“Corporation have emerged as the dominant governance institution on the planet, with the largest among them reaching into virtually every country in the world an exceeding most government in size and power, increasingly, it is the corporate interest more than the human interest that define the policy agendas of state and international body although the reality and its implication have gone largerly unnoticed and unaddressed”(Korten). The western models of accounting have contributed to this situation.
According to Hayashi, “The traditional Western double-entry based accounting technology is well-suited to an orthodox, positivist society of any kind. It is not surprising that it is proving inadequate, as people are returning to more integrated world views, whether Islamic or otherwise”. The main critics of western accounting states that it failed to consider the social interest, promote the exploitation of capitalist over labor and society and Promote the concentration of wealth and power o the hand of the rich.
Accounting is being developed based on religion and culture in many societies. Shinto for example has a potential drive to establish a Shinto based Accounting in Japan as the Japan is society with has strong commitment to traditions and culture. According to the research the culture and accounting are closely related. Different culture, different economic – socio-politico systems demand different accounting system. The researchers in Islamic accounting emphasis that “Islam is different from Occident (Capitalist ideology), so it must have its own accounting system”.
The western accounting is Individuality – oriented, focus on individuality aspect without consider any social aspect and secular. But the Islamic accounting has to be developed to address these issues Society – oriented and should be based on focus on society aspect, basically Al Qur’an & As Sunnah (Shariah),
religious (must responsibility to God at the Judgment Day).
Therefore, It is necessary to develop an accounting system based on Islamic values and guidelines to the will benefit the mankind. Sura Baqara V 282 clearly states about the recording of transactions and give divine guidance to the humanity in all the aspects of business and accounting.
The Islamic accounting practices will be able report accurate income determination, to promote efficiency and leadership, to comply with the shariah (Islamic principles), commitment to justice, to adapt to positive social change. The Islamic accounting should be based Al-Quran and As-Sunnah.
The key success in Islamic accounting practices is the formation of Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI). The AAOFI was found to report ethical dimensions in the Islamic financial institutions which was not addressed by the international accounting standards. The formation of AAOFI is the key stone for success in Islamic finance industry.
Islamic finance industry gave the real sprit to Islamic accounting. There are many researches going in this field. Some western educational institutions started to offer courses in Islamic accounting. These developments signify that Islamic accounting will also develop along with Islamic finance industry and will the benefit the humanity.
Dr. Jamaldeen M Faleel DBA
Assistant Professor – Finance and Accounting
Effat University – Jeddah, KSA