QUALITATIVE ANALYSIS OF THE ROLE OF INTERNAL AUDIT IN CONTROLLING NON-PERFORMING FINANCING (NPF) IN ISLAMIC BANKS IN INDONESIA

Abstract

This study aims to analyze the role of internal audit in controlling non-performing financing (NPF) in Islamic banking in Indonesia. The research employs a qualitative approach using a literature review method, drawing on various scientific sources such as journals, books, and relevant publications. The findings indicate that internal audit plays a significant role as a supervisory mechanism, an early risk detection tool, and an evaluator of the effectiveness of internal control systems and financing risk management. Internal audit also contributes to fraud prevention and ensures compliance with Sharia principles. The causes of NPF are influenced by internal factors such as weak financing analysis, low operational efficiency, and ineffective internal control systems, as well as external factors including inflation, economic growth, and customer characteristics. Strategies to control NPF include preventive measures, strengthening risk management, improving human resource quality, and resolving problematic financing through restructuring and gradual settlement approaches. The integration of internal audit with risk management has proven to enhance the effectiveness of financing control and reduce NPF levels. Therefore, internal audit plays a crucial role in maintaining the stability and performance of Islamic banking in Indonesia.