Zakah Audit

An audit is an objective evaluation and examination of the financial statements of an organization to make sure that the records are an accurate and fair representation of the transactions they claim to represent. Employees can conduct internally the audit of the organization, or externally by an outside firm. The IRS can perform audits to verify the accuracy of a taxpayer’s returns or other transactions. When the IRS audits, it usually carries a negative implication and is seen as evidence and proof of some type of wrongdoing by the taxpayer.

            In external auditing, there are two distinct categories of auditors. Firstly, in an external or statutory auditor who independently works to evaluate financial reporting. There are also external auditors who process cost statements and sheets to observe if there is any fraud.[1]

Basically, an audit is the official checking of the records or accounts of a business or organization (Reader Digest, 2000) or in other definition it is a formal, often periodic examination and checking of accounts or financial records to verify their correctness (Webster’s New World Dictionary). Audit in zakah is a process of perfect checking, collecting, reviewing the determination and assessment of the compulsory property of zakah and deductions which are feasible and allowable for the purpose of calculating zakat properly as determined, adopted and received.

      First and foremost, about the methodology of zakah distribution. The method is divided into two which are based on needs and based on accumulated zakah property. As we all clearly known, the zakah is distributed based on eight levels of asnafs. As Allah SWT said in Al-Quran Kareem in At-Taubah verse 60 which mean: “Alms are for the poor and the needy, and those employed to administer the (funds); for those whose hearts have been (recently) reconciled (to Truth); for those in bondage and in debt; in the cause of Allah. and for the wayfarer: (thus is it) ordained by Allah, and Allah is full of knowledge and wisdom.”

            Islamic scholars will always discuss revolving this ayah in particular issues and the flow of zakah management. Hence, zakah property will be collected and distributed to these people based on their needs. There will be two situations that may occur in the distribution of zakah based on needs. Firstly, excess of zakah funds. This situation is like occurred in Saidina Umar b Al Khattab, Uthman b Affan and Umar Abd Aziz times. The second situation is the depletion of zakah funds. Lack of zakah property can affect the distribution of property to the asnaf. In such circumstances, the government was forced to seek additional property from rich people.

           In order to seek additional property from rich people, there are some conditions that have to be implemented. The first condition is the process of distributing additional property shall be made fair and equitable. It is compulsory to have integrity, honesty and pure attitude in distributing the additional property. The second condition is additional property acquired must be channeled for the benefit of Muslims. The benefit of Muslims mean that something that is halal and beneficial for Muslims to be consumed. Not something that is prohibited and harmful. Third condition is the proposed conditions need to be approved by Islamic scholars. Islamic scholars are the best reference for Muslims to refer to.

            Meanwhile, the methodology of zakah distribution based on accumulated zakah property is that if each of asnaf had already received the appropriate zakah, hence the government or the zakat fund manager will determine zakat to whomever they think is worthy of accepting it. It is really good to take Saidina Umar al Khattab attitudes in hiring governor in each particular area to collect, manage and distribute zakah property to people. Saidina Umar Al Khatab was really good and precise when it comes to zakah management. The khaleefah did not want any of his people to suffer from poor and pauper hence he really details in his leadership. The government nowadays can relate his stories with today’s issues and incidents related to zakah management.

Zakah Audit Process

            Zakah audit process is divided into several steps which are planning, implementation, transactional checks, informal advices, and communications and audit summary. First thing first, the process of planning. In planning, the auditor explained to the client on audit tasks, discussing the scope of the audit and the objective of the inspection with zakat management.

            There are few things that must be included in the planning process which are contractual agreement, an overview or initial check, inspection and observation, internal control assessment and audit program. For contractual agreements, the client is notified by agreement from auditor. This letter describes the scope and objective of the audit to be carried out; the required documents or information shall be provided. Overview or initial check is introductory session are made for audited or client. The auditor will meet audited for an interview and further explanation.

            In inspection and observation, the auditor will collect information related to the organization's operation and management while the internal control assessment is the process that took a quiet long time. Structure control under organization will be valued. Many techniques will be used by auditor to detect the high-risk part and element. The closing part for the planning process is the audit program. This is a closure for the initial phase of auditing. Fieldwork is required to achieve the objectives of the audit.

            Second process in zakah audit is implementation. It is focusing on fieldwork and performing predetermined activities. This task focuses on non-formal transaction and communication. Continuous audit implementation steps include identifying monitoring audit rules, determining process frequency, establishing priority areas, configuring parameters, following up and communicating results.

            The third process in zakah audit process is transaction checks. This process typically tests the internal control systems and transaction accuracy. Authorities’ bodies (Zakah center in particular states) have two transaction records which are zakah collection and zakah distributions. It is the responsibility of the auditors to ensure that major transactions are inspected.

The fourth zakat accounting methodology is informal communication and advice. Upon fieldwork in the process, the auditor will discuss with clients any important findings obtained. At this stage, the client will be able to assist the auditor and discuss to identify the best method to overcome any questions or findings. Usually, this presentation is made verbally. For more complex inventions, formal or written communication is carried out. This can be made in the form of an interim report and email. Especially in the distribution of zakat, the determination of asnaf is very complicated and requires a written report.

            The last zakat accounting methodology is an audit summary. The auditor will issue an audit summary and report upon completion of fieldwork. Reserves and closures are important in providing audit reports. First, paperwork. An important tool in the audit profession is paperwork. This document is accompanied by audit recommendations and all records found by the auditor. This document is comprehensive and used as reference material and a historic relationship between the client and the auditor.

 Zakat Audit Procedures

   The first procedure of zakat auditing is to check and to ensure the date of starting the haul. The date starting of haul is the starting date of calculating the Zakat. The date of starting of haul or the date to calculate the zakat was different from every person who needs to pay zakat and according to the situation the group of the procedure the zakat. For example, if someone from agriculture so he needs to pay zakat agriculture. The starting of haul is from the day of harvesting and after he gets the profit and fulfill all the condition to pay the zakat so he needs to pay zakat.

  The second procedure of zakat auditing is to ensure or to assess a variety of zakat property owned by zakat procedures and explain the compulsory properties that must pay the zakat. Because we know there are many people out there who clearly do not know more about the zakat.

  The third procedure of zakat auditing is to ensure or to assess all the liability can be a deduction from zakat property before paying the zakat. For example to pay zakat income so before paying the zakat after fulfil the condition such as the haul and the nisab so they need to know there is the deduction of liability such as for wife and family. So the auditor will help to solve the zakat.

  Procedure of zakat auditing also to make sure deduction of liability from the zakat property to assess the compulsory zakat.After the auditor make sure the total deduction from the zakat property so the auditor will make sure he need to pay zakat or still do not fulfil the condition of nisab.

  To ensure the rate imposed on the zakat property. Every zakat property has different rate to pay the zakat. For example, the rate or nisab  for gold an od silver zakat is 2.5%. The rate of gold and silver had been decided by the Jurists. Zakat agriculture and fruits after deduct the capital such as tools for harvesting is 5%.So the auditor will make sure of nisab before paying the zakat.

  The next procedure of zakat auditing to check and to confirm that the distribution of zakat had been following the rules and regulations that had been given by shariah guidelines and follow all the method by Syariah.Last but not least the procedure of zakat auditing is to confirm and report according to the rate of zakat.

 Rules of Zakat Auditor

There are many rules of a auditor to auditing the zakat. The auditor will identify and collect all document that related to a property that can pay for zakat. The next rules of zakat auditor is to identify and to collect all document that related with the deduction that permissible to the calculation of zakat.

To check, to assess and to evaluate the property that can be for zakat also the rules of zakat auditor. Besides that, to check, to assess and evaluate all deduction for the zakat also the rules of zakat auditor. Actually, there are many rules of zakat auditor without the auditor the authority cannot manage zakat in Malaysia effectively. Work as the auditor for zakat is not something that useless but be the auditor zakat was ibadah in Islam, there is a verse from Al-Quran Surah Al Bayyinah verse 5 ;

“And they were not commanded except to worship Allah,(being)sincere to him in religion,inclining to truth,and to establish prayer and to give zakah and that is the correct religion”

 From the verse, we can say that zakat auditor also was a form of ibadah.The auditor of zakat  must manage to make sure anything that related to zakat needs to manage properly and effectively according to the shariah guidelines and follow all the condition and restriction of syara’.

---

[1]Kenton, Will. “Audit.”Investopedia, Investopedia, www.investopedia.com/terms/a/audit.asp