In the previous posting, I argued that a theory of accounting can be of two possibilities i.e. what it should be and what it is. "What it should be" in a conventional methodological approach is a normative theory. We need to develop Islamic accounting theory from the sources of Islamic knowledge i.e. the Qur'an, the Sunnah, and other sources of Shari'ah. Hence, it will be hypothethical but founded on the Islamic belief system. The way to develop it might be in qualitative and persuasive way.
Islamic accounting theory needs to be founded on Islamic accountability theory. We need to distinguish Islamic accountability from the conventional counterpart which mainly centred upon the agency theory. It does not mean that the agency theory with the theorisation of agency cost and moral hazard will not be relevant, however, the conventional agency theory is argued as insufficient to explain the accountability relationship. It is superficial to only view i the context of principal and agent only. In Islamic accountability theory, we need to theorise the Islamic concept of Hamblumminallah rather than just Hablumminannass. We also need to bring in the Islamic concept of Khalifah (vicegerency), Amanah (trust) and Taklif (individual responsibility) and theorise the relationship of accountability in the Islamic way.
With the richness and very distinguished Islamic accountability theory, we should be able to theorise the role of accounting as a mechanism to ensure financial, managerial and public accountability. Modern corporations and institutions need a much more comprehensive and equitable accountability theory. Islamic accounting then will function as "what it should be" in the context of Islamic accountability relationships. We can even link the theory with the functions of Islamic financial institutions such as Islamic banks. These institutions, in theory, should be founded on Islamic accountability theory rather that the western's principal-agent relationships in the conventional sense. Hence, the Islamic accountability of Islamic institutions should in turn shape (or may be create) Islamic accounting theory.
In the next few months, my intention is to write and develop a normative theory of "what Islamic accounting should be" in the form of an academic paper. I need to spend more time to theorize the Islamic accountability from the rich heritage of Islamic concepts. I hope many aspirants PhD candidates willing to work in this area. It is dry and challenging by certainly thought provoking. May Allah SWT guide us.
Islamic accounting theory needs to be founded on Islamic accountability theory. We need to distinguish Islamic accountability from the conventional counterpart which mainly centred upon the agency theory. It does not mean that the agency theory with the theorisation of agency cost and moral hazard will not be relevant, however, the conventional agency theory is argued as insufficient to explain the accountability relationship. It is superficial to only view i the context of principal and agent only. In Islamic accountability theory, we need to theorise the Islamic concept of Hamblumminallah rather than just Hablumminannass. We also need to bring in the Islamic concept of Khalifah (vicegerency), Amanah (trust) and Taklif (individual responsibility) and theorise the relationship of accountability in the Islamic way.
With the richness and very distinguished Islamic accountability theory, we should be able to theorise the role of accounting as a mechanism to ensure financial, managerial and public accountability. Modern corporations and institutions need a much more comprehensive and equitable accountability theory. Islamic accounting then will function as "what it should be" in the context of Islamic accountability relationships. We can even link the theory with the functions of Islamic financial institutions such as Islamic banks. These institutions, in theory, should be founded on Islamic accountability theory rather that the western's principal-agent relationships in the conventional sense. Hence, the Islamic accountability of Islamic institutions should in turn shape (or may be create) Islamic accounting theory.
In the next few months, my intention is to write and develop a normative theory of "what Islamic accounting should be" in the form of an academic paper. I need to spend more time to theorize the Islamic accountability from the rich heritage of Islamic concepts. I hope many aspirants PhD candidates willing to work in this area. It is dry and challenging by certainly thought provoking. May Allah SWT guide us.
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