An Islamic Perspective of Accounting: Introduction and Overview Christopher Napier and Roszaini Haniffa Introduction
The emergence of Islamic banks and other Islamic financial institutions since the 1970s has stimulated a modern literature that has identified itself as addressing “Islamic Accounting”. What does the term “Islamic Accounting” mean in the rapidly growing contemporary literature? Napier (2009) has proposed three interrelated aspects: a historically-oriented sense, in which “Islamic Accounting” refers to ideas and practices in Muslim-majority countries in past periods; a practice-oriented sense, where the focus is on how entities describing themselves as “Islamic” account for and report their transactions and activities; and a principle-oriented sense, where fundamental accounting concepts and methods form a coherent body of ideas and practices based on the religion of Islam. The word “Islam” means total submission or surrender to the will of God (Allah), and a Muslim is one who so submits. However, this raises the question of how Muslims can determine what the will of God is. The principal sources are the Qur’an, which is considered by Muslims to be the exact words of revelation from Allah to Prophet Muhammad, and the Sunnah (the acts and sayings of the Prophet as transmitted through traditions known as hadith). Principles derived from these two main sources constitute the Islamic law (Shari’ah Islami’iah or Sharia). Both the Qur’an and the Sunnah contain general principles and detailed rules concerning business, administrative affairs, economics and politics, and these principles and rules form the basis of that part of Sharia known as fiqh al-mu’amalat (literally “jurisprudence of inter-personal relations”). Hence, “Sharia Accounting” may perhaps be a better term than “Islamic Accounting” in this context. In this Handbook, “Islamic Accounting” refers to accounting ideas and practices that have some fundamental differences from their conventional counterparts, resulting from adherence to Sharia principles. Although the principle of an Islamic banking and financing system that is not based on the receipt and payment of interest has gained wide acceptance, Islamic Accounting has not developed in tandem with the rapid growth of the Islamic financial system and it remains poorly understood. Much of the scholarly research into Islamic accounting is not written in English, and the English-language literature tends to be published in non-mainstream accounting journals. Our aim with this Handbook is to provide wider exposure for research related to Islamic accounting, which we hope will stimulate debate and further research in the area. In this volume, we have collected some of the most significant English-language contributions to the early, foundational literature of Islamic Accounting. The Handbook includes papers that offer extensive prescriptions for financial and management accounting and auditing in compliance with Sharia principles and papers that report the empirical findings of studies into the accounting practices of Islamic financial institutions and other organisations. We also include some important historical studies showing the development of accounting in the Muslim world. We have classified the articles into six themes. Inevitably there is some repetition of key concepts, especially in relation to Sharia principles, which are at a minimum acknowledged and often discussed in detail in every paper.
Conceptual Framework of Islamic Accounting
The integration of religious principles with economic activities initiated by Islamic banking in the 1970s gave rise to new accounting issues. In the absence of...