Issues in Social and Environmental AccountingVol. 5, No. 1/2 December 2011Pp 124-137          THE CONTRIBUTION OF ISLAMIC ...
R.A. Yunanda, N. Abd. Majid / Issues in Social and Environmental Accounting 1/2 (2011) 124-137   1251. Accounting in Curre...
126      R.A. Yunanda, N. Abd. Majid / Issues in Social and Environmental Accounting 1/2 (2011) 124-137that those took pla...
R.A. Yunanda, N. Abd. Majid / Issues in Social and Environmental Accounting 1/2 (2011) 124-137   127the existing code of c...
128      R.A. Yunanda, N. Abd. Majid / Issues in Social and Environmental Accounting 1/2 (2011) 124-137context. The incorp...
R.A. Yunanda, N. Abd. Majid / Issues in Social and Environmental Accounting 1/2 (2011) 124-137   129      ers             ...
130      R.A. Yunanda, N. Abd. Majid / Issues in Social and Environmental Accounting 1/2 (2011) 124-137whether honesty, di...
R.A. Yunanda, N. Abd. Majid / Issues in Social and Environmental Accounting 1/2 (2011) 124-137   131of accountability. A m...
132      R.A. Yunanda, N. Abd. Majid / Issues in Social and Environmental Accounting 1/2 (2011) 124-137community.         ...
R.A. Yunanda, N. Abd. Majid / Issues in Social and Environmental Accounting 1/2 (2011) 124-137   133ogy, but also a way of...
134      R.A. Yunanda, N. Abd. Majid / Issues in Social and Environmental Accounting 1/2 (2011) 124-137recognizes the fact...
R.A. Yunanda, N. Abd. Majid / Issues in Social and Environmental Accounting 1/2 (2011) 124-137   135answer the problem. Th...
136      R.A. Yunanda, N. Abd. Majid / Issues in Social and Environmental Accounting 1/2 (2011) 124-137      spective”, Jo...
R.A. Yunanda, N. Abd. Majid / Issues in Social and Environmental Accounting 1/2 (2011) 124-137   137    tion and Ethical V...
International Journals Call for PaperThe IISTE, a U.S. publisher, is currently hosting the academic journals listed below....
Upcoming SlideShare
Loading in …5

11.vol call for paper_no 1-2_ pp. 124-134


Published on

Published in: Technology, Business
1 Like
  • Be the first to comment

No Downloads
Total views
On SlideShare
From Embeds
Number of Embeds
Embeds 0
No embeds

No notes for slide

11.vol call for paper_no 1-2_ pp. 124-134

  1. 1. Issues in Social and Environmental AccountingVol. 5, No. 1/2 December 2011Pp 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, MALAYSIAAbstractThe professional ethics of accountants is an important issue directly relating to the integrity ofthe profession and its ability to secure the public trust. The fraudulent activities in accountingfield indicate the failure of accounting education as the beginning stage of the practice. It isperceived 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 educationseeks 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 andalso 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 inthe individuals. Islam with its divine values plays the notable role to embed cognitive ethicalvalues. It emphasizes on the unity of God, the accountability to God and the concept ofmaslahah (public benefits) to be the foundations of ethics. Incorporating Islamic ethics into thesystem will be a significant contribution towards generating ethical accounting education. Thispaper attempts to elucidate how the Islamic ethics contribute its role towards ethicalaccountants as the products of accounting education.Keywords: management accounting, health, savety, environment, performance, supply chain,Indonesia1 Rochania Ayu Yunanda is Lecturer of Islamic Accounting Department, Sekolah Tinggi Ekonomi Islam Tazkia,Tel.:0878 7071 0101, Email: Norakma bt. Abd. Majid is Academic fellow of Accounting and Finance Department, Universiti MalaysiaTerengganu*) We would like to take this opportunity to acknowledge my appreciation to everyone who has contributed in thecompletion of this paper. We would like to convey our sincere gratitude and acknowledgement to our colleagues andall the lecturers of Sekolah Tinggi Ekonomi Islam Tazkia and Universiti Malaysia Terengganu (UMT) who supportedand motivated us to write. We truly appreaciate ISEA and ICSEARD team who have given us a golden opportunity sothat our paper can be published.
  2. 2. R.A. Yunanda, N. Abd. Majid / Issues in Social and Environmental Accounting 1/2 (2011) 124-137 1251. 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 toAccounting Practice as A Product of prepare for the job which will pay themEducation with the largest amount of money and be best fitted to their skills.Formal education is everywhere ac-knowledged as the principal channelthrough which ideas and values of the Problems of Lack of Ethics Educationruling elite may best be communicatedto 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 potentialsupposed to produce high-quality stu- professional accountants with a frame-dents as the output. Education can be work of professional values, ethics andspurred to reach this ideal by addressing attitudes for exercising professionalthe issue of values to develop the critical judgement and for acting in an ethicaland reflective thinking and also the manner that is in the best interest of themoral view. public and the profession (Young and Annisette, 2009, pp. 94). Lacking ofHowever, education at schools are still these elements resulted the overwhelm-based on the traditional idea that science ing accounting scandals and frauds inis scientific knowledge itself and insu- the global business industries. The caselated from moral values and ethics. Sci- of fraud, falsification and deliberateence is not value-free or neutral activity; overstatement of companies’ accountit is influenced by its cultural, political, and other professional misconduct haveand economic context, i.e. by contextual resulted financial institutions, public andvalues (Verhoog, 1985, pp. 102). Devel- private companies have either been de-oping from an industrialized culture clared distressed or completely closemakes accounting as a part of science down (Bakre, 2007). The collapse of bigmingled with the secular values. companies such as Enron, WorldCom and Global Crossing in the USA andThis secular oriented and pragmatic edu- Parmalat in Italy has overthrown thecational 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 effectaffected the accounting practice as the upon countries’ economic condition asresult of accounting education. Hassan well as society at large, where a massive(1996, pp. 34) stated that an educational unemployment and poverty problem arephilosophy and system grounded in a core concerns.secularistic ideas (pragmatism, human-ism, etc) tend to over-emphasize the idea Besides that, fraudulent activities haveof self-expression – as in a progressive had devastating effects on the financialeducation – and so called education for markets and investors. People inferredcitizenship, or for a particular profes-
  3. 3. 126 R.A. Yunanda, N. Abd. Majid / Issues in Social and Environmental Accounting 1/2 (2011) 124-137that 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 wellpublic is a severe threat to the account- implemented in the practice. Hookering profession. People start to blame (2001, pp. 38) argued that the code mayeducational system as it failed to insert be a way of putting added pressure onmoral values into the system. It bring people to do things that are in the best ofabout, the public loss their con¿dence in that particular company or due to corporate scandals. The This indicates that the adoption of codeadjustment to these harms require for a of ethics needs to be articulated by thereorientation of ethics education to be organization in its routine and dailyincorporated in educational system. activities performed by its members. Such practice is regarded as a kind ofAs anticipated by Jacking et al. (2007), training to educate member getting usedaccounting education system is consid- of the code and consequently leading toered as one of potential remedy to ad- the enhancement of ethical practices indress 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 codetion have been found to be insufficient is to develop and improve the ethicalin which he emphasized that the part of dimensions of practice. It serves as ahumanizing accountants is still lacking. framework for ethical practice whichThese trends place higher challenges may helps professionals to do the rightbefore the educators of accountant to things. Although code of ethical conductdevise 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, powergoing ethical guidance of professional and position become the lies in their Code of Ethics.The code is designed as to enforce and A number of researchers highlighted theensure that the professionals will act failure of AICPA code of ethics to ad-ethically and provides guidance of a dress certain issues in accounting andhigh quality of accounting services. The fail to accomplish the ethical awarenesspresence of ethical code can serve as a among the practitioners who expected tocontrol mechanisms and sanctions for comply with the Code. In Malaysia,professions. It is anticipated that the Bakar et al., (2003) conduct a study andcode could moderate or decrease the found that the By-Laws has nodeleterious effect of ethical problems significant influence over theamong practitioners. Thus, it facilitates practitioner’s action and behaviour duethe creation of an ethical environment in to the fact that most of them wereaccounting practices as the reference to ignorant of the law. This indicates thatthe code could enhance the ethical
  4. 4. R.A. Yunanda, N. Abd. Majid / Issues in Social and Environmental Accounting 1/2 (2011) 124-137 127the 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 personcomprehensive and ideal guidelines or groups, but the content of these stan-which can guarantee it enforceability to dards is fundamentally shaped by theguide 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 moralethics is not the best way to improve character and ethical reasoning abilityethical behavior (Carroll, 1998) unless it which is beyond the coverage in thehas been developed based on suitable ethical code of conduct. The concept ofpolicy and ethical code to prevent morality is defined by Irwin and Fryunethical issue repeatedly arise. (2007) as a product of the way we think about our contact and associations withMore importantly, it has been recog- other persons and groups andnized that ethics and ethical behavior is (hopefully) the consideration of theirunderpinned 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 clarifymost widely known work in the area of within the context of relationships bothmoral 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 ourIn general, higher levels of moral rea- understanding of the consequences ofsoning indicate higher level of ethical particular courses of action”. Thus, is-practices. sues of ethic are inescapably involve a discussion of values and belief withoutOn directly engaged to serve the public which ethical or moral positions couldthrough the professional judgement on not be legitimately evaluated and re-matters related to audit, accounting, tax vised.and consulting services , accountantsshould realize their roles as moralagents. They have to consider account- 2. Ethics and Religioning as an activity containing significantmoral dimensions. They are expected to The Role of Religion in Promotinghave a broader sight that the ethical code Ethicsshould be more than just code. The codeprovides a point of reference to address In view of the definition presentedthe concerns of ethical conduct without above, the present paper takes a viewenforcement 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
  5. 5. 128 R.A. Yunanda, N. Abd. Majid / Issues in Social and Environmental Accounting 1/2 (2011) 124-137context. The incorporation of the reli- ethical orientation is closely resembledgious into the code of ethics for the pro- to accounting ethics based on Islamicfessionals is expected to provide a worldview. In that, the focus of idealismmeans of countering the deficiencies in is more on human welfare whichcurrent Code of Conduct that purely em- mirrored the core values of Islamicbedded on concept of rationalism. This model of normative business ethics.statement is advocated as it has beenclaimed by previous researchers that thereligion may indirectly have impact The Ethics and Business.upon matters of accounting both in termsof economic behaviour and other cul- There is an increasing attention given totural values (Baydoun and Willet, 1997). ethics in the field of business. TheThe cultural value of western, usually spread of moral defects among thoseassociated with developed countries may who are in charge of business is a driverdiffer from Islamic culture, which is nor- to this move. The erosion of trust by themally resides in developing countries. business’s stakeholders is mainly due toThis difference may influence the per- the immoral behaviour of the business’sceived 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 maysome metascheme of which some kind negatively affect the reputation of theof faith is also an integral business and subject to legal and moralpart’ (Gambling and Karim, 1991:13). sanctions.Faith represent as a core factor in thereligion have identified by Keller, 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 asAccordingly, 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 individualslead (his)her actions and decisions. acting in professional capacity that pre-Lower level of religiosity was associated scribed required behaviour within thewith an inclination to engage in context of professional practices such asunethical behaviour (Keller,, accounting, medicine, law and engineer-2007). A study conducted by Greenfield ing. The following values are (2007), suggests that there is a the principles of personal and profes-significance relationship between an sional ethics respectively;individual’s ethical orientation anddecision 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-
  6. 6. R.A. Yunanda, N. Abd. Majid / Issues in Social and Environmental Accounting 1/2 (2011) 124-137 129 ers ment mechanisms in Islamic ethics be-y Trustworthiness and honesty gin with individual. Realizing that everyy Willingly compliance with the individual is accountable for their deeds law is the most powerful enforcementy Justice and fair mechanism, more so than any regulatoryy Refusing to take any unfair advan- and government control. tagey 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 any Full disclosures ;Openness essence of Islamic Shariah rules andy Confidentiality principles developed by the Accountingy Due diligence and Auditing Organizations of Islamicy Fidelity to professional responsi- Financial Institutions. Critique by Abdul bilities Rahman (2003) that the AAOIFI codey 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 theEnforcement Mechanism Islamic ethical principles into the Is-Currently, the Code of conducts by regu- lamic financial institutions. However, helators 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 materialethically. Unfortunately, as revealed by to explain and expose students to theprevious research, it claimed that the attributes of ethical awareness and prin-code of ethics have little or insignificant ciples from an Islamic perspective. Moreinfluence on the behaviour of account- researches are required to explore theants. As such, the code are never a factor ways to put it in practical use as a guideor a source of reference in solving ethi- to Muslim accountants and auditors incal 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 ethicalcode, absence of actual guidelines on to solve conflict and not havinglegal standing to subject offenders toprosecution in the court of law (Bakar et 3. The Relationship between Islamical., 2003). Ethics, Ethical Behaviour and Ac- counting Practices.Obviously, the code of conduct is not aprime solution toward ethical accounting Human interaction is guided by generalpractices. 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 “universalethical education to complement them principles”. In general, people are able(Abd Rahman, 2003). According to Bee- to differentiate between good and badkun and Badawi, (2005) the enforce- things. For instance, they agree to judge
  7. 7. 130 R.A. Yunanda, N. Abd. Majid / Issues in Social and Environmental Accounting 1/2 (2011) 124-137whether honesty, dishonesty, kindness, in its generic sense, relating to one’sand arrogance are good or evil. They can obligation to “account” to God on alljudge others based on their acts. Accord- matters pertaining to human effort foringly, 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 areIslamic Ethics obliged to do what Allah asks and avoid what He forbids.Ethics education concerns with formingand developing values and those with Accountability and liability refer to theactually changing behaviours. As com- aspects of duty and obligation, whereaspared to the west, Islam has competitive blame also involves sanctions (Bierhoffvalues 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 beingthree concepts of Islam and also the pil- “obligated to give an account” or beinglars 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 thingssystem encompass justice and balance, as well as matters left to choice. Theretrust and benevolence. Having deep in- are consequences behind those thingssight in the concept of tawhid, account- called reward and punishment. Account-ability, and benevolence as the concrete ability can be concluded as a concept inacts 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, enforcementparamount essence of Islam. Adherence and liability to do the commands, andto the concept of tawhid (the unity of blameworthiness in case of disobedi-God) and submissiveness to Allah deter- ence.mine individuals’ morality. Believingthat 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 principlesdience 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 establishedHisab or “account” is the root of ac- rules. Conversely, Islamic perspectivecounting, accountable, and accountabil- highlights different concept of account-ity. According to Lewis (2001), the ref- ability. The principle of vicegerency oferences in the holy Quran are to account humanity on earth increases the essence
  8. 8. R.A. Yunanda, N. Abd. Majid / Issues in Social and Environmental Accounting 1/2 (2011) 124-137 131of accountability. A man is accountable ethics perspective can provide some in-to Allah above the accountability to his sights into the process of developing asociety. However, accountability to Al- more humanized and ethical account-lah cannot be separated from account- ants.ability to His fellow men (habluminallahand habluminannaas). Habluminannaas(relationship among human beings) The Concept of Maslahah (Publicshould 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 professionThus, every individual performs and has been criticized as it mainly protectsobeys the rules because of accountability its self interest rather than the interestsin 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 toafter. infuse ethical aspects into its system. Accounting education should be filteredRecognizing that the universe did not from the values which make it lack ofcreate itself goads muslims to believe moral inputs. It should be purified bythat God Almighty is the creator who incorporating ethics in its them and not even the smallest Islam introduces the concept ofthing is missed from His oversight. It maslahah as the foundation ofstimulates and encourages due care of accounting education to educate thetheir 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 orthe 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 concernble 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 anpose and end of ethics in Islam is ulti- absolute sense. The other significantmately for the individual; what the man meaning of maslahah according toof 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 considerationsand 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, Abdulobtaining Allah’s pleasure, every indi- Rahman (2003) proposed that Islamicvidual should tend to be benevolent. Per- legal principles of maslahah as a basisforming good deeds and doing benefits of setting priorities for the work to befor others imply the concept of human- undertaken by the accountants.ity. Rahman (2003) in his paper sug- Therefore, accountants are expected togested that the Islamic worldview and feel socially responsible for others in the
  9. 9. 132 R.A. Yunanda, N. Abd. Majid / Issues in Social and Environmental Accounting 1/2 (2011) 124-137community. (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 beyonddifferent perceptions about individual that which is expected to occur natu-and societal interests. Nonetheless, Islam rally. McPhail (2001) also suggested thatemphasizes the welfare of the commu- one way to introduce emotional commit-nity over individual rights. Islam is ment into accounting education isgenerally predicated on benefits to the through business ethics education. Anindividual and the community, and its ethical curriculum insinuates an objec-laws are designed so as to protect these tive to help students building their moralbenefits 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 asituation 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 topriority to the question of social welfare increase the cognitive moral capabilityand 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 maythrough the concept of maslahah aims at differ from other forms of accountingcontrolling 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 reasoningIntegrating Accounting Education ability and strong principles regarding towith Islamic Ethics the reasons, the firm moral commitments should be established inside the ethicsIn 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 becomemorality. It has searched for the effec- an naturally being ethical. McPhailtive ways of producing fully moral (2001) has contended that accountinggenerations. To reveal the commitment education should contain an ethics com-toward morality, ethics should be em- ponent which attempts to engender abedded 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, Islamichas increasingly become an important moral education has the potential frame-component of accounting education. work to develop a sense beyond moralThe ethical curriculum is one that helps obligation to deal with ethical conflictsstudents develop a moral point of view since Islam is not only a religious ideol-
  10. 10. R.A. Yunanda, N. Abd. Majid / Issues in Social and Environmental Accounting 1/2 (2011) 124-137 133ogy, 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 topass of moral ideology to produce ethi- Ahmad (1930: 32), from the Islamiccal 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 tolevel of professional. Emphasizing ideal- them, because they will hold to accountism 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 bestandards. In which the former is mainly addressed by the application of Islamicfocuses on human welfare rather than ethics.individual’s concern in the latter This iswhat AAOIFI (Accounting and Auditing Stakeholders PerspectivesOrganizations of Islamic Financial Insti- Several criteria are of relevance whentutions) has incorporate in the code. Is- examining Islamic ethical system from asuing code of ethics inspired from Is- stake holders’ perspective : justice andlamic values has been an obviously balance, trust and benevolence (Beekunprominent step to manifest Islamic eth- and Badawi, 2005). Accounting infor-ics into the practice. The code provides mation must be transparent and providenot only principle of ethics for the ac- full disclosures in reporting businesscountants, but also Shari’ah foundations transaction in permissible (halal) busi-of the ethics. ness ventures; fair wages to employees; provision of good and quality productsProviding both Islamic divine values to customers.inserted to the material and the conceptof maslahah as the basics of ethical de- The Agency Theorycision making process can be consider- The philosophy of materialism and theable 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 westernaccountants. accounting systems entails is diametri- cally opposed to the value systems of the whole society. Some of the assumptionsThe Significant Contribution of that underlie theories of the purpose ofIslamic Ethics in Several Areas accounting information in western soci- ety are at variance of Islamic teaching. AMany studies and publications uncov- current example is an agency theory, theered a whole array of ethical issues relat- core of which is self interest (Baydouning 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 becompany assets, receiving inappropriate accompanied with the risk of loss andgifts, endorsement of unauthorized pay- that relationship between capital pro-ment and many more. These unethical vider and entrepreneur should be basedand immoral practices in the current ac- on the principle of partnership. Islam
  11. 11. 134 R.A. Yunanda, N. Abd. Majid / Issues in Social and Environmental Accounting 1/2 (2011) 124-137recognizes 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 objectivesa profit, but not at the expense of the underlying the preparation of Islamicclaims 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 informkind 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 interestcan level out the problem of greedy and ( Istislah). This principle will end theinjustice which are prevailing in princi- day of SPEs practice.pal and agent relationship.Earning Management 4. ConclusionThe earning management decision takesplace 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 inperformance. Immoral accountants can the accounting practices should be theuse a variety of techniques to manage rule, not an exception. The professionalearnings 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 explainedfrom the abuse of wealth by the wealthy in the paper, enhancement in ethical be-people to exercise improper pressure haviour among professional accountantover the needy, so as to retain the benefit is probably beyond the scope of code ofof their wealth, they simply transact the ethical conduct. The paper advocates thereceipt and payment of interest on loans use of Islamic ethical principles to helpprovided 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 ultimatethe ‘time value for money’(Gambling measure of worldly life is not fame andand Karim, 1991: 34). fortune but, it determined by moral char- acter and personal integrity, the elementOff Balance Sheet Items of moral sensitivity is expected to in-It is the practice legitimately allowed in crease.conventional accounting. It is often usedto 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 bedoes. Some types of off-balance-sheet accountable for their acts directs to theaccounting 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 andreport it in balance sheet. This practice the truthfulness of the messages will
  12. 12. R.A. Yunanda, N. Abd. Majid / Issues in Social and Environmental Accounting 1/2 (2011) 124-137 135answer the problem. Thus, taking a com- to realized the intended purposes.prehensive look into the Islamic beliefwhich is inseparable from Islamic viewof responsibility leads to the ethical Referencespractices and the understanding of pri-mary accountability that is accountabil- Abdul Rahman, A. R. (2003), “Ethics inity to the God. Accounting Education: Contribution of the IslamicThe regulators and leaders in accounting Principle of Maslahah”, IIUMprofessions have a responsibility to in- Journal of Economics andculcate the ethical behaviour and per- Management, Vol. 11 No. 1, pp.sonal integrity in practitioners and stu- 31-49.dents. The holism of Islamic ethics in- Accounting and Auditing Organizationscorporated in education and professional of Islamic Financial Institutionstraining programmes will gradually im- (AAOIFI). Code of Ethics for Ac-buing the good ethical mentality of pro- countants and Auditors of Islamicfessional accountants, hence providing Financial Institutions, 1998.them a foundation to deal with ethical Al-Safi, S. O. A. (1992).dilemma. “Accountability: A Comparative Study of Human ResponsibilityThe product of ethical accountants can between Islam and Man-Madegive a great contribution to project the Doctrine”. Kuala Lumpur: Darul-honest and accurate information by fikrwhich the important future decisions are Bakar M.A., Maisarah M. S. and Ainunbased on. As a matter of fact, it is not A.M. (2003). “Ethics and the Ac-easy to develop societies where the Is- counting Profession in Malaysia”,lamic values, moral and ethical princi- National Accounting Researchples are truly implemented in everys- Journal, Vol. 1, No.1.phere of life extended to accounting Bakre, O.M. (2007). “The unethicalpractices in business. Thus, enforcing practices of accountants and audi-ethics upon accounting students is cru- tors and the compromising stancecial to prepare graduates for the ethical of professional bodies in the cor-challenges awaiting them upon gradua- porate world: Evidence from cor-tion. Since public relies on schools and porate Nigeria”, Accounting Fo-universities to teach ethical behavior, rum, Vol. 31, pp. 277-303.enriching ethics in accounting education Baydoun, N. and Willet, R. (1997).and improving the moral behavior are “Islam and Accounting: Ethicalviewed as the ways to restore the credi- Issues in the Presentation of Fi-bility of the profession. Minimally, the nancial Information ”, Account-society expects the education system to ing, Commerce & Finance : Theproduce professionals of capable in rec- Islamic Perspective, Vol. 1 No. 1,ognizing and responding to emerging pp. 1 - 25.ethical issues arising in the current ac- Beekun, R. and Badawi, J. (2005),counting practices. Therefore, it is “Balancing ethical responsibilitybroadly accepted that ethics should be among multiple organizationalincorporated into accounting curriculum stakeholders: The Islamic per-
  13. 13. 136 R.A. Yunanda, N. Abd. Majid / Issues in Social and Environmental Accounting 1/2 (2011) 124-137 spective”, Journal of Business Jackling, B., Cooper, B. J., Leung, P. Ethics, Vol. 60, pp. 131-145. and Dellaportas, S. (2007),Bierhoff, H. W. and Auhagen, A. E. “Professional accounting bodies’ (2001). “Responsibility as A Fun- perceptions of ethical issues, damental Human Phenomenon”. causes of ethical failure and ethics Responsibility: The Many faces of education”, Managerial Auditing A Social Phenomenon. Routledge Journal, Vol. 22 No. 9, 2007, pp. Research International Series. PP. 928-944. 1-7. Kamali, M. H. (2007), Principles of Is-Carrol, R. (1998), “A Model for Ethical lamic Jurisprudence, Kuala Lum- Education in Accounting”, Gow- pur: Adiwarna Utama. thorpe, C. and Blake, J., Ethical Keller, (2007). “Do gender, educa- Issues in Accounting (Ed.), Lon- tional level, religiosity and work don: Routledge. experience affect the ethical deci-Er, M. (2008), “Corruption from the Is- sion making of U.S. account- lamic Perspective: Some recom- ants?”, Critical Perspectives on mendations for the MENA re- Accounting, Vol. 18, pp. 299-314. gion”, International Journal of Lewis, M. K. (2001). “Islam and Ac- Islamic and Middle Eastern Fi- counting”. Accounting Forum, nance and Management, Vol. 1 Vol. 25 No. 2. PP. 104 – 127. No. 1, 2008, pp. 31-51. Masud, M. K. (1995), Shatibi’sGambling, T.E., and Karim, R.A.A Philoshopy of Islamic Law, (1991). Business and Accounting Malaysia: Islamic Book Trust. Ethics in Islam. London: Mansell. McPhail, K. (2001), “The Other objec-Greenfield, A., Norman, C. and Wier, B. tive of Ethics Education: Re- (2008), “The effect of ethical ori- Humanizing the Accountancy entation and professional commit- Profession – A Study of Ethics ment on earning management be- Education in Law, Engineering, havior”, Journal of Business Eth- Medicine, and Accountancy”, ics, Vol. 83, pp. 419-434. Journal of Business Ethics, Vol.Hassan, M. K. (1996), Towards Actual- 34. izing Islamic Ethical and Educa- McPhail, K., Gorringe, T. and Gray, R. tional Principles in Malaysian So- (2004), “Accounting and theol- ciety, Selangor: Muslim Youth ogy, an introduction: Initiating a Movement of Malaysia. dialogue between immediacy andHooker, B. (2001), “Self-interest, ethics, eternity”, Accounting, Auditing & and the profit motive”, Business Accountability Journal, Vol. 17 Ethics, Cowton and Crisp, Oxford No. 3, pp. 320-326. University Press. Thorne, L. (2001), “Refocusing EthicsIrwin, K.S. and Fry, C.L. (2007). Education in Accounting: Exami- “Strengthening drug policy and nation of Accounting Students’ practice through ethics engage- Tendency to Use Their Cognitive ment: An old challenge for a new Moral capability”, Journal of Ac- harm reduction”, International counting Education, Vol. 19. Journal of Drug Policy, Vol. 18, Verhoog, H. (1985), “Science education pp. 75-83. in universities”, Science Educa-
  14. 14. R.A. Yunanda, N. Abd. Majid / Issues in Social and Environmental Accounting 1/2 (2011) 124-137 137 tion and Ethical Values, Switzer- Young, J.J. and Annisette, M. (2009). land: WCC Publications. “Cultivating imagination: Ethics,Wagner, R. B. (1989). “Accountability education and literature”, Critical in Education”. New York: Perspectives on Accounting, Vol. Routledge. 20, pp. 93-109.
  15. 15. International Journals Call for PaperThe IISTE, a U.S. publisher, is currently hosting the academic journals listed below. The peer review process of the following journalsusually takes LESS THAN 14 business days and IISTE usually publishes a qualified article within 30 days. Authors shouldsend their full paper to the following email address. More information can be found in the IISTE website : www.iiste.orgBusiness, Economics, Finance and Management PAPER SUBMISSION EMAILEuropean Journal of Business and Management EJBM@iiste.orgResearch Journal of Finance and Accounting RJFA@iiste.orgJournal of Economics and Sustainable Development JESD@iiste.orgInformation and Knowledge Management IKM@iiste.orgDeveloping Country Studies DCS@iiste.orgIndustrial Engineering Letters IEL@iiste.orgPhysical Sciences, Mathematics and Chemistry PAPER SUBMISSION EMAILJournal of Natural Sciences Research JNSR@iiste.orgChemistry and Materials Research CMR@iiste.orgMathematical Theory and Modeling MTM@iiste.orgAdvances in Physics Theories and Applications APTA@iiste.orgChemical and Process Engineering Research CPER@iiste.orgEngineering, Technology and Systems PAPER SUBMISSION EMAILComputer Engineering and Intelligent Systems CEIS@iiste.orgInnovative Systems Design and Engineering ISDE@iiste.orgJournal of Energy Technologies and Policy JETP@iiste.orgInformation and Knowledge Management IKM@iiste.orgControl Theory and Informatics CTI@iiste.orgJournal of Information Engineering and Applications JIEA@iiste.orgIndustrial Engineering Letters IEL@iiste.orgNetwork and Complex Systems NCS@iiste.orgEnvironment, Civil, Materials Sciences PAPER SUBMISSION EMAILJournal of Environment and Earth Science JEES@iiste.orgCivil and Environmental Research CER@iiste.orgJournal of Natural Sciences Research JNSR@iiste.orgCivil and Environmental Research CER@iiste.orgLife Science, Food and Medical Sciences PAPER SUBMISSION EMAILJournal of Natural Sciences Research JNSR@iiste.orgJournal of Biology, Agriculture and Healthcare JBAH@iiste.orgFood Science and Quality Management FSQM@iiste.orgChemistry and Materials Research CMR@iiste.orgEducation, and other Social Sciences PAPER SUBMISSION EMAILJournal of Education and Practice JEP@iiste.orgJournal of Law, Policy and Globalization Global knowledge sharing:New Media and Mass Communication EBSCO, Index Copernicus, UlrichsJournal of Energy Technologies and Policy Periodicals Directory, JournalTOCS, PKPHistorical Research Letter Open Archives Harvester, Bielefeld Academic Search Engine, ElektronischePublic Policy and Administration Research Zeitschriftenbibliothek EZB, Open J-Gate,International Affairs and Global Strategy OCLC WorldCat, Universe Digtial Library ,Research on Humanities and Social Sciences NewJour, Google Scholar.Developing Country Studies IISTE is member of CrossRef. All journalsArts and Design Studies have high IC Impact Factor Values (ICV).