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This is even more relevant in the multi-facet role played by the Islamic financial institutions in dealing with Islamic banking customers as the Islamic financial transaction is not merely based on the lender and borrower relationship as is the case in conventional banking. The move towards the adoption of the supervised market approach requires continuous efforts to enhance product disclosures and to elevate the level of financial literacy of consumers. BIS Review 3/2004  3  To further enhance transparency in the conduct of banking institutions, proper accounting standards need to be in place to reflect the true and fair value of banking operations that would lead to greater accountability and responsibility on the part of the banking institution. Accurate financial reporting requires a body of financial accountants that are well-versed in Shariah principles to ensure that the accounts are not only drawn in accordance with the international accounting standards but are also in line with Islamic principles. This is to enable the investors and supervisors to obtain the true and fair assessment of the Islamic institution’s financial condition and the profitability of the business. Transparency and disclosure is even more crucial in Islamic banking where the concept of mudharabah (profit-sharing) entails an investor-entrepreneur relationship and is a significant element in sourcing of funds. The establishment of the Accounting and Auditing Organisation for Islamic Financial Institutions (AAOIFI) has made a significant contribution in formulating and issuing accounting and auditing standards for Islamic financial institutions.