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Chapter 1_ Introduction

Chapter 1_ Introduction



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Published by: Dr. Shahul Hameed bin Mohamed Ibrahim on Jan 08, 2009
Copyright:Attribution Non-commercial


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The background to the present study together with the research objectives and issues, the methodologyand methods used and an outline of the thesis are presented in this chapter. In the next three sections(1.1,1.2 and 1.3) the context of the study, the problem giving rise to the study and imperatives which drivethe study are presented respectively. This is followed in section 1.4 by a discussion of the specific researchaims and objectives of the study, which is to inquire into the need for an alternative “Islamic accounting”given the problems that conventional Anglo-American Accounting poses for Islamic organisations andusers. Section 1.5 outlines the research methodology and methods followed in this study while thecontribution the study makes to the Islamic accounting literature are stated in section 1.6. This chapter endswith section 1.7 where a flowchart and a brief outline of each chapter of the thesis are presented.
Behind the facade of accounting as a purely technical subject, lies a reality in which accounting and societyare intertwined in a complex relationship (Burchell et al., 1980). Accounting creates social reality (Hines,1988) and in itself is influenced and moulded by society (or the dominating forces within it). This is notreadily apparent to users, even accountants, who unfailingly advocate its technical neutrality. Until recently,this was echoed even in academic circles which tends to be dominated by a positivist epistemology inmainstream accounting research especially in the USA (Baker & Beltner, 1997). Within this approach,accounting is studied for its causal relationships;
what is 
instead of
what ought to be 
and for thepurposes of predicting and projecting profitability and cash flows (Watts & Zimmerman, 1986). This hasgiven rise to a whole discipline of finance and financial markets and fund management, which has becomebasically a speculative activity- a popular post-modern game in hyper-reality (McGoun, 1997).This positivist tendency of accounting to be used for justifying speculative financial activity (for example, inthe case of the mergers, acquisitions and privatisations (Briloff, 1990; Arnold & Cooper, 1999) has seriousconsequences for any society, Islamic or otherwise. Academic circles in the West have realised thistendency and its dire consequences for society. Hence, a discourse on the critique of conventional Anglo-American accounting has developed which takes a more comprehensive view of accounting in relation toits role in society. Various accounting journals sprang up in the late 1970’s and 1980’s such as Accounting,Organizations and Society, Advances in Public Interest Accounting, Critical Perspectives on Accountingand the Accounting, Auditing and Accountability Journal which provided a broader gateway for alternativetypes of accounting research.
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There is also debate in academia about whether “Western” Anglo-American accounting (from here onreferred to as conventional accounting) is the appropriate system to be accepted without question by allother cultures and people of the world (Wallace 1990a). Initial research (e.g. Hove, 1986) has indicated thatit is not, although the extent to which western accounting is relevant or otherwise is a matter of debate(Baydoun & Willet, 1995). A whole journal dedicated to this area of research (Research in Third WorldAccounting) has sprung up and the debate is alive and well. Research so far has indicated that there is arelationship between accounting and culture (Gray, 1988; AlHashim & Arpan, 1992; Perera, 1989) and onesystem cannot be transplanted into another cultural environment to take root without causing dysfunctionaleffects on the host culture and society.Despite this however, in recent years, there have been pressures on developing countries with differentcultures, religions, social, business and political environments to adopt the conventional accountingprinciples and standards. Consequently, their underlying philosophy is adopted without any or negligiblemodification in the name of globalisation. These ‘pressures’ have been in the guise of; (i) Harmonisation ofinternational accounting standards by the IASC (Taylor, 1987;Wallace, 1990b), (ii) the operations ofmultinational audit firms and their clients the multinational corporations, and (iii) the professional educationimparted through the examination and qualification exporting accounting bodies of the UK e.g. CIMA(Briston & Kedslie, 1997).However, the spread of “Western” consumerism (Ahmed, 1992) and capitalism over the globe is notwithout its opponents. The resurgence of religion especially Islam in the Muslim countries, questions thesocio-economic values of Western capitalism and attempts to introduce its own socio-economic system inline with its own worldview. The researcher considers that the Islamic economic system may need analternative “Islamic accounting” System that would provide appropriate information which hopefully wouldinduce user behaviour consistent with the Islamic worldview. This research project hopes to make an initialcontribution in this area. The Islamic reaction against the attack on its values in the name of globalisation isthe imperative to this research project and is outlined in the following section.
Islam is the second largest and fastest growing religion in the world. It is not only a ritualistic religionconfined to the individual but an integrated way of life combining politics, economics, culture, religion andevery aspect of human life. From its very beginnings, it was an integrated way of life combining the secularand the sacred, mosque and the state, political and social life. Thus, Noreng (1997), for example, terms itas both a “political and social project “ since its inception. This is unlike the understanding of religion in themodern secular West where religion is separated from the state.
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In this study, Islam is used in the sense of a civilisation driven by Islam- the religion and code of life, law,ethics, government, economics and society. The word “Islamic” is used to denote Muslim society, whichlives according to Islamic principles in all areas of life. The word ‘Muslim’ on the other hand is used todescribe the actual situation of Muslim countries where Muslims have political power but have notimplemented Islam in their political, social or economic life although they may be at various stages of thisprocess. This civilisational view of Islam is not entirely novel or an entirely ‘Islamic’ perspective but isrecognised by writers in the West, for example, Hunttington (1996) who portrays Islam in this context.Further, the
(1998) included ‘Islam’ as a potential candidate for ‘super power’ status in the 21stCentury although arguing that it is very improbable given the disunity amongst its ranks and its lack oflong-range military power. Further, Talbott (1998), in commenting on the ambiguous response of the EC onTurkey’s admission to the European Union, admitted that European opposition to its joining was becauseof its ‘Islamic’ credentials and that this should not be the case:
“The debate within the EU over Turkey resonates with references to “culture” and “civilisation”.These words are often euphemisms for religion [emphasis mine]. The theory is currently in voguethat the cold war rivalry between communism and capitalism has given way to a global “clash of civilizations” including one between the Judeo-Christian West and the Islamic world. That idea ispernicious. If the “Europeanness” of a village depends on whether its landmarks are church spiresor minarets, then the peace of the Continent will be in recurring jeopardy of the kind we have seenin Bosnia over the past several years and in Kosovo over the past severalmonths”. (Talbott, 1998)
Although the Muslim countries are not united politically and Muslim countries for the most part are secularaccording to their constitutions this is due to a number of historical factors including colonialism’s divideand rule policy. There is a global resurgence of Islamic fervour at both local and international levels and theaspect which most concerns this study is the aspiration of the Muslims to order their political, social andeconomic life in accordance with Islamic teachings.Towards this end, in the socio-economic sphere, there has been a paradigm shift from conventionalutilitarian economics to Islamic Economics (Presley & Sessions, 1994). In Islamic economics, the rationaleconomic man’s utility maximising behaviour is replaced by the ‘homo-economicus-Islamicus’ (Al-Zarqa,1980) whose consumer behaviour is limited by a ‘moral filter’ and a redefined self interest extending to thehereafter (Chapra, 1992).To attain this “Islamic Economic System”, Islamic political and economic organisations have been set up atthe international, regional and local levels. International politico-economic organisations include theOrganisation of the Islamic Conference (OIC) grouping 52 Muslim countries, Economic Co-operationOrganisation (ECO) grouping Iran, Pakistan, Turkey and the Central Asian States, the newly formed D8(group of developing eight Muslim countries) and the Gulf Co-operation Council (GCC) which groups sixMuslim gulf countries. These organisations have economic, scientific, trade and cultural sub-committees.More important from an accounting point of view is the setting up of local and regional Islamic banks,
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