation banks would increase if they began implementing audit activities in compliance with the Interest-Free Finance Standards published by KGK. In this direction, the Case Study Method was employed between 2011 and 2020 to establish the level of compliance of the participating banks with audit standards. Then, the TOPSIS Method was utilized to determine their financial performance. In accordance with the study's findings, it was concluded that the financial performance of the participating banks that voluntarily (gradually) applied the Interest-Free Finance Audit Standards published by AAOIFI increased in line with their compliance with the audit standards.