The beauty of accounting based on Islamic principles is that it not only deals with the valuation... more The beauty of accounting based on Islamic principles is that it not only deals with the valuation but also deals with an inbuilt accountability mechanism. Generally the accounting should be able to perform roles like keeping safe custody of interests, certifying true and fair view of business, enabling accountability and providing reliable information for successful decision making to all the stakeholders. In this context there are three main issues with respect to present system of setting accounting standards. These are undue pressures of certain groups in setting these standards, no role of owners in setting these standards, and flexibility/discretion in applying these standards which may lead to subjectivity. These may results in incorrect valuation of business transactions, increasing management discretion which in return will increase corporate governance issues including incorrect financial reporting, earning management and limiting decision making ability of the stakeholders. In order to overcome to this situation there is an urgent need to revamp the accounting theory in such a way that when it is put into practice it performs its due role as being, discussed here. The best way to correct this situation is to develop a new accounting theory based on Divine guidance. In this background, the Islamic principles of "Amanah" (Custody) (Amer2007), "Shahadat" (Testimony), (Amer, 2008) "Shura" (Counseling) (Amer, 2012) and settlement in "Bay" (business transaction) (Amer, 2013) can lay down a solid foundation for a new accounting theory. In Islam the concept of AI-Adl and AI-Ihsan are leading and guiding principles. In this paper an effort has been made to look into that how these two concepts can be applied to accounting theory.
It is increasingly believed that the shareholders have lost control over their wealth in the hand... more It is increasingly believed that the shareholders have lost control over their wealth in the hands of management. As a consequent there is a need for an effective and efficient monitoring environment which can be materialized through active and effective participation of shareholders in policy making and major decision making. In this background, the purpose of this paper is to search for a new form of business organization in which the rights of all the stake holders are secured. "Mudarabah" is a basic mode of Islamic finance in which one party rabb-ulmal (owner) provide capital to the mudarib (manager) to run business within a given paradigm. Here we are focusing on the point that how this concept can be applied in the context of corporate governance issues. Through applying this concept, much debating issue of activism of share holders can be addressed to a great extent. In addition the concept of limited liability can also be refined. As per teaching of Islam even the death of debtors can not write off the right of repayment of debt to the creditors. It may emerge into a new paradigm of corporate governance as the concept may leads to a major shift in principal-agent relationship. The concept can be successfully implemented either to structurally change the corporate form of business organization or make the way for a new form of business organization. However, there would be a need to form a global body to oversee and implement the recommendations. It will also require extensive legislation by the countries.
The beauty of accounting based on Islamic principles is that it not only deals with the valuation... more The beauty of accounting based on Islamic principles is that it not only deals with the valuation but also deals with an inbuilt accountability mechanism. Generally the accounting should be able to perform roles like keeping safe custody of interests, certifying true and fair view of business, enabling accountability and providing reliable information for successful decision making to all the stakeholders. In this context there are three main issues with respect to present system of setting accounting standards. These are undue pressures of certain groups in setting these standards, no role of owners in setting these standards, and flexibility/discretion in applying these standards which may lead to subjectivity. These may results in incorrect valuation of business transactions, increasing management discretion which in return will increase corporate governance issues including incorrect financial reporting, earning management and limiting decision making ability of the stakeholders. In order to overcome to this situation there is an urgent need to revamp the accounting theory in such a way that when it is put into practice it performs its due role as being, discussed here. The best way to correct this situation is to develop a new accounting theory based on Divine guidance. In this background, the Islamic principles of "Amanah" (Custody) (Amer2007), "Shahadat" (Testimony), (Amer, 2008) "Shura" (Counseling) (Amer, 2012) and settlement in "Bay" (business transaction) (Amer, 2013) can lay down a solid foundation for a new accounting theory. In Islam the concept of AI-Adl and AI-Ihsan are leading and guiding principles. In this paper an effort has been made to look into that how these two concepts can be applied to accounting theory.
It is increasingly believed that the shareholders have lost control over their wealth in the hand... more It is increasingly believed that the shareholders have lost control over their wealth in the hands of management. As a consequent there is a need for an effective and efficient monitoring environment which can be materialized through active and effective participation of shareholders in policy making and major decision making. In this background, the purpose of this paper is to search for a new form of business organization in which the rights of all the stake holders are secured. "Mudarabah" is a basic mode of Islamic finance in which one party rabb-ulmal (owner) provide capital to the mudarib (manager) to run business within a given paradigm. Here we are focusing on the point that how this concept can be applied in the context of corporate governance issues. Through applying this concept, much debating issue of activism of share holders can be addressed to a great extent. In addition the concept of limited liability can also be refined. As per teaching of Islam even the death of debtors can not write off the right of repayment of debt to the creditors. It may emerge into a new paradigm of corporate governance as the concept may leads to a major shift in principal-agent relationship. The concept can be successfully implemented either to structurally change the corporate form of business organization or make the way for a new form of business organization. However, there would be a need to form a global body to oversee and implement the recommendations. It will also require extensive legislation by the countries.
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