Abstract
This study examines the validity of a theory of lslamic Corporate Reporting proposed by Baydoun and Willett (1994). Specifically, the theory suggests that Islamic communities would be better served by a corporate reporting model which includes a current value financial position statement and a value added statement. Baydoun and Willett's normative model was developed based on what Muslims ought to desire (the desirable). To determine if the desirable aligns with what Muslims actually desire (the desired), the theory was empirically tested in this thesis by reference to Muslim and non-Muslim users in Malaysia and New Zealand.
Data was collected through a questionnaire survey and a quasi-experiment. Survey respondents comprised of accountants, bank lending officers, financial analysts and zakat officers. Subjects for the quasi-experiment comprised final year accounting students of four universities, three in Malaysia and one in New Zealand. Primarily, the study examines perception differences between Muslims and non-Muslims relating to the usefuh1ess of the current value balance sheet and the value added statement. The thesis also investigates the difference in perceived usefulness between two types of financial statements: differences between the current value balance sheet and the historical cost balance sheet, and differences between the value added statement and the income statement by Muslims and non-Muslims separately.
Overall the hypothesis that Muslims and non-Muslims would differ in their perceptions of the usefulness of the current value balance sheet and the value added statement have not been supported by the results of this study. Similarly, there was very little evidence to show that Muslims would prefer the value added statement over the profit and loss account or the current value financial position statement over the historical cost balance sheet. The results regarding non-Muslims were similar. Thus, superficially, there appears to be little to support the contention that the cultural context of human activities (of which religion is a significant part) is relevant to financial reporting.
However, such empirical findings have to be interpreted with care. To ask questions concerning the proper form of accounting in an Islamic society, which is ultimately an ethical matter, it is necessary to invoke a purposive dimension in the search for answers. The way things are does not necessarily imply the way things should be. It may be, for example, that the technology of accounting which has been imported into Islamic communities is destructive of their values in some instances. This issue (i.e. the reasons why accounting is what it is in Islamic societies today and not based on what it apparently should be) is developed in significance as the research progresses. It becomes a central theme in the later stages of the thesis.