The Shari'ah and its Implications for Islamic Financial Analysis

I. Relevance of the IssueBy far the majority of articles in the world's leading accounting journalstake as given the culture and religions of the Western world. Articles appearfrom time to time that make distinctions among accounting practices indifferent Western or ex-Commonwealth countries, but in so doing there isusually no need to re-examine whether the basic building blocks of accountingand finance are consistent with the cultures of those countries; that is taken asself-evident. A few authors have pressed further to show that it is inappropriateto impose unmodified Western accounting practices on developingcountries, while many others have illustrated the difficulties in harmonizinginternational accounting standards when they have to be applied to countrieswith different environmental business and social foundations.This line of development is followed in these pages to examine the situationin countries adhering to strict Islamic principles where the culturalbackground to business, and in particular the influence of religious law, arequite different from that in Western countries. It will be shown that differencesbetween the Islamic and Christian religions imply different societal rules ofbusiness behaviour, which further imply differences in operating financialorganisations, as well as in accounting for them and conducting financialanalysis. In fact, the impact of religious principles are so different in these ...