Summary of Article.
Islam and Accounting: Ethical issues in the presentation of financial information.
Theoretically, it is very hard to study the relation between religions, human behavior and accounting. Researchers found unsatisfactory in examine an indexes to measure the intensity of the religious followers with their behavior on fulfilling their religious conduct. Thus, religion may be indirectly impact upon accounting either through its impact on economic behavior or its impact on other cultural values.
There are difference between Islamic values and attitudes inherent in Western accounting system. Islamic proprietor views accounting as an opportunity to show compliance with religious requirement. For less committed, it is merely as technical matter to measure and convey information to third parties on how efficiently the resources have been used. The very assumption that resources are scarce as mentioned by western economist is actually contradicts with the attitudes of most religions. Islam believed that God has provided enough resources for everyone. The scarcity will not exist if the resources are used sensibly.
During the Abbasid period, an institution called Hisbah was established to ensure all business activities like trading, lending, borrowing and commercial activities are in compliance with shariah requirements. However, during the Ottoman Empire the existence of western bank established in Islamic countries result to the decline of Islamic Financial Principles and replacement to European Based Secular Law which permits the usury or interest and any other activities not sanctioned by Shariah. As a result, nowadays most of Islamic countries do not practice their strict financial principles as it was before. The adoption of western model of economic perceive by Islamic Communities have brought material gain into an elite which solely focus on material gain rather than social developments and benefits.
Religious requirement gives impact on the accounting technology. Emphasis has been given on the disclosure rather than measurement. The impact of Shariah can be seen more on the financial reporting rather than financial measurement. Last, Islam on accounting gives impacts on the emergence of distinctive elements in achieving objectives of reporting financial disclosures. Among them are the need for properly compute zakah, the prohibition of riba’, the concept of social accountability and the concept of full disclosures. As a conclusion, any elements in western accounting theory need to be modified a it is opposed Islamic shariah principles.