The Impact of Islamic Worldview on Shaping the Accounting System: An Islamic Moral Economy and Historical Exploration in Rationalizing Islamic Accounting

The emergence of the Islamic economics movement in the post-colonial period aimed at developing a system of Islamic economy with the normative worldview of Islam and Sharia rules. This is rationalized on the grounds that economics, finance, management, and accounting are not value free as assumed by conventional thinking, which is imposed on the rest of the world as the truth by the West. In this authentic search, Islamic finance proved to be a successful proposition, and therefore, the trajectory of development has been unprecedented, which is constituted through the Sharia compliance process. However, in order to develop a system understanding, the governance, management, and accounting of the Islamic financing institutions should reflect the same worldview and the value system. As the literature indicates, research, practice, and institutional formation have been scarce in these areas. This is due to the subaltern assumption that these areas are value free. Accepting such an operating assumption has resulted in asymmetry in the knowledge base and operation of Islamic banks and financial institutions. While their financing operations are constituted in Sharia-compliant manner, their management and accounting are left to the conventional system. However, Islam, through its value system and worldview (tawhid), has implications for accounting too. This chapter, therefore, aims to identify the ontological and epistemological construct of Islamic accounting through its value system and worldview to overcome the observed asymmetry through social constructivism. In doing so, historical contribution of Muslim scholars and practice within the Islamic realm is used to bring historical evidence for the proposition developed in this study. Thus, this study argues that Islamic accounting is a subdiscipline of the system of Islamic economics or Islamic moral economy and essentializes it through Islamic normativeness, which urges the use of Islamic accounting, beyond the standards of Accounting and Auditing Organization for Islamic Financial Institutions, to establish consistency within the Islamic finance sector.