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Gadjah Mada International Journal of Business – May-August, Vol. 18, No. 2, 2016

Gadjah Mada International Journal of BusinessVol. 18, No. 2 (May-August 2016): 207-230

* Corresponding author’s e-mail: [email protected]

ISSN: 1141-1128http://journal.ugm.ac.id/gamaijb

Accounting and Accountability in Religious Organizations:An Islamic Contemporary Scholars’ Perspective

Hasan Basri,1* A. K. Siti Nabiha,2 and M. Shabri Abd. Majid3

1 Department of Master Sciences in Accountancy, Graduate School, Universitas Syiah Kuala, Indonesia2 Graduate School of Business, Universiti Sains Malaysia, Malaysia

3 Faculty of Economics and Business, Universitas Syiah Kuala, Indonesia

Abstract: The purpose of this article is to discuss the views and opinions of contemporary Muslimscholars on organisational accountability in Islam. The paper is based on in-depth semi-structured inter-views and a review of the relevant documents. Eighteen interviews with twelve Muslim scholars, twoulamas (mufti), two organisational donors, and two relevant government officers, both in Indonesia and inMalaysia were, respectively, conducted. The Muslim scholars interviewed perceived that accounting andaccountability activities are not contradictory to Islamic teachings. The accountability relationship in Islamis viewed as not only fulfilling the legal requirements, but also fulfilling the relationship with God. Thefindings clearly indicate that a formal accountability mechanism is strongly encouraged in Islam, andfinancial reporting is viewed as essential in enhancing the accountability of Islamic religious organizations.Therefore, any organization dealing with community funds must demonstrate its financial accountabilityformally; i.e., through written reports. Thus, public or community trust in the organisation cannot replacethe accountability mechanism.

Abstrak: Tujuan studi ini adalah untuk mendiskusikan berbagai pandangan dan pendapat para cendikiawanMuslim kontemporer tentang akuntabilitas organisasional dalam Islam. Wawancara mendalam semiterstruktur dan reviu terhadap berbagai dokumentasi yang relevan telah dilakukan untuk mendapatkanpandangan para cendikiawan terhadap isu ini. Studi ini telah mewawacarai 12 orang cendikiawan Muslimbaik yang berdomisili di Indonesia maupun di Malaysia, dua orang dari lembaga donor, dua orang ulamadan dua orang pegawai pemerintahan terkait baik di Malaysia maupun di Indonesia. Penelitian ini mendapatibahwa responden yang diwawancarai tidak melihat kegiatan akuntansi dan akuntabilitas sebagai sesuatuyang bertentangan dengan ajaran Islam. Hubungan akuntabilitas dalam Islam tidak hanya ditujukan untukmemenuhi persyaratan legalitas, tetapi juga sebagai bagian pelaksanaan kewajiban kepada Allah SWT. Paracendikiawan Muslim sepakat bahwa mekanisme akuntabilitas formal harus diaplikasikan dalam setiaporganisasi keagamaan Islam dan mereka memandang bahwa laporan keuangan adalah sesuatu yang sangatpenting dalam meningkatkan akuntabilitas organisasi tersebut. Oleh karena itu, setiap organisasi yangmengelola dana publik harus menunjukkan akuntabilitas keuangan mareka secara formal, yaitu melaluilaporan tertulis. Jadi, kepercayaan publik dan masyarakat tidak dapat menggantikan mekanisme akuntabilitas.

Keywords: accounting; accountability; Islam; islamic accounting; religious organization

JEL classification: L31, M41, Z12

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Introduction

Research concerning accounting andaccountability in religious organizations hasincreased over the years (Carmona andEzzamel 2006; Laughlin 1988, 1990; Walker2002; Booth 1993; Rahim and Goddard1998). However, compared to the researchinto the accounting and accountability ofChristian organizations, especially the West-ern churches; similar studies on Islamic orga-nizations have been relatively scarce.

An extensive study into Islamic religiousorganizations was undertaken by Rahim andGoddard (1998). By using a qualitative ap-proach, Rahim and Goddard (1998) examinedthe accounting practices of two State Reli-gious Councils (SRC) in Malaysia, namely,ASRC and BSRC.1 The findings of their studyindicated that the use of sophisticated ac-counting techniques was minimal in the twoaforementioned Islamic religious organiza-tions. The role of accountants in those orga-nizations was meaningful only as an organi-zational practice, but did not enhance theiraccountability. Accounting was regarded asno more than a technology to record account-ing and financial information and the role ofthe accountant had been reduced to the roleof a bookkeeper. Nevertheless, there was noresistance to the use of modern managementtechniques such as accounting in both orga-nizations. Accounting is considered as a partof religious activities, and accounting systemsare seen as necessary for the effective func-tioning of organizations.

Previous studies on accounting havealso indicated that there is a relationship be-tween accounting and religions, including Is-

lam (Zaid 2000; Carmona and Ezzamel2006). Pomeranz (2004, p. 10) claimed that“Muslim interest in accounting issues can betraced back to the time of the ProphetMuhammad and his immediate successorsCaliphs Abu Bakar and Umar The Great.These two caliphs and al Waleed, a later ca-liph, created governmental audit functions.”Likewise, Hamid (2009) suggested that dur-ing the period of the Caliph Umar binKhattab, accounting and accountability werepracticed and they became a commitmentamong the Muslim leaders. According toHamid (2009, p. 2) “When an official was ap-pointed, an inventory of all his possessionswould have to be taken. If any increase inhis possessions or in his overall financial po-sition was noticed, then an inquiry into thematter would have to be made and the addedpossessions were usually confiscated.” Thisindicates that accounting and accountabilityhave been practiced and organized as a pro-fession since the early days of Islam.

Unfortunately, the influence of Islamupon accounting has been ignored in the lastfew decades. Only recently, this issue hasbeen intensively discussed by contemporaryIslamic scholars, who had most of their sci-entific studies and papers published in theJournal of Islamic Accounting and BusinessResearch, or similar publications. The increaseof interest into the issue of Islamic financeand accounting is very much related to thepromising development of Islamic financialinstitutions worldwide. Globally, Islamicbanking assets were estimated at around 17percent in 2013, while Islamic funds andsukuk led year-on-year growth with 14 per-cent and 11 percent respectively. In Asia,

1 In Malaysia, a State Religious Council (SRC) is established in every state with the purpose of managing Islamicaffairs, and particularly for managing Islamic taxes (Zakat). In their study, Rahim and Goddard (1998) investigated twoSRCs. To ensure the confidentiality of the investigated SRCs, they named them ASRC and BSRC.

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Malaysia and Indonesia have experience rapidgrowth in their Islamic financial institutions.Malaysia has the fastest growth in Islamic fi-nancial institutions, with an annual growthrate of 18-20 percent over the period from2009-2013, achieving a 40 percent marketshare of the Islamic banking industry. Withthis achievement in Islamic financing, Malay-sia has been labelled as one of the Islamicfinancial hubs of the world (Majid andKassim 2015). Similarly, the Islamic institu-tions in Indonesia, the most populous Mus-lim country in the world, have recorded con-siderable progress with 43.5 percent growthover the period from 2009–2013 (World Is-lamic Banking Competitiveness Report 2014-2015).

Compared to the fast growth of Islamicfinancial institutions in Muslim countries,particularly in Malaysia and Indonesia, re-search that examines the views of contem-porary Muslim scholars regarding accountingand the way organisations should show theiraccountability to their respective stakehold-ers has been relatively limited. Thus, thisstudy is timely in its exploration of the issueof accounting in Islamic organizations. Theviews of Muslim scholars on the role of fi-nancial reporting in enhancing the account-ability of Islamic religious organizations, andhow, and in what way, these religious organi-zations should be made accountable to theirstakeholders, needs to be explored to ensurea fuller understanding can be gained of theseorganisations’ accountability and the way thatit should be practiced.

As such, the aim of this paper is to in-vestigate how Muslim scholars view the roleof accounting and accountability, and theirimportance in Islamic religious organizations,especially in the Pesantren (Islamic boardingschools), and how these organizations shoulddemonstrate their accountability. It is ex-

pected that this study will make a significantcontribution to the existing literature on theaccounting and accountability of Islamicorganisation. One major question guides thisresearch: how do Muslim scholars, academi-cians and practitioners view the role of fi-nancial reporting in enhancing the account-ability of Islamic religious organizations?

The rest of this paper is organized asfollows: the next section presents a reviewof the literature regarding accounting andaccountability in Islam. Section 3 presents theresearch method, followed by section 4 whichprovides a discussion of the findings regard-ing the role of accounting and financial re-porting in enhancing accountability, to whomthe Islamic organizations should be account-able, and how accountability in Islam is to bedemonstrated. The role of trust (amanah) inincreasing accountability, as well as the Is-lamic belief system in the role of accountingare also discussed in this paper. Section 5 pro-vides the conclusions and implications.

Literature Review

Islam has formulated a comprehensivecode of ethics governing how financial trans-actions should be treated in both profit andnon-profit organizations. This is also rein-forced by Dandago (2007, p. 2) as he says“Islam is not just about a set of religious ritesand rituals; it is a complete and comprehen-sive package for fashioning human life and,at the same time uplifting the human spirit.”The concept of accounting in Islam is derivedfrom the Qur’an, which makes sample refer-ence to the principles of accounting (Murtuza2003). Muslims are required to record theirtransactions and such an emphasis on record-ing indicates the importance of fulfilling therights and obligations as stated in the HolyQur’an:

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O you who believe! When you contract a debtfor a fixed period, write it down. Let a scribewrite it down in justice between you. Let notthe scribes refuse to write as Allah has taughthim, so let him write. Let him [the debtor] whoincurs the liability dictate, and he must fearAllah, his Lord, and diminish not anythingof what he owes (Al-Baqarah: 282).

(Al-Hilali and Khan 1984, p. 65.)

The above verse illustrates the impor-tance of accounting, and applies to both busi-nesses and for-profit organizations, as wellas other organizations and individuals. Oneof the main objectives of accounting is toenhance accountability through providing afair information flow between the accountorand the accountee (Lewis 2006; Sulaiman2005). This means that accounting plays avery significant role in providing information,and consequently enables the fulfilment ofreligious duties such as the payment of zakat(a tithe) (Maali and Napier 2007). Thus, it isnot surprising that historically, accountantsand accounting have played a very significantrole in Muslim societies and have held highpositions in their governments (Zaid 2000).The terms Al-ameel, Mubasher, Al- Kitab orKatep Al-Mal were the common titles for theaccountant/book keeper/accounts clerk, andthey are used interchangeably in differentparts of the Islamic world. Historical hand-written books preserved in Turkey and Egyptreveal that accounting has been practiced andorganized as a profession since the earlystages of the Islamic state in Madinah. Assuch, Muslims’ interest in accounting issuescan be traced back to the time of the ProphetMuhammad.

Subsequently, Alwaleed the Caliph cre-ated governmental audit functions (Pomeranz2004). Moreover, it is claimed that bookkeep-ing was first practiced by Arabic merchants

(Lieber 1968 as quoted by Zaid 2005). Theuse of accountants was stated in Ahmad binAli Al-Kalkashandy’s handwritten bookwhich consists of ten volumes, whereby vol-ume 10 was dated 821 H (1418 AD). Thisbook provides evidence of the use of ac-counting and the employment of accountantsin Muslim societies (Zaid 2000). Islam hasdeveloped its own concept of accountabilityor Taklif, the term used by Al-Safi (1992)which means that all Muslims are account-able for their actions or inactions on the Dayof Judgment. Al Safi (1992, p. 81) notes that:

Every person is responsible for his own deedsand everyone has a ‘book’, a register of acts inwhich all deeds –small or great – are writtendown. God Almighty will bring all people tolife after death and bring them from their gravesso that each one of them will meet the result ofhis deeds, with reward or punishment.

The concept of accountability in Islamis derived from the Qur’an, which makes ref-erence to the principle of accountability.According to Askary and Clarke (1997) in theHoly Qur’an, as explained by Lewis (2006,p.2), “Allah repeats the word Hisab or ‘ac-count’ as the root of accountability, morethan eight times in different verses.” To ac-count, in its generic sense, relates to one’sobligation to ‘account’ to God in all matterspertaining to human endeavour, for whichevery Muslim is ‘accountable’. The similaritybetween hisab in Islam and account lies in theresponsibility of every Muslim to carry outtheir duties as described in the Holy Qur’an.Nahar and Yaacob (2011, p. 92) adds “Theword ‘account’ in Islam conceptually relatesto humans’ obligations as Allah’s representa-tives on earth (Khalifah - vicegerent) (Quran2:30; 35:39) and they have to ‘account’ toAllah in the hereafter on all matters pertain-ing to their worldly endeavours.”

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There is no doubt that control mecha-nisms play a very important role in ensuringan appropriate level of accountability prac-tices. However, these control mechanismsalone cannot ensure such improvements, asexplained by Parvez (2004, p. 9):

From the Islamic perspective, controls and lawsthat are to be employed for guiding personaland business conduct should be enacted to pro-tect minimum standards or as deterrents towrongdoing. More than this, there is a need tocultivate a higher consciousness, morals, and asense of accountability as a prerequisite sincethey develop an inner respect for societal valuesand laws.

Similarly, in a business enterprise bothits management and the providers of capitalare accountable for their actions both withinand outside the firm, including the commu-nity or society at large (Lewis 2006). Thestress on accountability is stated in variousverses of the Holy Qur’an, including:

Allah will not call you to account for that whichis unintentional in your oaths, but He will callyou to account for that which your hearts haveearned, and Allah is Oft Forgiving, Most-Forbearing (Al-Baqarah: 225).

To Allah belongs all that is in the heavensand all that is on the earth, and whether youdisclose what is in your own selves or conceal it,Allah will call you to account for it. Then Heforgives whom he wills and punishes whom Hewills. And Allah is able to do all things (Al-Baqarah: 284).

The above verses deal not only withpersonal accountability but apply to organi-zations as well. Consistent with the Islamicontology of a dual worldview, this world, andthe hereafter, Muslims have to ensure thattheir activities in the world are in line withIslamic principles. Every Muslim has an ‘ac-count’ with Allah, where all their actions,

whether good or bad, are recorded and ac-counted for. Indeed, this concept constitutesa core message of Islam, which applies to thepolitical, social, and individual realms. Assuch, the Islamic view of accountability isbased on two main themes, i.e.,. the conceptof Tawhid and the concept of ownership(Maali and Napier 2007). The first theme isthe concept of Tawhid, which implies totalsubmission to God’s will, and adherence tothe religious requirements in all aspects oflife. Muslims have to devote themselves toGod as the fundamental aspect of theirbehaviour. A Muslim is required to believe inthe things mentioned in the Hadith of theProphet and in the Holy Qur’an (Al Safi1992).

According to Hameed (2001, p. 9) “Theconcept of Tawhid [Unity and Oneness ofGod] implies that since there is only one Godwho is the creator and sovereign of all [hu-man and non humans], Islam [literally mean-ing submission] requires total submission tohim in all aspects of life.” It is argued thatthe concept of Tawhid has a broader conceptof accountability than that which exists inWestern societies. This is understandable asthe Muslim’s belief in God’s judgment im-plies that every act in this world will have tobe accounted for to Allah. In the Islamicframework, human beings are accountable toGod on the Day of Judgment for their con-duct over the course of their lives as statedin Al Qur’an: “…certainly, Allah is ever acareful account taker of all things” (An Nisa:86).

The second theme is the concept ofownership in Islam. God is the ultimate ownerof all things. Human beings are God’s ap-pointed caretakers on earth and what is givenis a trust from God. Hence, individuals areseen as trustees to whom God has given bless-ings in the form of goods, property and other

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less tangible assets (Lewis 2001, p. 110). Thisdoes not imply that Islam does not recognizeprivate ownership. Everyone has the right toown property, but ownership is not absolute.Ownership of property is a trust (amanah) tobe enjoyed conditionally upon the complianceof the shari’ah and remaining worthy of thetrust given. Therefore, a person holds prop-erty in trust for God, and should use thisproperty in accordance with God’s will.

Seen in this light, the concept of ac-countability in Islam is parallel with the con-cept of trustworthiness in which man, in hisor her judgment of his or her actions, is in-fluenced by the fear that he/she will be heldto account by Allah. This concept of trust-worthiness is one of the highly regarded vir-tues in Islam especially for those involved inbusiness, as the Holy Prophet says “A truth-ful merchant will be raised on the Day ofJudgment together with the truthful and themartyrs” (Asri and Fahmi 2004, p. 5). It isbelieved that the importance of accountabil-ity in Islam can be traced in the Holy Qur’anto the Sunnah, which contains God’s inspiredacts - the sayings of the Prophet Muhammad(Hamid et al. 1993) and the traditions of thesahabah (companions) as well as Islamic ju-risprudence. Therefore, every individual in anorganization is required to subscribe to ethi-cal and moral practices while carrying out theiractivities as they are seen as trustees.

In addition, Islamic accountants shouldattempt to enhance accountability throughproviding appropriate information and makeeconomic or social decisions through a moralframework. This means that an Islamic ac-countant plays a very significant role in pro-viding information to fulfil religious duties.Thus, accountability in Islam requires everyMuslim, including accountants, to make sure

that their activities are in compliance withIslamic rules (Abdul Rahim et al. 2012, p.128).

Good governance, the whole system ofrights, and the processes and controls estab-lished internally and externally over the man-agement of an entity, with the objective ofprotecting the interests of all stakeholders(Hameed 2007) is a necessary preconditionfor accountability in Islam. Good governanceis about how the organization is managed andcontrolled, and the manner employed to en-sure accountability and transparency as wellas trustworthiness (Aziz 2005, Asri andFahmi 2004). Currently, good governance ofeconomic and administrative aspects includesthe elements of increased public accountabil-ity and transparency, respect for and strength-ening of the rules of law and anti-corruptionmeasures (Rogers 2007). An organizationcommitted to the highest standards of ac-countability also needs to foster practices thatcreate an environment of transparency, ac-countability, and integrity.

An effective system of good gover-nance requires an effective system of finan-cial reporting, and an effective system of fi-nancial reporting requires good accountingand accountability practices, as at the insti-tutional level good governance is essentiallyabout how the organization is managed andcontrolled, and the manner of ensuring properaccountability for those in charge (Aziz2005). As far as Islam is concerned, the man-agement of the organization should performtheir duties with the objective of satisfyingthe needs of the stakeholders and Allah aswell. There should be no fraud, materialsmisstatements or other malaise in the organi-zation.

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It is argued that this thinking has beenoutlined and implemented among sahabah2 ofthe Prophet and previous Muslim scholars.This view is in line with the comments ofBadawi (2004, p. 4) in his speech:

Honesty and integrity; a passion for justice anda sense of fairness; love of the people, espe-cially the poor, and a willingness to listen totheir grievances; and a readiness to seek coun-sel from the wise and the learned, were someof the attributes of leadership and good gover-nance outlined by famous Islamic thinkers suchas al-Farabi and al-Mawardi, al- Ghazzaliand Ibn Khaldun.

From this point of view, accountabilityin Islam is broader than what is generally un-derstood in the traditional view of account-ability. In Islam, accountability is designed notonly for the stakeholders, but also toAllah.This clearly differentiates the Islamicaccounting model from that of the Westernmodel, where accountability to the stakehold-ers, such as the owners, is given priority. Asfar as Islam is concerned, the managementof the organization should perform their du-ties with the objective of satisfying the needsof the stakeholders as well as accounting toGod. Mordhah (2012, p. 242) notes “it goesbeyond actions or thoughts to include evenattention.” As such, accountability encom-passes both the vertical and the horizontalaccountability to God to other individualsand the community respectively.

Therefore, those in charge of economicresources are obligated to present an accountof the execution of their stewardship, irre-spective of whether the transactions and re-sources in question are those of a govern-ment, a business or non-profit organization,

as clearly shown by the saying of ProphetMuhammad “Each one of you is a guardianand each guardian is accountable for every-thing under his care” (Asri and Fahmi 2004,p. 4). However, there are questions that needto be answered, i.e., what form of account-ability should be shown by organisations? Doorganisations, especially non-profit organiza-tions, need to show formal accountability interms of providing financial reports, or canthis be shown informally just from oral evi-dence?

Even though a significant proportion ofsocial and economic activities are currentlyconducted within non-profit organizations,most studies of accounting practices to datehave concentrated specifically on accountingfor profit-making organizations (Lightbody2005). Various scholars have suggested thatreligious or faith-based organizations are clas-sified as belonging to the broader sector ofnon-profit organizations or civic societies. InIslam, civic societies are believed to be as oldas Islam itself (Bremer 2004; Epley 2004;Lightbody 2005). Moreover, accounting andfinancial reporting have long been viewed asvery important components in improving theaccountability of Islamic religious organiza-tions. However, only limited studies havebeen conducted in this area to discuss theneed for adopting Islamic accounting stan-dards (Sarea and Hanefah 2013, p. 72).

As accountability to God and the com-munity for all activities is paramount to aMuslim’s faith, the notion that human beingshave an ‘accounting book’ with God is a cen-tral tenet of Islam (Lewis 2006; Kamla et al.2006). However, like most of the world’smajor religions, there are variations within

2Sahabah refers to someone who saw the Prophet Muhammad and believed in him, as well as dying as a Muslim(Haddad 2009, p. 2)

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Islam, which influence the interpretation ofShari’ah law, and therefore have implicationsfor Islamic finance. This implies a flexibilityin Shari’ah law, which on the one hand hasfacilitated the rapid growth of Islamic finance,but on the other hand has resulted in differ-ences in the practices between Islamic banks(Kahn 2007, p. 287; Olsen and Zoubi 2008,p. 48). Different practices arise due to thenature of the sources of Islamic law. The twoprimary sources are the Holy Quran, the re-vealed word of God to the ProphetMuhammad in the seventh century, and thesunnah, a written record of the sayings anddoings of the Prophet during his lifetime.Both mainly provide principles and recom-mendations to guide Muslims in their dailylives, including commercial activities. Inter-pretation is therefore required when apply-ing Islamic law to changing times and circum-stances, including developing financial prod-ucts suited to a modern day global economy.Not unnaturally, this results in differences ofopinion so that the established practices ofsome Islamic banks are unacceptable to oth-ers (Vinnicombe 2012, p. 80).

Methods

This study is based on a qualitative ap-proach in which the data were derived fromsemi-structured interviews. The semi-struc-tured interviews were used to provide theinterviewees with a degree of freedom to re-spond and be questioned, as well as to allowthem to explain their thoughts in greater depthin order to gain more in-depth information(Rahim and Goddard 2003). Four Muslimscholars from Aceh province in Indonesia, andeight from Malaysia were interviewed. Thescholars from Aceh were selected as respon-dents for this research given that Aceh is theonly province in Indonesia which has been

granted autonomy by the Indonesian centralgovernment to implement Shari’ah law in allaspects of society, including in the economicsector. Hence, given this context, the perspec-tives of the scholars from Aceh on the issueof accounting and accountability in Islam istimely and relevant for exploration. Moreover,as compared to the other provinces in Indo-nesia, the market share of Islamic bankingand financial institutions in Aceh is the high-est in Indonesia (approximately 10 percentin 2014).

Muslim scholars in Indonesia and Ma-laysia were interviewed to evaluate the schol-ars’ views on the accountability of Pesantren(or in Malaysia they are called Pondok), whichare Islamic religious educational institutionsthat have traditionally existed in both coun-tries. Hence, Islamic scholars in Indonesia andMalaysia were expected to provide a bettercontextual understanding of this type of in-stitution, given that these institutions areprevalent in both countries. All the selectedscholars interviewed had an in-depth knowl-edge of Islam.

To get clearer and more comprehensiveperspectives of the accounting and account-ability of religious organizations, the studyalso interviewed two organizational donors,and two relevant government officers and twoulamas (mufti) from both Indonesia and Ma-laysia. We strongly believed that this numberof scholars would provide a broader and morecomprehensive perspective on the account-ing and accountability of Islamic organiza-tions in both countries since the number ofIslamic scholars with a good understandingof the accounting and accountability ofPesantren is limited.

Specifically, the selection of the inter-viewees was made based on a purposive sam-pling. The researchers selected the inter-

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viewees with a purpose in mind. Accordingto Waltz et al. (2005, p. 221), the purposivesampling is defined as “The selection of thedata source to meet the needs of the study.”It is argued that the data source may be indi-viduals who have knowledge or experienceof the research topic of interest, or othertypes of data that would enhance the research-ers’ ability to comprehensively understandthe topic. This approach is considered appro-priate since the research is explanatory innature, in which not all the cases of interestcan be identified ahead of time (Green 2005).As such, one of the requirements of our studyis that the interviewees must be knowledge-able about Islam, but not necessarily have abroader knowledge of Islamic accounting andaccountability. The focus of this study wasnot on accounting procedures, but more onthe Muslim scholars’ perception of the wayIslamic religious organizations show theiraccountability, and the roles of accountingand financial reporting in enhancing theseoriginations’ accountability. It should be ac-knowledged that the majority of theinterviewees are experts in Islam, but notspecifically experts in the field of accoun-tancy, given that the purpose of this researchis to obtain the Muslim scholars views ofaccountability in Islam. However, two of theinterviewees are accounting scholars whohave expertise in Islamic accounting. Thus,in this study, the interviewed Muslim schol-ars appear to express their views in a forth-right manner on the issues discussed.

Besides the Muslims scholars, twointerviewees are from originations which pro-vide funding, one from a prominent Non-Governmental Organization (NGO) that pro-vides donations to Aceh and the other onefrom a governmental department in Indone-sia that provides funding to the Pesantren inAceh. Interviews with the donors were done

to solicit their views regarding the account-ability required and needed from the organi-zations that they provided funding to. In to-tal, 18 people were interviewed and 20 inter-views were undertaken. This was becausesome people were interviewed more thanonce. With this number of interviews, theauthors feel that the study has attempted toprovide sufficient information about the is-sues. Each interview lasted about one houron average. The empirical study was con-ducted over a six-month period. The detailsof all the respondents interviewed in thisstudy are provided in Appendix 1.

Findings and Discussions

The Role of Accounting andFinancial Reporting inEnhancing Accountability

Generally, religious or faith-based orga-nizations are considered to be nonprofit or-ganizations or civic societies. In Islam, civicsocieties are believed to be as old as Islamitself (Bremer 2004; Epley 2004; Lightbody2005). Moreover, accounting and financialreporting have long been viewed as very im-portant components in improving the ac-countability of Islamic religious organizations.

Accountability to God and the commu-nity for all activities is paramount to theMuslim faith and the notion that human be-ings have an ‘account book’ with God is thecentral tenet of Islam (Lewis 2006; Kamla etal. 2006). All of the interviewees agree thatfinancial reporting has an important role inenhancing the accountability of any religiousorganization. As a senior lecturer at the In-ternational Institute of Islamic Thought andCivilization, Malaysia acknowledged:

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During and after the time of the Prophet this[the recording of financial transactions] is very,very important. However, the actions of Mus-lims are not based on their principles. TheAccountant will also cheat [laughing], most ofthe scandals in the banks, and so on [laugh-ing] are because of the accountants (A12).

This was also expressed by an academicfrom the Islamic studies course, Universityof Science, Malaysia. As he explained:

It is an important aspect to assure that every-thing must be run efficiently…if all the trans-actions have been recorded properly...it will notcreate the issue of non-credibility. Secondly, itwill increase the effectiveness, the competenceand the efficiency of how they spend the fundsreceived from the donors. As such, it [therecords] can be reviewed and studied (A09).

This understanding implies that there isa link between Islamic teachings and ac-counting. Proper recording and reporting areviewed as having a very important role in pro-viding information to the users and are usedto improve the accountability and efficiencyof the institutions. Besides, it can develop amutual trust between the institution and itsdonors. Other interviewees pointed out thatproper financial information is very impor-tant to show the transparency of the organi-zations. As expressed in the following com-ments of the various scholars interviewed:

Of course, I view it [financial report] posi-tively, [there] must be a proper report, [there]must be a proper chart, [there] must be a properorganization, and [there] must be a proper[record of the] inflow and outflow of money.Those things are very important to show trans-parency. Clearly, that is very important in Is-lam (A11).

I see it as very important, I always read aboutzakat [alms], and I like to see the amount

received, distributed, as well as whom the re-cipients are. Although it is difficult to read,but I will try to see how much the inflow andoutflow of funds are. For me, it is very impor-tant, even though, I cannot understand it fully(A10).

Financial reporting is very important. It is ex-tremely important. They should provide weeklyreports, monthly reports, stick them on the wall,we receive money from this source, we buy these,and we spend on these. These are the expendi-tures and so on…you cannot trust anybodyunless they have good administration, manage-ment, and recording systems (A03).

I think accounting is very important…thereare various verses [in the Quran] that showthe importance of accounting… The HolyQur’an has placed the foundation for suchmatters (A01).

Thus, there are no different perceptionsamong the Muslim scholars interviewed re-garding the importance of accounting, andparticularly financial reporting, in enhancingaccountability. All the interviewees believein the importance of accounting in providinginformation and to evaluate the managementand transparency of Islamic religious organi-zations. It was indicated that the accountingconcept was not new, in either its conceptionor practice, in Islam. However, it may not bewell operationalized as noted by one Muslimscholar from the University of Science, Ma-laysia:

Accounting activities have existed in Islam sincethe first era, the first day of Islam. The Prophetimplemented accounting activities during thatperiod which provided the base for the account-ability mechanism practiced during the era ofCaliph Umar bin Khattab. Such foundationswere developed by the Prophet. Hisbah is ac-counting, hesab is counting. So a Muhtasib,

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an officer who is in charge of the state assets’financial management, is needed. However, theconcept of hisab in Islam is wider (A09).

It is believed that the accountant andhence accounting is also actually given a keyrole in Islamic history. As Kamla et al. (2006,p. 257) explained:

The person that is described as an accountantor Muhtasib in Islam is the one responsible formaking sure that businesses are not harmingthe community. It was the Muhtasib’s task,among other things, to ensure that business ac-tivities such as banking and tanning were situ-ated in areas where they did not have a nega-tive impact on the community through the emis-sions and smells they produce…the muhtasibwas charged with checking that businesses werenot disposing of their waste in a way that washarmful to the community surrounding them.The Muhtasib during the Islamic rule of the15th and 16th centuries are reported to havemade sudden visits to these business locationsto ensure that their activities were in compli-ance with the best interest of the ummah. TheMuhtasib’s role, in respect to accountability inan Islamic society therefore, was not limited totechnical and financial traditions. It was a so-cial role, whereby the Muhtasib’s accountabil-ity extended to making sure that shariah’s so-cial rules in respect of the ummah’s welfareand interests were enforced and complied with.

Some interviewees also pointed out thataccounting had played a significant role dur-ing the golden era of Islam as one Mufti (Di-rector of the Indonesian Council of Ulama,Aceh province) explained:

Accounting plays a very important and sig-nificant role, and the achievement of the pre-vious Muslim era, especially in financial mat-ters and so on, are due to that [the sound prac-

tices of accounting]. Currently, if we read themodern textbooks, we can still find the totalincome of zakat figures collected in Egypt, asrecorded by the Governor Amr bin Ash dur-ing the era of Caliph Umar bin Khattab. Thismeans that [even during that time] the record-ing of accounting activities was done very sys-tematically (M02).

This is supported by another academicfrom the Islamic State University Ar-Raniry,Indonesia who explained that good financialadministration existed during Islam’s goldenera:

Sure, we [the Muslims] were at one time suc-cessful in managing the world. We had beensuccessful and had good financial administra-tion. Then the ignorance surfaced and went onfor hundreds of years and we become uncivi-lized, primitive in our management skills. Nowwe are just like the ‘losers’ (A03).

This understanding implies that there isrecognition of accounting as giving a tremen-dous historical contribution to the develop-ment of Islamic communities, especially inthe development of Islam’s charitable sectors,as well as in the public sector. This can alsobe seen from the following quote:

There was an institution under the UmayyadCaliphs, which was similar to this institute,called Diwan El-Kharaj. However, it was re-sponsible only for collecting government income.This institution was established during the ruleof the Abbasid Caliph Al-Mahdi to be mainlyresponsible for collecting, reviewing, and con-trolling the government revenues and expendi-tures. This institute required a representativein every organization and in every region toreview, monitor, and control the organizations’accounts and report them to the head of DiwanEl-zemam. (Al-Qahtani 2007, p. 5).

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To Whom Should the IslamicOrganizations be Accountable?

The majority of interviewees agreed inprinciple that Islamic religious organizationsshould be accountable to Allah and the soci-ety as a whole, including the donors, the gov-ernment, beneficiaries, and the public at large.A senior lecturer from the Islamic State Uni-versity Ar-Raniry, Indonesia said:

If he received funds from the government, hemust provide an account to the government. Healso has to provide accounts to other stakehold-ers; meaning to the society. Accountability inIslam is the accountability to God and the ac-countability to society. In addition, Islamic lawcontains two accountabilities, accountability inthis world and accountability in the hereafter(A02).

Similarly, another academic from thesame organization explained that:

Islamic religious organizations have an obli-gation to be accountable to their donors as wellas to society. In Islam, accountability is wider,accountability to the constituents and account-ability to God (A03).

Thus, accountability in Islam is viewedas being broader than what is generally un-derstood in the West. There is an individual’saccountability to the society or stakeholdersand there is the same individual’s account-ability to God. In a similar vein, one of thescholars of Islamic studies from the Univer-sity of Science, Malaysia also shared the sameview as he explained:

First, certainly he or she is accountable to God.Since the donor gave the money because of God.Second, the accountability is to the donor andaccountability to the target group…because theseare the people intended to be helped (A09).

This argument was supported by one ofthe interviewees from the International Is-lamic University Malaysia as he said:

According to Islam, accountability first andforemost is to God. The second is to society,specifically, to the donors (A07).

The same view was also illustrated by asenior lecturer from the International Insti-tute of Islamic Thought and Civilization,Malaysia as he said:

I think the principles of accountability for us[Muslims] should go to the donors as well asto the whole community (A12).

He argued that Muslims believe in theunity of God as the creator of human be-ings, in which God’s sovereignty is recog-nized. This concept of unity is defined astauhid (oneness of God), which is the basisof Islamic belief. Furthermore, Islam providesa complete code of conduct for human be-ings. Therefore, accountability in Islam in-cludes both vertical and horizontal account-ability, to God and to people.

All the interviewees revealed that theproviders of financial resources are the im-portant group in society to whom nonprofitorganizations should be held accountable.Accordingly, Muslims are accountable to Godand also they must demonstrate their account-ability to society, and more specifically, in thecase of nonprofit organizations such asPesantren, they have to be responsible to thedonors of their financial resources as well asto their recipients. This is also illustrated bySulaiman and Willet (2002, p. 11) in the fol-lowing quote:

The axiom of equilibrium or Al-‘Adl pre-scribes the relationship among individuals.Related to equilibrium is the concept of justice.From the perspective of the absolute, this re-fers to the supreme attribute of God. God him-

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self promises justice for all. From the perspec-tive of social action, equilibrium is the bind-ing moral commitment of individuals in a so-ciety to uphold a delicate balance between theirindividual rights and their responsibility to-wards the ummah. Accordingly, in Islam ev-eryone is ultimately accountable to God andthis accountability encompasses their account-ability to society.

Thus, these views are consistent andcompatible with the basis of the stakeholdertheory in which companies/organizations areso large, and their impacts on society so per-vasive that they should discharge their ac-countability to many more actors. Therefore,the theory rejects the idea that an organiza-tion/enterprise exists only to serve the inter-est of its owners. Rather, the theory is basedon the idea that the organization/enterpriseexists to serve the many stakeholders whohave an interest in it, or who in some waymay be harmed by it or benefit from it(Solomon and Solomon 2005; Donaldson andPreston 1995; Elias et al. 2000).

However, one of the interviewees inIslamic studies from the University of Sci-ence, Malaysia has a slightly different viewregarding this issue. For him whether the or-ganization should provide a report of its ac-countability or not depends on the conditionsrequired by the donors. As he explained:

The money should not be reported to any spe-cific parties. However, if the donors put a con-dition on them to provide the report of account-ability to the donor, then he or she has to pre-pare the report. If not, then his or her respon-sibility is only to carry out the amanah basedon the trust put in him or her (A08).

Seen from this argument, amanah isviewed as being more important, even thoughit can disregard reporting to the donors orother related parties if they do not request a

financial report of the resources donated tothe organization. He argued that this amanahis only given to sincere people. Amanah isdefined as “A mental attitude of being com-pletely trusted” (M02) which is in line withSosis’ definition (2005, p. 1):

We may employ the word trust to characterizethe attitude of agents toward other agents. Thussometimes it denotes an attitude of confidenceabout another agent’s reliability. However, wealso use trust to describe behavior. Accordingly,to trust is to act on this attitude of confidencein another agent’s reliability.

Showing Accountability

How should religious nonprofit organi-zations show accountability in Islam? Mustthey show accountability formally? Eventhough there is a different perception amongMuslim scholars regarding this issue, the ma-jority of interviewees pointed out that ac-countability must be shown formally or onpaper. As one of the interviewees said:

If people are like the Prophet probably yes [in-formal], but now it is necessary [written]. EvenGod orders two angels, to write it down [ourdeeds] (M02).

A Muslim scholar in Islamic studies from theIslamic State University Ar-Raniry, Indone-sia, also shared a similar view, “All must berecorded, Al Qur’an says when dealing withdebt, it must be written down” (A03).

He argues that formal reporting such asfinancial reporting is a very important elementin demonstrating accountability and is con-sidered a religious obligation. This is also sup-ported by another scholar from the same or-ganization. As he claimed:

What is stated in the Holy Qur’an is that youhave to record transactions…all transactions,in any context, must be recorded, because it is a

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form of accountability, and it is amanah(A04).

Thus, from the views of the Muslimscholars, Islam requires a written report as amechanism to show the financial responsi-bility of the institution. It represents one ofthe most important tools for promoting andenhancing accountability and transparency inany organization. Accordingly, those who areheld to account should not give an accountof their actions through an informal report.In addition, this interviewee suggests:

Now the need for proper recording has become‘compulsory’, as it is mentioned by Hanafischolars. Since all transactions require a legalstanding, thus, authentic evidence, such as re-cordings are needed (A04).

Clearly, there is a view that organiza-tions that manage community funds, such asPesantren, should provide written reports. Asexpressed by several Muslim scholars below:

In Islamic teachings, this [financial] mattershould be able to be seen, must be able to beproven….It is important to note that Islam alsohas a mechanism to confirm that the account-ability is really carried out. It was known asthe system of hisbah. If the system of hisbahis available, and there are officers of hisbah,known as muhtasib, then how can the muhtasibexamine something to see if it was well imple-mented or not, if there is no written document,etc. (A09).

All has to be written down clearly…you haveto show on paper, there is no other choice(A11).

We have to show a formal report actually,people do not really trust you or believe youunless you make it formal, especially in thepresent day…I think it [informal report] isnot really good, not really systematic accordingto the Islamic point-of-view, when you just say

it verbally, without showing the actual reportto your donors (A12).

There must be a record, what did we buy; howmuch have we spent; there must be a record, sothat other people can verify it. If we did not doit, there might be accusations that we have mis-used the money (M01).

Besides, founders are now also increas-ing their reporting requirements. Recipientsare more frequently asked to provide detailedfinancial information. This can be seen fromthe following comments:

We cannot rely only on verbal reports. Whenwe donate to some organizations, of course weasked them to submit a regular report…weusually ask them to give us an audited account,all the time we ask them to give us auditedaccounts by a registered audit firm (D1).

However, there are also some differentopinions from those interviewed about theway to show accountability in Islam. This isillustrated in the following comment by onescholar in Islamic Studies from the Interna-tional Islamic University, Malaysia:

If we referred to Islamic teachings, it is onlyfor those pertaining to borrowing that some-thing must be written. Other than borrowing,it is often based on trust or amanah. How faris the amanah carried out? This does not meanthat the possibility to develop an accountabilitymechanism in Islam like you mentioned earlieras a ‘written report’ is not there (A07).

He further said:

It is clear in the Holy Qur’an, the transactionwas the transaction of ad-Dayn [the borrow-ing]. Absolutely it must be recorded, becausethere is potential for a huge disagreement. There-fore, the Holy Qur’an requires it to be recorded.It must have a clear record. Therefore, account-ability is quite clear there (A07).

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In the context of waqaf (Islamic endow-ment), which includes donations, he arguedthat the transactions are different and that itis not part of the contract of ad-Dayn (bor-rowing), it is not a trade contract. Therefore,the accountability in this context is more flex-ible. As he explained:

Providing a report is more flexible in this con-text. For me it can be formal, or informal. AsI said earlier, the principle of amanah in Is-lam is how far we carry out the requirementsof the donors (A07).

This is also supported by a senior lec-turer from the Islamic State University Ar-Raniry, Indonesia. As he said:

The important thing in the accountability istrust. Oral [providing a verbal report] is okay,we make it all clear. We may not blame themif they did not have the human resources…wehave to see their situation. The issue is thatthey do not have any staff (A01).

However, another scholar from the In-ternational Islamic University, Malaysia pro-vided a slightly different interpretation of themessage of the Holy Qur’an. As he said: “Ac-countability should be performed in a formalway” (A06). He argued that even thoughSurah Al Baqarah verse 282 did not specifi-cally state that for all transactions, one hasto understand the spirit of that verse in thecontext of two people, one the borrower, andone the lender. Regarding accountability toanother party for the loaned money, Godmakes it clear that debt transactions must berecorded. Seen from this perspective, clearly,there is a different view and interpretationexisting among Muslim scholars regarding therecording of financial transactions and howthe accountability should be demonstrated.

Informal reports are not considered asfulfilling the requirements of Islamic law(shari’ah).3

The message of the holy Qur’anFaqtubu…write it down. How can the donorsfeel safe; can be sure. Thus, recording it willcreate trust…(A02).

This argument is supported by one ofthe scholars interviewed at the University ofScience, Malaysia. As he illustrated in thefollowing comments:

So, if we want to comply with shari’ah [Is-lamic law], then written documents are neededto show that the accountability has been car-ried out and has been fulfilled (A09).

The above quotes imply that in spite ofthe different views that exist among Muslimscholars, there is a general belief that a for-mal accountability mechanism is an integralpart of religious-based organizations and isstrongly encouraged. Some scholars considerit as compulsory. Formal reporting can onlybe provided through a proper accounting sys-tem. As one of the main objectives of theaccounting systems is to aid accountability(Lewis 2006), accordingly, there is no doubtthat accounting becomes a very importantelement and a successful aspect of the ac-countability mechanism in Islam.

However, it is acknowledged that thereare some arguments that accountability canbe demonstrated informally. One of theinterviewees from the International IslamicUniversity, Malaysia viewed that this argu-ment is not in line with Islamic teaching. Ashe said:

“It does not meet the requirement of Islam”(A06).

3 Islamic law, also called shari’ah, is a comprehensive code of life regulating the entire spiritual and material life ofMuslims. It is based on the Qur’an, Sunnah, Ijma’ and Qiyas (Zaid 2000, p. 330).

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This scholar believed this argument ac-tually tried to bring in religion as the justifi-cation not to use management accountingtechniques and accountability. He rejectedusing the informal mechanism as a tool toshow accountability. As he elaborated:

We should not use that [informal accountabil-ity] as an excuse in saying that Islam, our rela-tionship to God is very informal. Therefore, itis not necessary to be formal, we can be infor-mal. Nevertheless, by being informal, we arenot fully accountable. How do you measure ifyou do not report? If you do not use a docu-ment, how do you measure? (A06).

It is suggested to view this from thecontext of Sirah as-Sahabah (the companions’history), such as in the case of Caliph Umarbin Khattab. This interviewee argued thatwhen Caliph Umar bin Khattab established[a zakat/charity collection institution called]Baitul-Mal, he formalized and institutional-ized the system. The Caliph understood thataccountability should be shown to the com-munity and to God. He believed that therewas a proper reporting system. However, theCaliph could also decide to remain informal,as the previously existing way of performingaccountability was very informal.

The majority of interviewees empha-sized that Islamic institutions should not usethe informal accountability mechanism toexplain their responsibilities, and especiallytheir financial affairs. Because times havechanged, all religious organizations have tomeet and incorporate reporting requirements,as explained below by an academic from theIslamic State University Ar-Raniry, Indone-sia.

No, it is not the time any more, the time is pastfor those standard things [informal accountabil-ity]. Now it must follow the rules of accountabil-ity, the rules of bookkeeping, the rules of fund-

ing administration, it is necessary, we cannot avoidit. It is a part of the core teachings of Islam (A03).

This is also illustrated by one of the in-dividual donor’s to an Islamic religious orga-nization in Indonesia, as he commented:

The management should at least provide a writ-ten version and this can be displayed on an infor-mation board and so on. It would be more thanenough, even if it were merely displayed on thewall. If it is only done by a verbal, informal ex-planation with some complaints [concessions] say-ing we have limited funds but we have made sig-nificant developments, I think it sounds like rheto-ric (D2).

Trust (Amanah) andAccountability

The majority of interviewees agree thattrust or amanah plays a significant role in en-hancing institutional accountability. This isillustrated by the following comment from oneMuslim scholar:

It will be an unbeliever, those who do not holdamanah. Amanah means an attitude of com-pletely being trusted. In Islam if a person is notamanah, they cannot be trusted at all. Trust isgiven to someone by somebody and is strongly as-sociated with his or her faith. If his or her faithis depraved, all of his or her deeds are not true(M02).

However, this amanah cannot replacethe accountability mechanism for the public.Amanah also does not stand alone, it is influ-enced by the systems and the accountabilitymechanism. This is depicted in the followingcomments by a scholar who was interviewed:

Amanah [trust] is a mental attitude, it is apersonal attitude… I am trustworthy, I amamanah, but how are you going to prove it? Wecannot put it as a kind of mechanism…amanah must be managed through the real

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mechanism, through the bureaucracy, throughthe system…Amanah can be maintainedthrough a good system, otherwise it will collapse.It will collapse, especially in this modern age.(A03).

All the interviewees agreed that a per-son who manages the publics’ interests mustbe amanah. However, to avoid public miscon-ceptions, a financial report to the stakehold-ers is needed to enable the public to knowthat those who manage the community’sfunds are truely amanah. Otherwise, it wouldbe problematic and difficult to know, for ex-ample, if they are amanah, they never lie, andso on, even though they appear to be verygood individuals who do not cheat, etc. Ascommented by one of the scholars in the ac-counting field from the International IslamicUniversity, Malaysia below:

How do you know the institution is amanah ornot? It will depend on how good this institution isin the eyes of the public…how do you know theorganization is good? If the organization pro-vides a financial statement, they never lie, the fi-nancial statement is audited, and has integrity,accountability, independence, and then people willknow whether you are amanah or not….You claimyourselves as amanah, I am good man, I amamanah, but [if] you do not report and show youramanah, how will people know? (A06).

He argued that the intention is not toshow that we are good, but the small groupof people who understand the accountabil-ity mechanisms and financial reporting willknow whether the organization is in factamanah. These small groups of people are thevery important stakeholders for any institu-tion that manages the community’s funds. Theinstitutions have to satisfy them in order toattract more financial support for the exist-ence of the organization. For him, amanah isa measurable thing, as he claims, “Amanah to

me can be measured, otherwise we would notknow that the Prophet is al-Amin ( the truth-ful), if we cannot measure amanah.” It is thesame in the case of the organization.

Accounting: Sacred or SecularActivities?

Accounting activities in Islam are re-garded as sacred activities. One intervieweesaid: “Definitely yes, for me, there is no ar-gument for that. It is religious, it is compul-sory, it is obligatory, and anybody dealing withthat has to do it sincerely, with honesty”(A03).

This is in line with the following quote:

Accounting in the broad sense is central to Is-lam. Since, accountability to God and the com-munity for all activities is paramount to theMuslim faith…one of the primary objectivesof the accounting is as a system to aid account-ability (Lewis 2006, p. 1).

The above quotes clearly imply that inIslam, accounting is not a secular or profaneactivity. It is an integral part of an institution’smanagement and it is part of a religious obli-gation. It is argued that Islam also encour-ages ethical behavior such as sincerity andhonesty in managing funds and financial re-sources. Other interviewees pointed out thatthere are many verses in the Holy Qur’an re-lating to accounting activities. This is de-picted in the following comments by an aca-demic in Islamic Studies from the Universityof Science, Malaysia who said:

There are many verses in the Holy Qur’an aboutproperty, about the law of inheritance. If amother passes away and leaves her children,then this child gets half, that child receives onethird. I think these are also parts of account-ing activities (A09).

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These quotes imply that in Islam, ac-counting is clearly a part of ones sacred ac-tivities. The religious and the secular divideare unknown in Islam. One of the senior lec-turers at the International Institute of IslamicThought and Civilization, Malaysia said:

Faqtubu is mentioned so many times,about kitaba about records, to record, towrite, not only once, but about otherloans, about borrowing, so many otherthings…to write not only on this matter,in this context, so many, so many, count-less actually. So many [verses], brother,so many verses about kitaba, aboutkataba (A12).

The sacred and secular dichotomy wasnoted in the accounting and accountabilityliterature by Laughlin in 1988, subsequentlyrefined and extended by Booth in 1993. Ithas become influential within the academicaccounting community and the dominant in-terpretive model for researching the practicesof religious organizations (see Hardy andBallis 2005). All activities within religiousorganizations (churches) can be separated intotwo categories, the first of which are the ac-tivities to do with teaching, preaching, edu-cating, and meeting the welfare needs of thereligious community. These are considered tovarious degrees as having to do with the sa-cred. Conversely, finance, administration, re-sources management, and commercial func-tions that appear to be not directly relatedwith the core mission activities of the reli-gious organization are considered as secular(Hardy and Ballis 2005; Laughlin 1988; Booth1993).

The rejection of sacred and profane di-chotomy in Islam was also stated by one ofthe Muftis in Malaysia, as he said:

We cannot separate the worldly affairs withthe ukhrawi [eschatological]. We are held ac-

countable for all our actions in the hereafter.Thus, it is a part of religious affairs. Since, itis part of religious affairs, so, our understand-ing is that we cannot separate between worldlyaffairs and religious affairs (M01).

In a similar vein, another scholar inter-viewed described that:

From the Islamic point-of-view, any instrument,activities, or tools, which are good in nature,are considered good. Anything, which is bad innature, will be bad in Islam. Accounting isgood, because it fills the accountability relation-ship and, therefore if accounting follows thespirit of, or requirements of, Islam then it is anIslamic accounting (A06).

He argued that the reason that somepeople do not consider accounting activitiesas religious activities is due to their lack ofknowledge of Islam, and that they do notunderstand the role of accounting in thatsense. As he further said:

[The reason] it has been considered non-Islamicis because we do not practice it according to Is-lam. Therefore, if accounting follows in thespirit of or requirements of Islam, then it isan Islamic accounting. If you understand Is-lam and you understand the worldly activities,then you can reconcile the administration; whywe have a separation, to some people, becausethey do not understand. They said that this isunnecessary; they do not understand the roleof accounting in that sense (A06).

Clearly, in Islam there is no separationbetween the sacred and the profane. Muslimscannot become good Muslims if they com-partmentalize their behavior into sacred andsecular dimensions, as all their activities arebound by the shari’ah (also see Kamla et al.2006).

Nevertheless, some religious people stillconsider themselves as accountable only toGod, and they only need to be accountable

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to God. In responding to this argument, oneMuslim scholar said:

It is a very ‘clever’ excuse as if [one was] hid-ing himself from his weaknesses. It is as if[one was] hiding behind God. What is Godhere? God means humanity. We are theKhalifah (vicegerent) of God. What do youmean I am only responsible to God? What doesthat mean? That your prayer is okay? How-ever, in dealing with money, material mattersand so on, this concerns the Khalifah of God.Thus, we are managing the activities, the trustthat is given by the Khalifah of God (A03).

This quote implies some views that do-nation (sadaqah) is an act of worship. Theirorganizations are exclusively accountable toGod, not to man. Thus, there is a reason fornot disclosing financial information. It is ar-gued that accountability to God is achievedthrough performing accountability to humanbeings.

This is in line with what Baydoun andWillett (1994) note as quoted by Sulaimanand Willett (2002, 24):

From Islam’s perspective, an individual is ul-timately accountable to God…Islam teaches theindividual to regard life as a matter of mutualcooperation and personal responsibility so thataccountability to God can be interpreted as ac-countability to the ummah [community of be-lievers].

This means that from an Islamic pointof view, we cannot separate between ac-countability to God and accountability tohuman beings. This was also stated by an-other interviewee as he elaborated:

In Islam, we cannot separate the relationshipbetween God and humankind. You fulfil yourresponsibility to God, but you ignore your re-sponsibility to humankind. There is no suchthing in Islam, because you may not separate

between God and human beings. Certainly, itis different, but accountability to the commu-nity is the result of, or comes from, our account-ability to God.…When you fulfil your respon-sibility to your fellow human beings, then itmeans you also fulfil your accountability to God(A09).

The same view was also expressed byanother academic, as he explained:

It is not correct to say that we are accountableonly to God, as we are also accountable to man(A11).

The above arguments clearly indicatethat accountability to God implies account-ability to society as depicted in Maali’s et al.,(2003, p.21) explanation:

The relationships of Muslims to each other andto the ummah [which refers to the Islamic soci-ety] in general are emphasized in the Qur’anand in the deeds of the Prophet Muhammad.This implies that submission to the will of Godincludes recognizing the rights of others, anddealing with society justly. Thus, accountabilityto God includes accountability to society.

More importantly, it is believed that aperson’s relationship with other individualsmirrors their relationship with God. As oneinterviewee explained in his comment:

If you behave well to people, there is a strongindication that you are being good to God. Ifyou do not behave well to people, definitely youdo not have good relationship with God. Forexample, look at us; if we are good with oth-ers, definitely our relationship with God is good.If we are not good, definitely our relationshipwith God is not good (A06).

Conclusions and Implications

The findings of this study affirms thatthe concept of accountability in Islam is not

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only restricted to financial accountability, bymeans of financial reports, but goes far be-yond this so that all activities are required tobe accountable. This is because all Muslimsbelieve in God and that they will be subjectedto hisab in the hereafter for their actions inthis world. As such, every Muslim, either asan individual or as the head of an organiza-tion, needs to ensure that their deeds andwords in this world are in accordance withthe God given rules. The study also affirmsthat the concept of accountability in Islam isone of personal accountability, in which eachperson will be accountable for each of his orher actions and inactions on the Day of Judg-ment.

Another important theoretical contribu-tion from this research is that the account-ability relationship in Islam is also differentfrom the conventional accountability relation-ship. The majority of Muslim scholars inter-viewed emphasized that accountability in Is-lam is understood as being broader than whatis generally understood in conventional ac-countability because conventional account-ability approaches are not considered to ex-tend beyond human society, and do not en-visage any accountability to God. Whereas,the accountability relationship in Islam notonly involves the relationship between themanagement of an organization and its stake-holders, such as the providers of its financialresources, or the government and society atlarge, but also involves the relationship be-tween the management and God, as the ulti-mate owner of everything. Therefore, Islamicreligious organizations should be accountableto society as a whole, including to their do-nors, the government, their beneficiaries andthe public at large, as well as to God since itis an injunction of Islamic teaching. There

was no different view among the Muslimscholars interviewed regarding this issue. Thisphenomenon suggests that the accountabil-ity relationship in Islam is not only to fulfilthe legal requirements of accountability butalso to fulfil the relationship with God. Thestudy indicates that there is no clear distinc-tion regarding the way to show accountabil-ity to God and to human beings since ac-countability to God is interpreted as account-ability to society.

Regarding how financial accountabilityshould be demonstrated, there are some ar-guments that in Islam accountability can bedemonstrated both formally and informally.However, the findings clearly indicate thatthere is a general belief that a formal account-ability mechanism is strongly encouraged.Therefore, any organization dealing with com-munity funds must demonstrate their finan-cial accountability formally through writtenreports. Even though, it is acknowledged thatin Islam trust or amanah plays a significantrole in enhancing accountability, the findingsof this study affirm that as far as Islam isconcerned trust cannot replace the account-ability mechanism to the public.

Another theoretical contribution of thisstudy is the understanding of the classifica-tion of accounting activities. The findings ofthis research clearly show that the issue ofthe sacred and profane is not recognized inIslam. All the Muslim scholars we intervieweddid not see accounting and accountabilityactivities as contradictory to Islamic teach-ings. In addition, there is much evidence tosuggest that accounting and financial report-ing have long been viewed as very importantcomponents in enhancing the accountabilityof Islamic religious organizations.

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Al Buraey, M. A. 2002. A key notes address: Islamic perspectives on good governance. Presented in Interna-tional Conference on Good Governance: Perspectives and Practices. University Brunei Darussalam.

Al-Hilali, T. A., and M. M. Khan. 1984. Translation of the Meaning of the Nobel Qur’an in the English Language.King Fahd Complex for the printing of Holy Qur’an, Madinah, KSA.

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No Interviewees

Code Field

of Expertise Number of Interviews

Status Institutions

1 2 3 4

A01 A02 A03 A04

Islamic Studies Islamic Studies Islamic Studies Islamic Studies

1 1 2 1

Scholar (PhD) Scholar (PhD) Scholar (PhD) Scholar (PhD)

Islamic State University Ar-Raniry, Indonesia.

5 6 7

A05 A06 A07

Accountancy Accountancy Islamic Studies

1 1 1

Scholar (PhD) Scholar (PhD) Scholar (PhD)

International Islamic University Malaysia, Malaysia

8 9 10

A08 A09 A10

Islamic Studies Islamic Studies Islamic Studies

1 1 1

Scholar (PhD) Scholar (PhD) Scholar (PhD)

University of Science Malaysia, Malaysia

11 12

A11 A12

Islamic Studies Islamic Studies

1 1

Scholar (PhD) Scholar (PhD)

International Institute of Islamic Thought and Civilization, Malaysia

13 D1 Donor (Country Director of Muslim Aid)

1 Muslim Aid

14 D2 Donor 1 Individual Donor 15 M01 Mufti (Ulama) 1 Mufti (Ulama) Malaysia

16 M02 Mufti (Director of the Indonesian Council of Ulama)

2 The Indonesian Council of Ulama, Aceh Province

17 G01 Government Officer

1 Department of Religious Affairs, Aceh-Indonesia

18 G02 Government Officer

1 Department of Religious Development, Malaysia

Appendix 1. The List of Respondents

accounting and accountability in religious organizations

Documents