Conventional and Islamic Perspective in Accounting: Potential for Alternative Reporting Framework

Authors: Shibly Abdullah

Abstract:

This paper provides an overview of fundamental philosophical and functional differences in conventional and Islamic accounting. The aim of this research is to undertake a detailed analysis focus on specific illustrations drawn from both these systems and highlight how these differences implicate in recording financial transactions and preparation of financial reports for a range of stakeholders. Accounting as being universally considered as a platform for providing a ‘true and fair’ view of corporate entities can be challenged in the current world view, as the business environment has evolved and transformed significantly. Growth of the non-traditional corporate entity such as Islamic financial institutions, fundamentally questions the applicability of conventional accounting standards in preparation of Shariah-compliant financial reporting. Coupled with this, there are significant concerns about the wider applicability of Islamic accounting standards and framework in order to achieve reporting practices satisfying the information needs generally. Against the backdrop of such a context, this paper raises fundamental question as to how potential convergence could be achieved between these two systems in order to provide users’ a transparent and comparable state of financial information resulting in an alternative framework of financial reporting.

Keywords: Accounting, Islamic accounting, conventional accounting, corporate reporting.

Digital Object Identifier (DOI): doi.org/10.5281/zenodo.1315773

References:

[1] R. Kamla, “Critical insights into contemporary Islamic accounting,” Critical Perspectives on Accounting, vol. 20, pp. 921 – 932, 2009.
[2] D. Pollack, “Introduction: religious change in modern societies—perspectives offered by the sociology of religion,” In: D. Pollack, D. Olson, editors, The role of religion in modern societies, Routledge; 2008.
[3] T. Kuran, “Islam and mammon: the economic predicaments of Islamism,” Princeton University Press, 2004.
[4] S. Zizek , “The fragile absolute: or, why is the Christian legacy worth fighting for? London, New York: Verso, 2000.
[5] T. Gambling, R. A. A. Karim, “Business and accounting ethics in Islam,” Mansell Publishing Limited, London, 1991.
[6] R. Wilson, “Economics, ethics and religion,” Macmilan Press Ltd, 1997.
[7] Interview: Muhammad Yunus, “lots of possibilities” in Uniqlo venture, 10 June 2016, Nikkei Report, © Copyright 2016. Nihon Keizai Shimbun, Inc.
[8] S. M. Ather, M. H. Ullah, “Islamic accounting and traditional accounting some conflicts and their resolutions,” The Bangladesh Accountant, January-March, 2010, pp. 20-24.
[9] S. S. Harahap, “Islam auditing in the Islamic perspective,” Pustaka Quantum, Jakarta, 2002.
[10] C. Deegan, “Financial accounting theory,” McGraw-Hill Education (Australia) Pty Ltd. North Ryde, 2014.
[11] S. Reiter, The ethics of care and new paradigms for accounting practice. Accounting, Auditing and Accountability Journal, vol.10, no. 3, pp. 299-324, 1997.
[12] C. Cooper, “The Non and Nom of accounting for (M)other nature,” Accounting, Auditing and Accountability Journal, vol.5, no.3, 1992.
[13] S. Hameed, “Islamic accounting, a new push,” Akauntan Nasional, January-February, 2003.
[14] H. Yaacob, N. K. Donglah, “Shari’ah audit in Islamic financial institutions: The postgraduates’ perspective,” International Journal of Economics and Finance, vol. 4, no. 12, pp. 224- 239, 2012.
[15] A. R. A. Rahman, “An introduction to Islamic accounting: Theory and practice,” Cert Publication, Kuala Lumpur, 2010.
[16] N. Baydoun, R. Willet, “Islamic Corporate Reports,” Abacus, vol.36, no. 1, pp. 21-91, (2000).
[17] D. Ratmono, F. Masud, “Cultural influence on perceived usefulness of Islamic corporate reporting model,” Jurnal akuntansi dan auditing Indonesia, vol. 9, no. 2. 2005.
[18] M. U. Chapra, “Islam and the Economic Challenge,” Leicester: Islamic Foundation, 1992.
[19] Z. Iqbal, and A. Mirakhor, “An Introduction to Islamic Finance”, Singapore, John Wiley and Sons (Aisa), 2011.
[20] A. Soroush, “Reason, Freedom and Democracy in Islam: essential writings of Abdulkarim Soroush, with an introduction by M. Sari, A. Sadri,” Oxford University Press, Newyork, 2002.
[21] R. Haniffa, and M. Hudaib, “A Conceptual Framework for Islamic accounting: The Shari’a paradigm,” Paper of the International Conference on accounting commerce and finance: Islamic perspective, New Zealand, 2001.
[22] M. A. Choudhury, “Contribution to Islamic economic theory,” The Macmillan press Ltd, Hong Kong, 1986.
[23] PricewaterhouseCoopers (PWC), Open to comparison: Islamic finance and IFRS, PricewaterhouseCoopers, retrieved from http://www.pwc.co.uk/assets/pdf/open-to-comparison-islamic-finance-and-ifrs.pdf , accessed on 04 September 2017.
[24] T. Tinker, “The enlightenment and its discontents: antinomies of Christianity, Islam and the calculative science,” Accounting, Auditing and Accountability Journal, vol.17, no. 3, pp. 442–75, 2004.
[25] A. Trokic, “Islamic Accouniting; History, Development and Prospects,” European Journal of Islamic Finance, No.3, Dec 2015.
[26] M. K. Lewis, “Islam and Accounting,” Accounting Forum, vol. 25, no. 2, June 2001.
[27] O.A. Zaid, “The appointment qualifications of Muslim accountants in the Middle Ages,” Accounting Education, vol.9, no. 4, pp. 329–342, 2000.
[28] F. Pomeranz, “The Accounting and Auditing Organization for Islamic Financial Institutions: an important regulatory debut,” Journal of International Accounting, Auditing & Taxation, vol.6, no.1, pp.123–130, 1997.
[29] R. Dhal, “A critical analysis of the financial reporting practices of Islamic financial institutions (IFI)” International Journal of Economics and Management Engineering, vol.2, no.6, 2015.
[30] B. Maali, P. Casson, C. Napier, “Social Reporting by Islamic Banks,” Abacus, vol. 42, no. 2, 266-289, 2006.
[31] M. Mirza, N. Baydoun, “Accounting policy in a Riba free environment in Accounting Commerce and Finance,” The Islamic Perspective Journal, vol. 4, no. 1, pp. 30-40, 2000.
[32] M. A. Adnan, “The Shariah, Islamic banks and Accounting Concepts and Practices,” Proceedings of the international conference, Accounting, Commerce and Finance: Islamic Perspective. Sydney, Australia, 1997.
[33] AAOIFI, Accounting and Auditing Standards for Islamic Financial Institutions. Manama, Bahrain: AAOIFI, 1996.
[34] A. Ahmad, K. Hassan, “The Time Value of Money Concept in Islamic Finance,” American Journal of Islamic Social Sciences, vol.23, no. 1, pp. 66-89, 2006.
[35] N. Uddin, “Comparative analysis of Reporting Practices of Islamic Financial Institutions (IFIs),” The 16th International Business Research Conference. Dubai. UAE. accessed on 04 September 2017 retrieved from https://www.wbiconpro.com/110-Nazim.pdf