11.vol 0005www.iiste.org call for paper_no 1-2_ pp. 124-134

Issues in Social and Environmental Accounting
Vol. 5, No. 1/2 December 2011
Pp 124-137

THE CONTRIBUTION OF ISLAMIC
ETHICS TOWARDS ETHICAL
ACCOUNTING PRACTICES
Rochania Ayu Yunanda1 *)
Islamic Accounting Department
Sekolah Tinggi Ekonomi Islam Tazkia (STEI Tazkia)
Indonesia
Norakma bt. Abd. Majid2
Faculty of Management and Economics
Universiti Malaysia Terengganu (UMT)
Terengganu, MALAYSIA

Abstract

The professional ethics of accountants is an important issue directly relating to the integrity of
the profession and its ability to secure the public trust. The fraudulent activities in accounting
field indicate the failure of accounting education as the beginning stage of the practice. It is
perceived that those happen due to deficiency of moral values inserted in the education level.
Inevitably, education system is alleged as the main cause of the problem. Accounting education
seeks for moral values to generate ethical accountants as part of society. Accordingly, the visi-
bility of ethics education in accounting programs may initiate the development of morality and
also increase public confidence in the profession. However, the efforts to integrate ethical val-
ues in educational system will not work well if there are no moral commitments implanted in
the individuals. Islam with its divine values plays the notable role to embed cognitive ethical
values. It emphasizes on the unity of God, the accountability to God and the concept of
maslahah (public benefits) to be the foundations of ethics. Incorporating Islamic ethics into the
system will be a significant contribution towards generating ethical accounting education. This
paper attempts to elucidate how the Islamic ethics contribute its role towards ethical
accountants as the products of accounting education.

Keywords: management accounting, health, savety, environment, performance, supply chain,
Indonesia

1
Rochania Ayu Yunanda is Lecturer of Islamic Accounting Department, Sekolah Tinggi Ekonomi Islam Tazkia,Tel.:
0878 7071 0101, Email: andatazkia@yahoo.com.
2
Norakma bt. Abd. Majid is Academic fellow of Accounting and Finance Department, Universiti Malaysia
Terengganu
*)
We would like to take this opportunity to acknowledge my appreciation to everyone who has contributed in the
completion of this paper. We would like to convey our sincere gratitude and acknowledgement to our colleagues and
all the lecturers of Sekolah Tinggi Ekonomi Islam Tazkia and Universiti Malaysia Terengganu (UMT) who supported
and motivated us to write. We truly appreaciate ISEA and ICSEARD team who have given us a golden opportunity so
that our paper can be published.

R.A. Yunanda, N. Abd. Majid / Issues in Social and Environmental Accounting 1/2 (2011) 124-137 125

1. Accounting in Current Practice: sion, trade, or technical skill. This edu-
Reaview and Critiques cational system incidentally has culti-
vated a psychological effect to the stu-
dents that the purpose of education is to
Accounting Practice as A Product of
prepare for the job which will pay them
Education
with the largest amount of money and be
best fitted to their skills.
Formal education is everywhere ac-
knowledged as the principal channel
through which ideas and values of the
Problems of Lack of Ethics Education
ruling elite may best be communicated
to the younger generation (Hassan,
In the context of professional account-
1996, pp. 26). Through its system, cere-
ant, “education in ethical and profes-
bral and analytical values are transferred
sional responsibilities” means a pro-
to the students. Ideally, its process is
gram of learning that provides potential
supposed to produce high-quality stu-
professional accountants with a frame-
dents as the output. Education can be
work of professional values, ethics and
spurred to reach this ideal by addressing
attitudes for exercising professional
the issue of values to develop the critical
judgement and for acting in an ethical
and reflective thinking and also the
manner that is in the best interest of the
moral view.
public and the profession (Young and
Annisette, 2009, pp. 94). Lacking of
However, education at schools are still
these elements resulted the overwhelm-
based on the traditional idea that science
ing accounting scandals and frauds in
is scientific knowledge itself and insu-
the global business industries. The case
lated from moral values and ethics. Sci-
of fraud, falsification and deliberate
ence is not value-free or neutral activity;
overstatement of companies’ account
it is influenced by its cultural, political,
and other professional misconduct have
and economic context, i.e. by contextual
resulted financial institutions, public and
values (Verhoog, 1985, pp. 102). Devel-
private companies have either been de-
oping from an industrialized culture
clared distressed or completely close
makes accounting as a part of science
down (Bakre, 2007). The collapse of big
mingled with the secular values.
companies such as Enron, WorldCom
and Global Crossing in the USA and
This secular oriented and pragmatic edu-
Parmalat in Italy has overthrown the
cational system has influenced the prin-
credibility of ¿nancial reporting and ac-
ciples in accounting and the educational
countability. Such cases, to some extent,
process as a whole. Consequently, it has
might contribute to unfavourable effect
affected the accounting practice as the
upon countries’ economic condition as
result of accounting education. Hassan
well as society at large, where a massive
(1996, pp. 34) stated that an educational
unemployment and poverty problem are
philosophy and system grounded in
a core concerns.
secularistic ideas (pragmatism, human-
ism, etc) tend to over-emphasize the idea
Besides that, fraudulent activities have
of self-expression – as in a progressive
had devastating effects on the financial
education – and so called education for
markets and investors. People inferred
citizenship, or for a particular profes-

126 R.A. Yunanda, N. Abd. Majid / Issues in Social and Environmental Accounting 1/2 (2011) 124-137

that those took place due to unethical behavior of the professional.
and immoral behaviors of the account- Nevertheless, as the literature indicates,
ants. The lack of ethics perceived by the the established code of ethics is not well
public is a severe threat to the account- implemented in the practice. Hooker
ing profession. People start to blame (2001, pp. 38) argued that the code may
educational system as it failed to insert be a way of putting added pressure on
moral values into the system. It bring people to do things that are in the best of
about, the public loss their con¿dence in that particular company or profession.
business due to corporate scandals. The This indicates that the adoption of code
adjustment to these harms require for a of ethics needs to be articulated by the
reorientation of ethics education to be organization in its routine and daily
incorporated in educational system. activities performed by its members.
Such practice is regarded as a kind of
As anticipated by Jacking et al. (2007), training to educate member getting used
accounting education system is consid- of the code and consequently leading to
ered as one of potential remedy to ad- the enhancement of ethical practices in
dress the profession’s ethical crisis. the workplace.
However, in view of Rahman (2003),
ethical components in accounting educa- As it has been claimed, the aim of code
tion have been found to be insufficient is to develop and improve the ethical
in which he emphasized that the part of dimensions of practice. It serves as a
humanizing accountants is still lacking. framework for ethical practice which
These trends place higher challenges may helps professionals to do the right
before the educators of accountant to things. Although code of ethical conduct
devise an excellent guidance for poten- is considered as an important device,
tial professional accountant to live up to they are not sufficient. They do not guar-
public expectations. antee members of the profession to com-
ply with the code. Persistent commit-
ment is required to do the right things,
The importance of Code of Ethics otherwise the code will be considered as
just enforcement and they will be ig-
At the practical level, the means of on-
nored when the desire for money, power
going ethical guidance of professional
and position become the priorities.
accountants lies in their Code of Ethics.
The code is designed as to enforce and
A number of researchers highlighted the
ensure that the professionals will act
failure of AICPA code of ethics to ad-
ethically and provides guidance of a
dress certain issues in accounting and
high quality of accounting services. The
fail to accomplish the ethical awareness
presence of ethical code can serve as a
among the practitioners who expected to
control mechanisms and sanctions for
comply with the Code. In Malaysia,
professions. It is anticipated that the
Bakar et al., (2003) conduct a study and
code could moderate or decrease the
found that the By-Laws has no
deleterious effect of ethical problems
significant influence over the
among practitioners. Thus, it facilitates
practitioner’s action and behaviour due
the creation of an ethical environment in
to the fact that most of them were
accounting practices as the reference to
ignorant of the law. This indicates that
the code could enhance the ethical


the existing code of conduct is failed to justice from injustice (Rahman, 2003).
develop the ethical awareness among the As contented by Irwin and Fry (2007),
practitioners. The finding significantly the ultimate object of ethics may con-
implied the need for a new version of cern on standards of conduct for person
comprehensive and ideal guidelines or groups, but the content of these stan-
which can guarantee it enforceability to dards is fundamentally shaped by the
guide the professional practices toward interactions. In short, code may high-
the ethical professional conduct. It can light the ethical concern, but what is re-
perhaps be concluded that a code of quired by accounting profession is moral
ethics is not the best way to improve character and ethical reasoning ability
ethical behavior (Carroll, 1998) unless it which is beyond the coverage in the
has been developed based on suitable ethical code of conduct. The concept of
policy and ethical code to prevent morality is defined by Irwin and Fry
unethical issue repeatedly arise. (2007) as a product of the way we think
about our contact and associations with
More importantly, it has been recog- other persons and groups and
nized that ethics and ethical behavior is (hopefully) the consideration of their
underpinned by moral reasoning view points. According to the authors,
(Jacking et al., 2007). Ethics goes be- ethics is defined as “the values and be-
yond the code; it is moral reasoning. The liefs we develop, define and clarify
most widely known work in the area of within the context of relationships both
moral reasoning is that of Kohlberg interpersonal (e.g. within families and
(1969), who developed the theory of friendships) and even more distant con-
cognitive moral reasoning and develop- nections (e.g. within professions, relig-
ment (Jacking et al., 2007). Kohlberg’s ion, cultural/ national identity, environ-
theory is concerned with how judgments ment), our expectations and acknowl-
are made and why one makes judgment. edged responsibilities in these, and our
In general, higher levels of moral rea- understanding of the consequences of
soning indicate higher level of ethical particular courses of action”. Thus, is-
practices. sues of ethic are inescapably involve a
discussion of values and belief without
On directly engaged to serve the public which ethical or moral positions could
through the professional judgement on not be legitimately evaluated and re-
matters related to audit, accounting, tax vised.
and consulting services , accountants
should realize their roles as moral
agents. They have to consider account- 2. Ethics and Religion
ing as an activity containing significant
moral dimensions. They are expected to The Role of Religion in Promoting
have a broader sight that the ethical code Ethics
should be more than just code. The code
provides a point of reference to address In view of the definition presented
the concerns of ethical conduct without above, the present paper takes a view
enforcement by itself. On the other side, that when developing a content of ethi-
ethics, clearly signal and distinguish cal code, it is necessary to adopt a differ-
right from wrong, good from bad, and ent perspective according to religious


context. The incorporation of the reli- ethical orientation is closely resembled
gious into the code of ethics for the pro- to accounting ethics based on Islamic
fessionals is expected to provide a worldview. In that, the focus of idealism
means of countering the deficiencies in is more on human welfare which
current Code of Conduct that purely em- mirrored the core values of Islamic
bedded on concept of rationalism. This model of normative business ethics.
statement is advocated as it has been
claimed by previous researchers that the
religion may indirectly have impact The Ethics and Business.
upon matters of accounting both in terms
of economic behaviour and other cul- There is an increasing attention given to
tural values (Baydoun and Willet, 1997). ethics in the field of business. The
The cultural value of western, usually spread of moral defects among those
associated with developed countries may who are in charge of business is a driver
differ from Islamic culture, which is nor- to this move. The erosion of trust by the
mally resides in developing countries. business’s stakeholders is mainly due to
This difference may influence the per- the immoral behaviour of the business’s
ceived ethical problems and ways to administrators ranging from chief execu-
solve it. It has indeed been argued that tive officers to lower level managers and
‘accounting can have no purpose outside its employees. Such behaviour may
some metascheme of which some kind negatively affect the reputation of the
of faith is also an integral business and subject to legal and moral
part’ (Gambling and Karim, 1991:13). sanctions.
Faith represent as a core factor in the
religion have identified by Keller, et.al. The Principles of Ethics.
(2007: 310) to provide a strong founda- The ethics perspective can be better un-
tion for the behaviour, particularly in the derstood by categorizing it into two ba-
case where ethical judgement is re- sic principles of which comprise of per-
quired. sonal and professional ethics. The prin-
ciples of personal ethics are known as
Accordingly, this evidenced that both morality reflecting the general expecta-
culture and religion will materialize in tions of any person, acting in any capac-
(his)her ethical ideology. Subsequently, ity. Meanwhile, the principles of profes-
one’s ethical ideology will significantly sional ethics are imposed to individuals
lead (his)her actions and decisions. acting in professional capacity that pre-
Lower level of religiosity was associated scribed required behaviour within the
with an inclination to engage in context of professional practices such as
unethical behaviour (Keller, et.al., accounting, medicine, law and engineer-
2007). A study conducted by Greenfield ing. The following values are underlying
et.al. (2007), suggests that there is a the principles of personal and profes-
significance relationship between an sional ethics respectively;
individual’s ethical orientation and
decision making. In our judgement, Principles of Personal Ethics.
between the two ethical orientations y Concern for the well being of oth-
suggested by Greenfield et al. (i.e. ers.
relativism and idealism) the idealism y Respect for the autonomy of oth-


ers ment mechanisms in Islamic ethics be-
y Trustworthiness and honesty gin with individual. Realizing that every
y Willingly compliance with the individual is accountable for their deeds
law is the most powerful enforcement
y Justice and fair mechanism, more so than any regulatory
y Refusing to take any unfair advan- and government control.
tage
y Benevolence Islamic Code of Ethics.
y Preventing harm Currently, the Code of Ethics for Ac-
countants and Auditors of Islamic Finan-
Principles of Professional Ethics. cial Institutions (AAOIFI, 1998), repre-
y Objectivity ;Impartially sents the only code of ethics having an
y Full disclosures ;Openness essence of Islamic Shariah rules and
y Confidentiality principles developed by the Accounting
y Due diligence and Auditing Organizations of Islamic
y Fidelity to professional responsi- Financial Institutions. Critique by Abdul
bilities Rahman (2003) that the AAOIFI code
y Avoiding potential or apparent serves as a collection of Islamic ethical
conflict of interest. concepts and principles but lacks of op-
erational guidance on how to impart the
Enforcement Mechanism Islamic ethical principles into the Is-
Currently, the Code of conducts by regu- lamic financial institutions. However, he
lators serves as the enforcement mecha- suggested that AAOIFI’s code of profes-
nism to guide the professional to act sional conduct can be used as a material
ethically. Unfortunately, as revealed by to explain and expose students to the
previous research, it claimed that the attributes of ethical awareness and prin-
code of ethics have little or insignificant ciples from an Islamic perspective. More
influence on the behaviour of account- researches are required to explore the
ants. As such, the code are never a factor ways to put it in practical use as a guide
or a source of reference in solving ethi- to Muslim accountants and auditors in
cal issues due to lack of exposure to eth- either financial or non financial institu-
ics and ethical issues, vagueness of the tions to improve their moral and ethical
code, absence of actual guidelines on characters.
how to solve conflict and not having
legal standing to subject offenders to
prosecution in the court of law (Bakar et 3. The Relationship between Islamic
al., 2003). Ethics, Ethical Behaviour and Ac-
counting Practices.
Obviously, the code of conduct is not a
prime solution toward ethical accounting Human interaction is guided by general
practices. In order for the Code of pro- rules which are universally accepted.
fessional conduct to be of value it is al- Man’s acts are joined and related to-
ways necessary to have a comprehensive gether by the concepts called “universal
ethical education to complement them principles”. In general, people are able
(Abd Rahman, 2003). According to Bee- to differentiate between good and bad
kun and Badawi, (2005) the enforce- things. For instance, they agree to judge


whether honesty, dishonesty, kindness, in its generic sense, relating to one’s
and arrogance are good or evil. They can obligation to “account” to God on all
judge others based on their acts. Accord- matters pertaining to human effort for
ingly, acts cannot be separated from which every muslim is “accountable”.
faith. Faith should be reflected in acts, The linguistic stem of the term (Taklif –
and acts should reflect the faith. Arabic) includes the meaning of having
to do difficult and burdened things gen-
erally named obligation. Muslims are
Islamic Ethics obliged to do what Allah asks and avoid
what He forbids.
Ethics education concerns with forming
and developing values and those with Accountability and liability refer to the
actually changing behaviours. As com- aspects of duty and obligation, whereas
pared to the west, Islam has competitive blame also involves sanctions (Bierhoff
values to elevate and refine the ethics. and Auhagen, 2001). In addition, Wag-
Kamla et al. (2006) supported that unity, ner (1989) stated that the term account-
trusteeship, and accountability are the able can be used to imply being
three concepts of Islam and also the pil- “obligated to give an account” or being
lars of the environmental ethics of Islam. “subject” to doing so. In Islamic per-
Besides that, Beekun and Badawi (2005) spective the term of accountability en-
mentioned that criteria of Islamic ethics compasses commands, forbidden things
system encompass justice and balance, as well as matters left to choice. There
trust and benevolence. Having deep in- are consequences behind those things
sight in the concept of tawhid, account- called reward and punishment. Account-
ability, and benevolence as the concrete ability can be concluded as a concept in
acts guides the individuals to raise innate ethics with several moral behaviors in-
ethics. volved in it. It covers such concepts as
responsibility to perform obligation, an-
Tawhid swerability of what has been done re-
Believing in one and the only God is the garding to the obligation, enforcement
paramount essence of Islam. Adherence and liability to do the commands, and
to the concept of tawhid (the unity of blameworthiness in case of disobedi-
God) and submissiveness to Allah deter- ence.
mine individuals’ morality. Believing
that Allah is observing the acts of His Western viewpoint emphasizes that ac-
servants engenders Allah-fearing con- countability is limited to law only. Con-
duct in everything. This leads to the obe- sequently, there are no ethical principles
dience of Qur’anic ordinances and Sun- such as decency, truthfulness, and hon-
nah as the primary rules and man-made esty underlying a man’s acts and con-
rules in particular. sciousness. The individual attempts to
pursue his benefits and interest by de-
Accountability ceiving and breaking the established
Hisab or “account” is the root of ac- rules. Conversely, Islamic perspective
counting, accountable, and accountabil- highlights different concept of account-
ity. According to Lewis (2001), the ref- ability. The principle of vicegerency of
erences in the holy Quran are to account humanity on earth increases the essence


of accountability. A man is accountable ethics perspective can provide some in-
to Allah above the accountability to his sights into the process of developing a
society. However, accountability to Al- more humanized and ethical account-
lah cannot be separated from accountants.
ability to His fellow men (habluminallah
and habluminannaas). Habluminannaas
(relationship among human beings) The Concept of Maslahah (Public
should reveal habluminallah Benefits)
(relationship between human and God).
This view constitutes how to ethically Referring to ethical problems in ac-
interact, behave, and deal with society. counting field, the accounting profession
Thus, every individual performs and has been criticized as it mainly protects
obeys the rules because of accountability its self interest rather than the interests
in the life after life and belief that Allah of third parties. It proves that conven-
may punish them in the world and here- tional accounting education has failed to
after. infuse ethical aspects into its system.
Accounting education should be filtered
Recognizing that the universe did not from the values which make it lack of
create itself goads muslims to believe moral inputs. It should be purified by
that God Almighty is the creator who incorporating ethics in its curriculum.
watches them and not even the smallest Islam introduces the concept of
thing is missed from His oversight. It maslahah as the foundation of
stimulates and encourages due care of accounting education to educate the
their acts since they will be accountable ethical decision making process.
for all of their actions and undertakings.
Based on that reason, Islam familiarized Literally, maslahah means benefit or
the concept of individual accountability interest (Kamali, 2007, pp. 267). Shatibi
– God-inspired accountability which (as quoted in Masud, 1995, pp. 151) de-
remarks that “every person is responsi- fined maslahah as that which concern
ble for his own deeds”. the subsistence of human life, the com-
pletion of man’s livelihood, and the ac-
Benevolence quisition of what his emotional and in-
Based on aforementioned views, the pur- tellectual qualities requires of him, in an
pose and end of ethics in Islam is ulti- absolute sense. The other significant
mately for the individual; what the man meaning of maslahah according to
of Islam does here he does in the way he Shatibi is the protection of public inter-
believes to be good only because God est. Maslahah comprises considerations
and His messenger say so and he trusts which are in line with objectives to se-
that his actions will find favor with God cure a benefit for public and prevent
(Al Attas, 1978, pp. 70). For the sake of harm. Regarding to that matter, Abdul
obtaining Allah’s pleasure, every indi- Rahman (2003) proposed that Islamic
vidual should tend to be benevolent. Per- legal principles of maslahah as a basis
forming good deeds and doing benefits of setting priorities for the work to be
for others imply the concept of human- undertaken by the accountants.
ity. Rahman (2003) in his paper sug- Therefore, accountants are expected to
gested that the Islamic worldview and feel socially responsible for others in the


community. (Caroll, 1998). Armstrong (1993) in
Jackling (2007) did stress that the posi-
It is clear that society is becoming more tive effect of ethics education on stu-
pluralistic; individuals and groups have dents’ moral development was beyond
different perceptions about individual that which is expected to occur natu-
and societal interests. Nonetheless, Islam rally. McPhail (2001) also suggested that
emphasizes the welfare of the commu- one way to introduce emotional commit-
nity over individual rights. Islam is ment into accounting education is
generally predicated on benefits to the through business ethics education. An
individual and the community, and its ethical curriculum insinuates an objec-
laws are designed so as to protect these tive to help students building their moral
benefits and to facilitate the characteristics such as humanity, toler-
improvement and perfection of the ance, unselfishness, trust, empathy, fair-
conditions of human life on earth ness, and justice. The ethical curriculum
(Kamali, 2007, pp. 395). is supposed to stimulate ethical reason-
ing.
McPhail et al. (2004) stated that from a
situation where accounting can legalize The traditional focus of accounting eth-
injustice they call, rather, for accounting ics education research has been on de-
to become “the soul of justice” by giving veloping an understanding of how to
priority to the question of social welfare increase the cognitive moral capability
and public interest. Every person always of students who will soon enter account-
faces the conflict about self-needs and ing profession (Thorne, 2001). She sug-
public interest. Islamic moral education gested that cooperative education may
through the concept of maslahah aims at differ from other forms of accounting
controlling any problematic behavior education in its effect on the moral rea-
resulting from unsatis¿ed needs. soning of accounting students. Since
cognitive moral capabilities will only be
reached if the individuals have reasoning
Integrating Accounting Education ability and strong principles regarding to
with Islamic Ethics the reasons, the firm moral commitments
should be established inside the ethics
In these recent decades, the society real- education.
izes that it needs support in the develop-
ment of character in their youth to pre- The moral education providing a nurtur-
pare future citizens with high level of ing context expects a person to become
morality. It has searched for the effec- an naturally being ethical. McPhail
tive ways of producing fully moral (2001) has contended that accounting
generations. To reveal the commitment education should contain an ethics com-
toward morality, ethics should be em- ponent which attempts to engender a
bedded in the students rather than legal- sense of empathy for, and moral com-
ized in the form of codes. Hence, ethics mitment to ‘the other’. Further, Islamic
has increasingly become an important moral education has the potential frame-
component of accounting education. work to develop a sense beyond moral
The ethical curriculum is one that helps obligation to deal with ethical conflicts
students develop a moral point of view since Islam is not only a religious ideol-


ogy, but also a way of life. counting system mainly happen due to
the dichotomy between sacred and secu-
Accounting education needs to encom- lar element. Conversely, According to
pass of moral ideology to produce ethi- Ahmad (1930: 32), from the Islamic
cal professionals. Grandfield et al. worldview and ethics, people cannot
(2008) argued that individual’s ethical behave irresponsibly with the goods,
ideology will affect the commitment equipment, land and talents entrusted to
level of professional. Emphasizing ideal- them, because they will hold to account
ism rather than relativism should be pre- for them (Gambling and Karim, 1991:
ferred for a universal set of rules and 34). The following areas may need to be
standards. In which the former is mainly addressed by the application of Islamic
focuses on human welfare rather than ethics.
individual’s concern in the latter This is
what AAOIFI (Accounting and Auditing Stakeholders Perspectives
Organizations of Islamic Financial Insti- Several criteria are of relevance when
tutions) has incorporate in the code. Is- examining Islamic ethical system from a
suing code of ethics inspired from Is- stake holders’ perspective : justice and
lamic values has been an obviously balance, trust and benevolence (Beekun
prominent step to manifest Islamic eth- and Badawi, 2005). Accounting infor-
ics into the practice. The code provides mation must be transparent and provide
not only principle of ethics for the ac- full disclosures in reporting business
countants, but also Shari’ah foundations transaction in permissible (halal) busi-
of the ethics. ness ventures; fair wages to employees;
provision of good and quality products
Providing both Islamic divine values to customers.
inserted to the material and the concept
of maslahah as the basics of ethical de- The Agency Theory
cision making process can be consider- The philosophy of materialism and the
able contribution of Islamic ethics to- more specific doctrine of economic ra-
ward accounting education. As the re- tionalism embedded in current account-
sult, this may lead to producing ethical ing practiced was adopted from western
accountants. accounting systems entails is diametri-
cally opposed to the value systems of the
whole society. Some of the assumptions
The Significant Contribution of that underlie theories of the purpose of
Islamic Ethics in Several Areas accounting information in western soci-
ety are at variance of Islamic teaching. A
Many studies and publications uncov- current example is an agency theory, the
ered a whole array of ethical issues relat- core of which is self interest (Baydoun
ing to misuse of proprietary information, and Willet,1997).
abuse of company expenses account,
plant closing and layoffs, misuse of The Islamic view is that profit must be
company assets, receiving inappropriate accompanied with the risk of loss and
gifts, endorsement of unauthorized pay- that relationship between capital pro-
ment and many more. These unethical vider and entrepreneur should be based
and immoral practices in the current ac- on the principle of partnership. Islam


recognizes the fact that the owners/ fi- violate the concept of Islamic ethics.
nanciers of a firm have the right to make Specifically, the two general objectives
a profit, but not at the expense of the underlying the preparation of Islamic
claims of various other stakeholders corporate reports are; social accountabil-
(Beekun and Badawi, 2005). These ap- ity and full disclosure. The establish-
plications provide an indication of treat- ment of the justice to community re-
ing others with virtuous dealings. This quired an accounting system to inform
kind of action will spread a strong tie of and disclose to the society that is explic-
trust, brotherhood and cooperation that itly orientated to the public interest
can level out the problem of greedy and ( Istislah). This principle will end the
injustice which are prevailing in princi- day of SPEs practice.
pal and agent relationship.

Earning Management 4. Conclusion
The earning management decision takes
place when the accountant chooses the The importance role played by profes-
reporting methods and the estimates that sional accountants as a moral agent, ne-
do not accurately reflect their actual cessitates that being ethical and moral in
performance. Immoral accountants can the accounting practices should be the
use a variety of techniques to manage rule, not an exception. The professional
earnings for many different reasons. For accountants must be skilful at imple-
example, the business that approaching menting moral judgements, so that s(he)
debt covenant violations are more likely can consider the welfare of those af-
to manage earnings. This practices start fected by (her) his action. As explained
from the abuse of wealth by the wealthy in the paper, enhancement in ethical be-
people to exercise improper pressure haviour among professional accountant
over the needy, so as to retain the benefit is probably beyond the scope of code of
of their wealth, they simply transact the ethical conduct. The paper advocates the
receipt and payment of interest on loans use of Islamic ethical principles to help
provided to needy . This unfair dealing implant moral value in potential and ex-
is absolutely forbidden in Islam which isting professional accountant. As such,
simply does not accept the concept of upon the realisation that the ultimate
the ‘time value for money’(Gambling measure of worldly life is not fame and
and Karim, 1991: 34). fortune but, it determined by moral char-
acter and personal integrity, the element
Off Balance Sheet Items of moral sensitivity is expected to in-
It is the practice legitimately allowed in crease.
conventional accounting. It is often used
to make a business look like it has far Thinking about why people should be-
less liabilities or debts than it actually have nicely and to whom they will be
does. Some types of off-balance-sheet accountable for their acts directs to the
accounting move debt to a newly created fundamental orientation of life, the Is-
company called special purpose entities lamic belief. Profound thinking and rea-
(SPEs) and are also known as variable soning of the creation of the universe,
interest entities (VIEs) without having to who created it, about the prophets and
report it in balance sheet. This practice the truthfulness of the messages will


answer the problem. Thus, taking a com- to realized the intended purposes.
prehensive look into the Islamic belief
which is inseparable from Islamic view
of responsibility leads to the ethical References
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