Browse by Topic "Islamic accounting"
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- PublicationAccounting & auditing for Islamic financial institutionsMohamed Ibrahim, Shahul Hameed (IIUM Press, 2009)
This book covers accounting for murabaha, bay' bi al-thaman al-ajil, mudarabah, musharakah, ijarah, salam, istisna', zakah, sukuk and other investments. This book is not only prescriptive but also critical of current practice, which should challenge students to critically think of improving this new discipline. Available in physical copy only (Call Number: HF 5616 I74 S525)
- PublicationAccounting for Islamic financial transactions: a case study on financial reporting practicesZulkarnain Muhamad Sori (IBA Press, 2018)
This hypothetical case study was developed based on the financial statements of Bahrain Islamic Bank and Bank Islam Malaysia Berhad. The banks were registered in two different countries namely Bahrain and Malaysia that adopted Financial Accounting Standards (FAS) issued by the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI) and International Financial Reporting Standards (IFRS) (the standards are locally adopted and named as Malaysian Financial Reporting Standards (MFRS)) issued by International Accounting Standards Board (IASB) respectively. The key issues explored in this case are: the motivation for recording and reporting Islamic financial transactions; types and purposes of financial statements prepared by Islamic financial institutions (IFIS) in the two different financial reporting regimes; Shari'ah perspectives of key accounting assumptions such as substance over form, time value of money, fair value and principles of probability. Understanding the Shari'ah perspective of key accounting assumptions would help preparers and users of financial statements to appreciate the effect of accounting policy adopted for financial reporting.
- PublicationAccounting for leasing: the case of Islamic car financingShamsher Mohamad Ramadili Mohd; Zulkarnain Muhamad Sori (IBA Press, 2018)
This case was developed based on a real-life experience dealing with an Islamic car financing contract (i.e. Al-ljarah Thumma Al-Bay |AITAB] contract - Sale and Leaseback) between a Malaysian Islamic Financial Institution and their customer. It is well recognised that AITAB is governed by the Malaysian Hire Purchase Act 1967, that oversees conventional (nor Islamic) car financing, yet it is used for both financing modes. The contract requires clarification on the following: understanding of the nature of the contract used and the relevant transactions involved; revenue recognition (current and future); capitalisation of relevant costs in the asset's value; fair value of leased asset; recognition of financial assets and liabilities; and disclosure requirements from the bank and customer perspectives. Users of the case are assumed to be familiar with the various regulatory requirements and theoretical foundation of the "Accounting for Islamic Financial Transactions" from IFRS/MFRS (International Financial Reporting Standards/Malaysian Financial Reporting Standards) and the AAOFI (Accounting and Auditing Organization for Islamic Financial Institutions) reporting perspectives.
- PublicationAccounting for musharakah mutanaqisah home financingMahmoud Al Homsi; Alam Asadov; Zulkarnain Muhamad Sori (UMK Press, 2019)
This chapter provides the discussion on accounting issues for musharakah mutanaqisah (MM) home financing in the case of Malaysia. Though the MM mode of financing has addressed the 'ambiguities and risk issues in conventional mortgage financing and the controversy that surrounds other financing packages like al Bai Bithaman Ajil and Bay al Inah (Mydin-Meera & Abdul-Razak, 2009), there are some practical issues in operating this mode of financing, as Islamic banks operate this type of contract more closely to conventional practice, thereby lacking the spirit of the contract itself ...
- PublicationAccounting for the property acquisition: the case of musharakah mutanaqisahZulkarnain Muhamad Sori (IBA Press, 2018)
This case was developed based on a real-life experience related to an lslamic equity home financing contract (ie. Musharakah Mutanaqisah) between a Malaysian Islamic Bank and their customer. The Musharakah Mutanaqisah (MM) Financing mode has gained popularity in house financing in Malaysia, where the bank and customer enter into a contract of joint property ownership and the customer's ownership of the asset gradually increases throughout the financing period and fully owns the asset after the last financial settlement. This case aims to: illustrate the process of property acquisition using the MM financing mode; account the various transactions involved in MM financing; account capitalisation of acquisition costs; recognise and disclose financial assets/liabilities; and determine Fair value of the MM assets. Users of the case are assumed to be familiar with the various regulatory requirements and theoretical foundation of the "accounting for Islamic Financial transactions" from reporting perspectives of IFRS/MFRS (International Financial Reporting Standards/Malaysian Financial Reporting Standards) and the AAOIFI (Accounting and Auditing Organization for lslamic Financial lnstitutions).
- PublicationAn analysis of accounting from Islamic perspectivesNurazleena Ismail; Zulkarnain Muhamad Sori (UMK Press, 2019)
This chapter provides a discussion of a study that examines accounting in Islamic perspectives. The discussion includes an overview of the development of Islamic finance, accounting in Islamic perspectives, decision usefulness, stewardship, accountability, financial measurement, disclosure and presentation and four key accounting assumptions, namely 'substance over form', 'time value of money', 'fair value' measurement and 'recognition based on probability', which serve as important guides to preparers of financial information ...
- PublicationApplication of Shariah governance framework in Islamic financial institutionsMohamed Eskandar Shah Mohd Rasid; Shamsher Mohamad Ramadili Mohd; Zulkarnain Muhamad Sori (UMK Press, 2019)
This chapter provides discussion on a study that investigates the perceptions on shariah governance practices among Malaysian Islamic financial institutions. The chapter explores the effectiveness of implementation of Shariah Governance Framework among Malaysian IFIs with the focus on their level of commitment, the challenges and suggestions to further improve the effectiveness of implementation of this framework. The system of corporate control, effective and efficient governance that is consistent with shariah guidance has been an important agenda for Islamic Financial Institutions (IFIs) since the existence ofIslamic Finance in Malaysia. This is especially important in light of rapid growth in Islamic Finance industry not only in Malaysia but globally. The well-functioning Islamic finance industry can only be sustained if there is good corporate governance practice by IFIs that comply with the shariah guidance.
- PublicationAuditor independence and corporate governanceShamsher Mohamad Ramadili Mohd; Zulkarnain Muhamad Sori (INCEIF, 2015)
Failures of major financial institutions globally that have supposedly audited has led to major criticism of the auditing profession. The collapse of many large companies and the demise of one of the major auditing firm, Arthur Andersen, have damaged the credibility of financial statements and undermined the reputation of audit profession. Among the many explanations for these failures (like investors’ irrational exuberance, infectious greed, and foolishness; the bursting of the bubble; the impoverished morality of CEOs), the tendency of management to cook the books; the failure of the gatekeepers; and the ambiguities in application of financial reporting standards, which have encouraged auditors to be creative and apply their accounting gimmicks, are directly related to the auditing profession.
- PublicationA closer look at accounting for Islamic financial institutionsIsmail, Nurazleen; Zulkarnain Muhamad Sori (EDP Sciences, 2017)
This paper provides a discussion of a study that examines accounting in Islamic perspectives. The discussion includes an overview of the development of Islamic finance, accounting in Islamic perspectives, and four key accounting assumptions, namely "substance over form", "time value of money", "fair value" measurement and "recognition based on probability", which serve as important guides to preparers of financial information.
- PublicationCommunicated ethical identity disclosure (CEID) of Islamic banks under the AAOIFI and IFRS accounting regimes: a global evidenceMohamed Anouar Gadhoum; Shamsher Mohamad Ramadili Mohd; Ziyaad Mahomed; Zulkarnain Muhamad Sori (Emerald Publishing Limited, 2022)
This paper aims to assess the ethical disclosure of Islamic banks (IBs) under different accounting regimes and to ascertain whether the adoption of an Islamic accounting standards (Auditing Organization for Islamic Financial Institutions [AAOIFI]) promotes the practice of ethical disclosure. An ethical identity disclosure index was developed to serve as a benchmark to assess the level of the communicated ethical identity disclosure (CEID) of 47 IBs over 18 countries using annual reports. The findings suggest that, overall, there is poor ethical disclosure practices and even banks that had some initiatives towards disclosures had no proper reference to benchmark for effective implementation of ethical reporting standards and had no plans for ethical and socially responsible schemes. There was no evidence to suggest that IBs that adapted the religious-based accounting regime (AAOIFI) had better levels of ethical disclosure. Though poor practices of CEID are expected to increase reputational risks and the likelihood of loss of religious conscious customers and investors' confidence and therefore market share and performance in the long-term, the current practice does not concur with this expectation. Furthermore, since there is no evidence to support the notion that the adoption of AAOIFI standards would support greater initiatives towards level of ethical identity disclosures, a mandatory requirement for effective disclosure through enforcement of AAOIFI's financial reporting standards, specifically with regard to ethics and social and environmental commitment is needed.
- PublicationA comparison of MASB and AAOFI accounting conceptual frameworksShamsher Mohamad Ramadili Mohd; Zulkarnain Muhamad Sori (AAOIFI, 2017)
This paper aims to present comparison of conceptual framework published by the Malaysian Accounting Standards Board (MASB) (fully converged with the standards issued by the International Accounting Standards Board (IASB) and the Accounting and Auditing Organization for Islamic Financial Institutions (AAOIFI). As the Islamic finance industry evolved, some scholars proposed that the Islamic Financial Institutions (IFIs) should have different accounting standards to serve their need to report the unique financial information needs. The research is motivated by the introduction of accounting standards by the AAOIFI to fulfill the financial reporting needs of Islamic finance industry that offered Shariah complied products and services. AAOIFI divided the objective of financial reporting into two parts, namely, objective of financial accounting and objective of financial reports. However, only a limited number of countries adapted the AAOIFI accounting standards as mandatory for their IFIs. The other 120 countries apply standards issued by IASB for their IFIs. For MASB, the objective of financial reporting is to generate useful financial information for creditors and investors. An analysis of the accounting principles outlined in the conceptual framework of the MASB shows substantial replication of the AAOIFI's conceptual framework. In the Malaysian Islamic finance industry perspective, though the regulator requires the IFIs to apply the IFRS, yet it issued relevant regulations as a guide for IFIs financial reporting and to close the gap.
- PublicationConclusionZulkarnain Muhamad Sori (UMK Press, 2019)
Islamic finance industry has grown rapidly over the last few years, where the 2018 Islamic Finance Development Report by Thomson Reuters reported that the year on year growth by of 11% to US$2.4 trillion in assets in 2017 and predicted that it would grow to $3.8tn of assets by 2023 (Thomson Reuters, 2018). Realising the importance of the industry, this book examines various issues on Accounting and Governance of Islamic financial institutions. In fact, the unique feature of Islamic financ that is based on the shariah principle warrants critical examination on various issues relating to accounting of Islamic financial transactions. Basically, business dealings are prohibited to contain component of riba (interest), gharar (uncertainty) and maysir (gambling/speculation), and trading of actual assets and share the risk between participants are encouraged. Thus, scholars posited different views as to whether the key concept of current accounting principles such as time value of money, substance over form, principles of probability and accrual basis are permissible. The book also covers accounting issues on various Islamic finance products and Shariah governance of Islamic financial institutions.
- PublicationContemporary issues in financial reporting of Islamic financial institutionsSazali Abdul Wahab; Mahmoud Al Homsi; Zulkarnain Muhamad Sori (UMK Press, 2019)
This book presents contemporary issues in financial reporting of Islamic financial institutions. Two key areas are covered namely, accounting for Islamic financial transactions and shariah governance. The main motivation to publish this book is to share our understanding on the unique nature of Islamic finance industry and the approach taken in accounting and reporting of Islamic financial transactions. Also, the book illustrate the importance of shariah governance in ensuring end-to-end shariah compliance. This book is to provide a practical guidance to researchers, industry practitioners and the other stakeholders.
- PublicationEmbracing maqasid Shari'ah via integrated via integrated reporting: the case of Islamic banks in MalaysiaMuhammad Syukqran Kamal; Noor Suhaida Kasri (Emerald Publishing Limited, 2021)
Financial reporting has undergone tremendous development in the last couple of years. It traditionally discloses financial results that mainly consist of income statement, balance sheet, and cash flow. This information aids its shareholders, customers as well as the public to assess and measure the financial performance of the corporation or organization. It also informs them of the resource allocation, investment decision that affects the business operations in that particular year. However, such format of reporting has in recent years faced disruption due to the introduction of Integrated Reporting (IR). The style of reporting under IR is that it reports not only financial but non-financial information. It gives emphasis on value creation and sustainability as well as future outlook of a company via its short-, medium-, and long-term planning.
- PublicationIE 1002: Reporting of Islamic financial transactionsMohamed Ibrahim, Shahul Hameed (INCEIF, 2012)
This study guide is to develop an understanding of the accounting issues in Islamic finance in the framework of Islamic accounting concepts. This guide covers the view od practices and issues in shariah review, and auditing in Islamic financial institutions and performance of analysis of Islamic banks.
- PublicationThe impact of management, family, and institution on the auditor's going concern opinion issuance decisionMohammad Noor Hisham Osman; Ahmed Razman Abdul Latiff; Zaidi Mat Daud; Zulkarnain Muhamad Sori (Universiti Putra Malaysia (UPM), 2018)
Incidents where external auditors do not issue a going concern audit opinion (GC opinion) to companies having severe financial problems have been reported globally. This issue motivated this study : (i) to investigate the effect of selected auditor characteristics in terms of specialization, tenure, and fee on GC opinion issuance and (ii) to examine the moderating effect of management's, family's, and institution's influence on the relationship between auditor characteristics and GC opinion issuance. The study involves 644 Malaysian financially distressed listed companies in the period 2006 to 2012. The results of a panel logistic regression analysis show that auditor characteristics have no relationship with GC opinion issuance. Influential management - measured as the level of their ownership - can dampen the positive relationship between auditor specialization and auditor tenure with GC opinion issuance. The presence of an influential family, on the other hand, can strengthen the positive relationship between auditor tenure and GC opinion. No evidence about an influential institution's impact on the GC opinion process could be found. In conclusion, while auditor characteristics do not affect the possibility of a GC opinion issuance, pressure imposed by influential management and family on the auditor during the audit opinion decision process does have an impact.
- PublicationThe implementation of internal control system among Malaysian credit co-operativesAishah Ariffin; Farahaini Mohd Hanif; Salwana Ali; Nor Alyani Abdul Razak; Zulkarnain Muhamad Sori (Maktab Koperasi Malaysia, 2016)
This study aims to examine the perception on internal control system (ICS) practices among Malaysian credit co-operatives. Specifically, this study provides input to those who are involved in developing ICS in co-operative namely, the Board Members (BOARD), Internal Audit Committee (IAC) and management staff. Using Malaysian Co-operative Societies Commission (MCSC) definition on classification of co-operatives, four groups of respondent cooperatives based on size of cooperatives were developed i.e. micro, small, medium and large. After eliminating with incomplete data, 536 co-operatives were selected to be included in this study, where, two questionnaires were mailed to co-operatives' BOD and IAC. After three follow up procedure, 22% of the respondents returned the questionnaire. To compliment the questionnaire analysis, a case study on four co-operatives using unstructured interview questions was conducted. The data was analysed based on three themes namely ICS awareness, readiness and practices. It was found that the majority of respondents are highly aware on the importance of ICS and they believed that ICS should associate with monitoring activities. Consistently, the large majority of the respondents pointed out that, their co-operatives are ready to perform ICS in the perspective of human resource, knowledge, and training. On the other hand, the majority of Malaysian credit co-operatives are not ready to provide sufficient financial resources to appoint competent and skilled staff. Finally, the majority of the respondents (> 80 percent) have performed 60 percent of the ICS components presented to them. Also, 56 percent of the respondents submitted periodic report to the MCSC as required by the law. These findings indicate that Malaysia credit co-operatives are aware and ready to perform ICS towards good governance in the interest of their members.
- PublicationIntellectual capital disclosure practices and governance mechanisms of Islamic banks: a comparative study between IFRS and AAOIFI financial reporting regimesSyaima' Adznan; Zulkarnain Muhamad Sori; Shamsher Mohamad Ramadili Mohd (INCEIF, 2022)
The Islamic banking industry has grown and gained a remarkable position in the global share of the financial sector. This growth requires a strong emphasis on intellectual capital (IC) that includes dedicated human capital, reliable structural capital, and a committed and long lasting relational capital among participants in the Islamic banking ecosystem. The study aims is to examine and compare the intellectual capital disclosure (ICD) practices of Islamic banks under different reporting regimes. The IFRS issued by IASB and FAS issued by AAOIFI are the two commonly used standards for financial repoting by Islamic banks. The findings indicate that, on average, there is not much difference between IFSB and AAOIFI scores (IASB:57.25% vs AAOIFI: 56.58%); in fact, most of IFSB-based banks performed better that AAOIFI-based banks throughout the period of study except in first year (i.e. 2012). The study also examined the relationship of corporate governance and the moderating role of Shariah committee with the extent of ICD practices among the Islamic banks. Several corporate governance mechanisms such as board size, number of board meetings, board gender, board independence, board expertise, audit committee size, number of audit committee meeting, audit committee gender, audit committee independence, and audit committee expertise were used as dependent variables. While, selected Shariah committee characteristics that, included Shariah committee size and Shariah committee gender were the moderating variables and firm characteristics were used as control variables to control for cross-sectional differences associated with ICD. The study applied the prominent resourced-based, agency and legitimacy theories and formulated twenty-three (23) hypotheses. Based on a total sample of 231 Islamic banks in four countries, namely Malaysia, Brunei, Bahrain and Jordan covering year 2012 to 2018, the findings revealed that having an effective governance structure is essential, as it is able to influence the ICD practices of Islamic banks. Specifically, the study found that ICD practices of Islamic banks is significantly and positively associated with board size, board independence, audit committee gender and audit committee independence. The results suggest that larger or reasonable board size tends to have varied skills and expertise among the board members, resulting in more information by allowing for greater diversity of backgrounds and viewpoints.
- PublicationIntroductionSiti Zaidah Turmin; Mohammad Noor Hisham Osman; Ahmed Razman Abdul Latiff; Zulkarnain Muhamad Sori (UPM Press, 2015)
Over the last 10 years, Malaysian capital market has made significant progress in instilling an efficient and well-regulated marketplace together with a proper institutional framework for the regulation of the accounting profession. The shareholders and stakeholders interests are safeguarded through high quality corporate financial reporting and corporate governance. It is the aim of the book to provide evidence and research findings on relevant issues. This book is divided into three parts that consists of 11 separate chapters of academic research works. The chapters covered ranging from issues on corporate internet reporting practice, corporate social responsibility, corporate governance, auditor independence and Islamic finance.
- PublicationIslamic banking stability, efficiency and growth: the market discipline of Islamic term deposits investment accountsSharezan Abd Rahman; Mansor H. Ibrahim; Zulkarnain Muhamad Sori (INCEIF, 2017)
This research empirically investigates the role of profit sharing investment accounts in providing market discipline and the extent to which PSIA influences Islamic banks' stability, efficiency and financing growth, thus complementing government supervision and regulation of Islamic banks. Data from 48 Islamic banks from 13 countries in different regions over the period 2007 to 2014 were collected. A two-step system generalized method of moments (GMM) was applied to estimate the equations. The fixed and random effects and the two-step difference GMM were also applied for comparison purposes. The empirical results do support the view that PSIA is able to influence the Islamic banks’ prudent behaviour, and provide evidence that PSIA is an effective instrument of market discipline. PSIA was found to be able to reduce credit risk of Islamic banks and influence their financial health by maintaining adequate capitalization. The study further finds evidence to support that PSIA is able to provide discipline and influence Islamic banks’ cost management and a boost to their financing growth. PSIA not only improves banks’ market discipline by directly reducing non-performing loans but also influences reduction of cost to income ratio, improving the Islamic banks’ efficiency.
- PublicationProfessionalizing the role of Shari'ah auditors: how Malaysia can generate economic benefitsSyed Faiq Najeeb; Shahul Hameed Mohamed Ibrahim (Elsevier, 2014)
The paper presents arguments on the need for inventing the profession of Shari'ah auditing and why Malaysia should take the lead to create an Association of Chartered Shari'ah Accountants and Auditors (ACSAA) that can result in long run economic benefits for the country. The paper also critically analyzes how accounting and auditing membership is being exported worldwide by few dominant players to generate economic benefits for their respective origin countries and how existing Islamic accounting and auditing qualification suppliers have failed to deliver and create holistic Shari'ah accountants/auditors required to serve in an ideal Islamic economy. The paper proposes 2 models through which ACSAA can be made a practical reality.
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