CHAPTER 7:    RESEARCH DESIGN AND DATA COLLECTION

“So ask the learned if you do not know”

(Al-Qur’an 16:43)

 

7.0 INTRODUCTION

 

Research data may be categorised as primary and secondary data.  Primary data are data generated by the researcher using data gathering techniques, some of which will be discussed below. Secondary data are those that have been generated by others and are included in data-sets, case materials, computer or manual databases or published by various private (e.g. Annual Reports of companies) and public organisations or government departments (official statistics by the Statistical Office). International Organisations such the International Monetary Fund and the World Bank and the United Nations and Islamic Conference Organisations publish economic statistics of member countries or on a worldwide basis.

In this research primary data collected by the researcher are used. As discussed in Chapter 2, one way of extending knowledge in Islam is to ask those who are knowledgeable in the field and to seek their consensus (ijma). Asking people who know is a Qur’anic imperative (Al-Qur’an, 16:43). There is a dearth of empirical work in Islamic accounting research. Doubts have also been expressed, in view of the economic and political situation and apparent unethical behaviour of the Muslim world, whether there is an Islamic ethos among the Muslims at all. If these doubts were true, especially amongst the educated and professional groups such as accountants, the whole exercise would be merely theoretical. In the event, extending Briloff’s quote (Gambling & Karim, 1991), time would be better spent developing accountants with Islamic principles rather than developing Islamic accounting principles. There is therefore the need to gather primary data, which is done in this research.

This chapter proceeds as follows: In the next section (section 7.1), data gathering techniques and methodology are discussed in general followed by specific data gathering techniques. The reasons for the methods chosen in this project are given in Section 7.2 along with the reasons for the choice of the research environment. This is followed in section 7.3 by a discussion of: the construction of the primary research instrument used in this project - the Islamic Accounting Questionnaire, the characteristics of the population and sample surveyed, and the problems encountered during the survey. This is followed in section 7.4 and section 7.5 by a discussion on the construction of the second and third questionnaires respectively. These are the finance and the non-finance personnel questionnaire on the behavioural consequences of conventional accounting. This chapter is concluded in section 7.6.

7.1 DATA GATHERING TECHNIQUES: MATCHING METHODOLOGY AND METHODS.

 

Research data may be collected in various ways. Some of these methods depend on the methodology and the theoretical assumptions used in the research. There is a tendency for researchers in the functionalist, positivist paradigm to collect hard objective numbers e.g. Share prices, accounting numbers etc by observation, experimentation, extraction from published sources, questionnaires and structured interviews. They emphasise quantitative techniques over qualitative methods. “Softer” humanistic researchers in the interpretative and radical humanist paradigms use the latter generally.

Although purists in either paradigms stick to their own methods, it is not a case of ‘neither the Twain shall meet’ as researchers have been encouraged to mix and match (Tomkins & Groves, 1983). This researcher has followed this route.

Further, “ triangulation”- a notion introduced from military studies by Denzin (1978) (as quoted by Tomkin & Groves, 1983), has been suggested as a way to make research studies more robust and rigorous by verifying results through different methods, thus ensuring that the results are not a function of the research method.

The theoretical paradigm adopted by the researcher as explained in Chapter 5 (Section 5.3.5) is the  ‘Islamic’ paradigm, which is a spiritual extension of a middle position of the subjective/objective dimension divide and towards an interpretive approach. For this paradigm, long-term participant observation in an organisational setting, multi-stage interviews and case studies would be appropriate data collection methods. However the researcher has chosen to use questionnaires because of the difficulties in obtaining access to organisations and more specifically, to obtain evidence of consensus among  the  respondents on Islamic Accounting issues.  A short description of data gathering techniques used in this project is given next.

7.1.1 Questionnaires and the survey method

 

Questionnaires have, according to Sharp & Howard (1996, p 145), “over the past century, become a common method of gathering information.”  It can be defined as “a pre-formulated written set of questions to which participants record their answers, usually within largely closely defined alternatives.” (Sekaran, 1992, p 200). In the USA, the term “Survey” is used for this data collection method (Nachmias & Nachmias, 1996, p224).  Creswell (1994) informs us that a survey design - through the data collection process of asking questions, provides a quantitative or numeric description of some fraction of the population i.e. a sample which can be in turn generalised to the population from which the sample was drawn.

In general, questionnaires are useful, where the researcher cannot observe the phenomenon directly or is impractical to do so. It allows the researcher to reconstruct the phenomena through the experience and perceptions of the participants who have observed the phenomena (Nachmias & Nachmias, p 224). In addition, certain research including the present one, intends to elicit the thoughts and perceptions of people who have certain qualities e.g. education, experience, situation in life etc. who have the knowledge and also the ability to precipitate changes in their environment.

Questionnaires can also be divided into perception and factual questionnaires (see for example, Mahmud, [n1] 1997), although this division involves ontological positions which are not acceptable to some academics. Perception questions ask questions concerning the feelings, thought, knowledge and opinion of participants, which are quite subjective. Factual questions ask questions of fact. Even in perception questionnaire, there is usually a ‘personal details’ section, which is factual.

Questionnaires can also be categorised by the method of delivery i.e. Postal Questionnaire, Personally Administered Questionnaire and telephone and its recent extension - emailed questionnaires. In the researcher’s opinion, the main advantages of these methods are structure and timeliness.

Although questionnaires can be both open ended or closed ended, both types provide structure to the process of data collection, the closed ended one being more specific and less prone to verbosity and interpretation than the open ended questionnaire. As compared to participant or process observation, where only general points can be watched for, the questionnaire structures the data and makes it easier for later analysis especially when nominal or ordinal scales are used to capture data. These can be used in computerised statistical analysis, which makes the research more robust and rigorous especially in the light of positivists.

The timeliness of data gathering is another feature especially of postal or telephone questionnaire surveys. Controlling for the response rate, more data can be collected in a shorter period of time by using questionnaires than by interviewing sequentially or observing over long periods of time.

7.1.2 Postal Questionnaires

 

In this process, the questionnaires are mailed to the sample participants, usually with a pre-paid self-addressed envelope to encourage response. A large geographical area can be covered quickly and cheaply by this method. It is also very timely, as many questionnaires are being answered in parallel. This can be contrasted to a situation where the researcher would have to sequentially administer questionnaires or interviews. This enables a larger sample to be obtained in a short space of time. Although in theory the researcher could employ an army of interviewers to administer questionnaires, this is a costly affair and is not practical for a PhD project. In terms of reliability, posting questionnaires avoid accusations of incorporating researcher bias as compared to administered questionnaires.

Another advantage is greater anonymity due to the absence of the interviewer, especially when sensitive questions are asked, e.g. ethical practices. “People in the sample are more likely to respond to sensitive questions when they do not have to face an interviewer or speak to someone directly” (Sekaran, 1992, p225).

In this particular research, the identity of the individual members of the Malaysian Institute of Accountants to whom the questionnaires were posted was kept confidential by the institute. Many participants did not disclose their addresses and names in the questionnaires. For the questionnaires which were handed out to the working MBA students, many did not want to identify their organisation, perhaps to avoid accusations of disloyalty, as they had to respond to questions on the behaviour of their managers and companies,.  Hence anonymity has been important for many participants in this research.

Finally, questions requiring considered answers (as in the case of the Islamic Accounting Questionnaire used in this research) are better mailed to enable the participants to give some thought to the questions. In this research, some academics did not give back the questionnaires immediately, as they wanted to think about the issues for a few days. Where the questionnaires were administered, the participants spent considerable time answering the questionnaires often debating points with the researcher, sometime as much as two hours for what would have taken 30 minutes, if the answers were not given much thought.

The negative side to postal questionnaires is that the response rate is usually small which requires a second or even a third mailing. The ever increasing number of research and posting of junk mail means that many questionnaires end up straight in the dustbin. A further more important disadvantage of this method is that different participants may interpret the questions differently and certain questions can be completely misunderstood by many or all of the participants. To avoid this problem, questions would have to be simple (see for example, Mahmud, 1997 listing variables in his perception questionnaire). In this research, however, it was very difficult to keep the questions simple, especially for the Islamic Accounting Questionnaire and this may have affected the understanding and interpretation of some of the questions. Another problem associated with this questionnaire is the language ability of the participants especially if a foreign language such as English is used in countries where English is not the native tongue of the participants. Again the researcher faced this problem in the case of the non-finance behavioural questionnaires sent to personnel of the Islamic business organisations visited due to their lower education and English proficiency.

7.1.3 Personally Administered Questionnaires

 

Here, the researcher personally administers the questionnaire to the participants, usually at the participants’ workplace or residence. This has the advantage of a faster response, as the researcher and his team can get the questionnaires completed quickly as compared to the postal method, where the participant might postpone filling up or returning the questionnaire. This method is especially suitable, where the researcher can get the participants and /or his organisation to co-operate to allow the researcher access, in a survey confined to a local area.

Advantages of this method include: (i) doubts regarding the meaning of the questions can be clarified to ensure that the participant is answering the questions in the sense that the researcher intended, (ii) the importance of the research can be personally presented to the participants and its significance explained to them  to motivate honest answers by emphasising their  contribution to the research, (iii) it requires fewer skills than interviewing, and hence relatively low skilled assistants can be recruited to perform this task to speed up the research, and (iv) it ensures better response rates because there is a ‘personal face’ to the questionnaires as personal persuasion usually increases interest.

The main disadvantage seems to be that the researcher may introduce his personal bias by giving facial or verbal expressions, which may put the participant at unease. Further in explaining questions differently to different people, participants may be in fact answering different questions as compared to those whom the questionnaire was mailed.

7.1.4 Interviews

 

7.1.4.1 Definition:

 

Nachmias & Nachmias (1996,) defines an interview as a “face-to-face, interpersonal role situation in which an interviewer asks participants questions designed to elicit answers pertinent to the research hypotheses” (p 232). However, Sekaran (1992) reminds us that interviews need not be face-to-face as it can be conducted through the telephone or can even be computer assisted.

7.1.4.2 Classification of Interviews

 

Interviews can be classified as structured or unstructured (or non-directive interview) although Nachmias & Nachmias (1996) identifies a third category- the focused interview , which is a variation of the structured interview. In the structured interview, the format is more rigid and assumes that the researcher knows exactly what information is needed and has a list of pre-determined questions he intends to ask of the participants. The same questions are administered to every interviewee, although in certain cases depending on the circumstances or participants’ answers, the researcher may elicit additional information by asking additional questions not on his schedule. “Through this process new factors might be identified and a deeper understanding might result” (Sekaran 1992, p 192).

In the nonstructured or non-directive interview, the researcher does not have a schedule listing a set of pre-specified questions , nor are the questions asked in a specific order. The researcher does not direct the interviewee and thus the interviewee is encouraged to relate his or her experiences and to reveal their attitudes and perceptions on the topic of interest. In this method, the interviewer has an opportunity to probe various areas and to raise specific queries during the interviews.

 

7.1.4.3 Advantages and Disadvantages of interviews versus Postal  Questionnaires.

 

The main advantage of face to face interviews is that the researcher can adapt the questions as necessary, clarify doubts and ensure that the responses are properly understood by repeating or rephrasing the questions. (Sekaran, 1992, p197). Probing during interviews can elicit additional information and detail, which can provide deeper insights. The interview also results in a higher and more complete response rate than mailed questionnaires. This may be the only way to get information from people who cannot read or write or understand technical language. One further advantage is that during interviews, the researcher can collect information on the environment of the interviewee e.g. request for annual reports, organisation charts, brochures, which are normally entertained as opposed to requests through the mail.

 

The disadvantages of the interview include cost and possibility of bias. It is very costly to conduct many interviews over large geographical areas as it may involve training interviewers, transportation and accommodation out of town.  The very flexibility of an interview is also an opportunity for researcher bias to influence the data collected. Facial or verbal cues may influence the answers the participants give.

 

A further disadvantage of the interview would be lack of anonymity.  Participants may feel threatened or intimidated by the interviewee, as he knows many personal details of the interviewee such as name, position, organisation, telephone number and addresses. This is especially true, if the topic of the research or particular questions is sensitive.

7.1.5 Telephone Surveys

 

Telephone surveys may consist of polls, interview or questionnaire survey conducted over the telephone. Compared to mailed questionnaires or personal interviews, they can cover a wider geographical area in a shorter time. However the disadvantage is the higher cost compared to mailed questionnaire but there can be substantial cost savings compared to personal face-to-face interviews.

Anonymity of the telephone survey varies; the lack of face to face contact can both be an advantage and disadvantage. Personal cues cannot be given or received, hence there cannot be an accusation of researcher bias. However, this is not conducive to getting a greater insight into the perceptions, feelings and thoughts of the interviewee. Further, interviewees may not be easy with a faceless researcher as they may fear lack of confidentiality of their views.

In this research, the length of the questionnaire and the nature of the questions which required some thought was not suitable for administration over the phone. Hence the telephone was used only to fix appointments for interviews to hand over questionnaires and make presentations to academics, in some cases before handing the questionnaires to staff.

 

7.2 Methods and the  Rationale for the methods

7.2.1 The Data Collection Methods: From The Ideal To Reality

 

Initially, the researcher intended to divide the data collection into three parts; i.e. an Islamic Accounting Questionnaire; delivered by mail and in person and a case study combined with interviews. Unfortunately, the economic situation in Malaysia, where the research data was collected, deteriorated since 1997. This made companies unwilling to discuss ethical matters when their survival was at stake. Further, Malaysia faced political problems with the sacking of the Islamist Deputy Prime Minister Anwar Ibrahim, and the subsequent riots and uprising by the Muslim population in 1998; this made some companies who were Islamically inclined inaccessible to the researcher. This was especially true for companies whose directors had strong connections with the ex deputy prime minister. In fact, the Islamisation of the economy and politics were to some extent due to the effort of the ex-deputy Prime Minister (especially the setting up of the Malaysian Islamic Bank and the International Islamic University). If not for the fact that the CEO of one of the Islamic Companies studied was personally known to the researcher it would have been impossible even to get the finance and non-finance questionnaires answered.

The Islamic companies set up by opposition Muslim political parties were very careful about inviting outsiders to access their organisations due to fear of infiltration by Government spies. Hence, due to lack of access for case studies, the data collection method was changed to delivered questionnaires on behavioural aspects of conventional accounting for finance and non-finance personnel.

To summarise, the main data collection methods used in this research are:

(a) The Islamic Accounting Questionnaires which were (i) mailed to members of Malaysian Institute of Accountants, (ii) delivered to accounting academics in Universities in Malaysia, (iii) delivered to companies through colleagues and friends and (iv) delivered to audit firms.

(b) The Finance and Non-Finance Questionnaires  which were sent to (i)  part  time MBA students of the International Islamic University  who were working full time as executives in various sectors and (ii)  employees of Tabung Haji , Abrar Group and some other companies and (iii) University Technology Mara Executive MBA students who were also full time executives.

Before the contents of the above questionnaires are discussed in detail, the choice of Malaysia as the research environment needs some elaboration.

7.2.2 The Choice of Malaysia as the Research Environment

 

This study is an exploratory study of Islamic accounting. It is intended to be the first of a series of studies, which as a whole may culminate in findings, which are generalisable to the whole Muslim world.  However due to financial and time constraints, an international survey was not possible in this PhD project, thus the reason for focusing in a particular country. The findings are therefore meant to be generalisable only to Muslim academics and Muslim professional accountants in Malaysia, in the case of the Islamic accounting questionnaire.  

7.2.2.1 Some background information on Malaysia

 

Malaysia is or was recently seen to be a model Muslim country (although not an Islamic state) because of the economic and political stability and the infusion of Islamic values in both government and private life.  Malaysia has only a 55% Muslim population (constituting of about 50% Malay Muslims and 5% other Muslims – mainly Indian Muslims). The Non- Muslim population consist of 30% Chinese (mainly Buddhists and Taoists) and 10% Indians (who are mainly Hindu) and 5% others. However, the political and military machinery is dominated by the majority Malays (who are almost 100% Muslim) who govern the country by means of a multi-party coalition. Malaysia is a constitutional monarchy with a two-tiered parliament, the lower house is elected by all citizens of Malaysia, Muslim and Non-Muslim. Islam is the official religion defined by the constitution.

The Malays are an ethnic group who covers the Malay Archipelago consisting of Malaysia, Indonesia, Brunei, Singapore and Southern Philippines and Southern Thailand. They are predominantly Muslim although due to recent missionary activity in Indonesia, about 10% of the population there are Christian. One of the unique characters of Malaysia is the definition of Malay in its federal constitution. It defines Malay as a Muslim who practices Malay customs, speaks the Malay language and was resident in Malaya or an offspring of such resident in 1957 when the country received independence from Britain. This technically means that an Indian or Chinese who has embraced Islam and follows Malay customs is classified as Malay.  Although not many Chinese and Indian Hindus have chosen this option, there are many born Indian Muslims and a few Chinese converts through inter-marriage who have. Hence the Malay classification can be a proxy for Muslim. (See section 7.3.4.2 for the importance of this).

Although officially a secular state, the government has been increasingly infusing Islamic values, which it claims are universal. The Shari’ah (or more accurately Mohammedan Law – a leftover from the British era) in a much diluted form is enforced by a parallel system of Shari’ah courts.  The Shari’ah is enforced only on Muslims in personal law areas only. In criminal cases, it is the civil courts (which enforce the British common law and local statutes) which have the upper hand. However there have been recent calls by Muslims to implement the Shari’ah as the official law of the land although this has been resisted by the government and non-Muslims alike.

7.2.2.2 Islamic revivalism in Malaysia

 

In the 1960’s and 1970’s, Malaysia like other newly independent countries was born and governed in the secular mould of the British. However Islamic revival throughout the world, especially in the light of military and economic failures in other Muslim countries led first to an ethnic and later a mixed ethnic-religious assertion in politics, government and the economy by the Muslim Malays. Many political and social movements arose in Malaysia in the name of Islam. The Angkatan Belia Islam Malaysia (ABIM – Malaysian Muslim Youth Movement) was one such Islamic social welfare organisation which included the ulemas (Muslim scholars), intellectuals, students, farmers, government servants from both the government political party and opposition Islamic political party (PAS- Pan Malaysian Islamic Party). The leaders of this organisation were influenced by the writings and actions of the Islamic Brotherhood of Hasan al Bana (d. 1948) of Egypt,  and other renown Islamic scholars of the 20th Century, which were basically trying to implement Islam in the modern world in all aspects of life. Its most popular President, Anwar Ibrahim was co-opted into the Government in the 1980’s and was tipped to be the next Prime Minister of Malaysia until his recent downfall in 1998. Due to the resurgence of Islam in Malaysia, the government was forced to concede to the Muslims by opening new mosques, Islamic schools, implementing more religious education in the curriculum and having more Islamic religious programs on the radio and TV. 

When Anwar Ibrahim was co-opted into the government, he began a long career, first as the culture Minister (during which more Islamic elements were incorporated into culture rather than Hindu influenced dances), the Agriculture and the Education Minister and finally the Deputy Prime Minister. He managed to get the Islamic bank and the university going along with the introduction of compulsory Islamic subjects in all universities for Muslim students and the controversial introduction of Islamic civilisation as a compulsory subject for Non Muslims at the Universities in Malaysia. The government promoted a parallel Islamic Money Market and Financial System. The wearing of Islamic headscarf and costume  by Muslim females were allowed or even encouraged.

Although these developments were seen as purely cosmetic by the more extreme elements in the Islamic movement who called for a full implementation of the Shari’ah. This non-violent gradual Islamisation process was encouraged and admired by many in the Muslim world. Together with the rapid economic success of Malaysia and a more or less equitable distribution of wealth, Malaysia was seen as a model Muslim country.

7.2.2.3 Islamisation of business life

 

There is an increasing Islamic eagerness among the Muslims to practice Islam in all sectors of life including business.  The Malaysian government as far back as the late 1980s made it a policy of instilling Islamic values in Government (at least cosmetically). Economists and businessmen who at least cosmetically adopted Islamic lifestyles increasingly took up the instilling of Islamic values or Islamisation. There were some efforts to instill Islamic values in businesses by the newly privatised companies with Muslim heads (e.g. Tenaga, Renong and Berjaya Corporations) although they were mainly ritualistic and lacking in substance. However, there are many Muslim businessmen who wanted to conduct their business in accordance with the Shari’ah. There were also Islamic organisations such as Lembaga Tabung Haji (a statutory funds investment organisation), Abrar Corporation (financial conglomerate) and Pusat Pungutan Zakat (Zakat collection company) which are Islamic by their incorporation charters.

Islamic banking and finance became a popular topic for academic and business discussion. The importance of the Islamic banking industry from an accounting perspective is indicated by the fact that the Malaysian Institute of Accountants formed a working committee on Islamic Accounting and Finance to set standards for Islamic banks and similar institutions. Even secular educated and secular minded professionals were turning more towards Islam (at least outwardly).

7.2.2.4 Malaysia as the Country of Choice for this Project.

 

In summary, Malaysia is a suitable place for the research project because:  (i) the increasing awareness of Islam and intention of the people to implement in the economic, business, social and political aspects of life,  (ii) the leading position of Malaysia in Islamic banking and finance and the Islamic money market, (iii) the existence of large Islamic and Muslim Business organisations,  (iv) the economic state of development with a robust Stock Exchange, a modern banking system, and continued industrialisation and progress towards  a knowledge based-economy (e.g. the Multimedia super corridor),  and (v) a developed accountancy profession based on Anglo-American Accounting system.

In addition, the researcher comes from Malaysia and hence language, communication and logistic problems, which may crop up if the research were conducted in other countries were reduced. Also, the fact that Malaysia is or was until recently seen as a model for Muslim economic development and a blueprint for gradual Islamisation increases the probability of adoption of any development in Islamic accounting by other Muslim countries.

7.2.3 Questionnaires and Interviews from an Islamic perspective.

 

 

The Qur’an in many of its verses, encourages learning, thinking and observation. It encourages Muslims to observe phenomena (both celestial and social) and learn from history and creation[1]. There is also a specific command in the Qur’an asking Muslims to question and “ask those who are knowledgeable, if you do not know” (Qur’an, 16:43). Hence, questionnaires may be regarded as a legitimate device in Islam if addressed to knowledgeable persons or specialists in the area. Further obtaining consensus (ijma’)  of scholars (‘ulema) is an accepted method of developing Islamic law. The Ulema in modern times could possibly be extended to subject specialists who also have some knowledge of Qur’an and Usulul Fiqh (Principles of Islamic Jurisprudence).


 

In this research, Accounting is viewed not a technical subject but as a social construct, constructing reality and being constructed by it. Accounting exists in the context of a society. In an Islamic society, the essence is a moral – ethical foundation based on scripture and its interpretations by ulema  (Muslim theologians, lawyers and intellectuals combined into one) or literally “the knowledgeable  people”.  Traditionally ulema are those who are well versed in Qur’anic and related Islamic knowledge. In the so-called “golden ages of Islam” when the Muslim world was the centre of civilisation and learning, many of the intellectuals of the day were ulemas. However, due to historical reasons, the educational system bifurcated into secular and religious education in the Muslim world, especially after colonisation of Muslim lands.

 Islamic resurgence in the 1970’s plus other factors such as oil wealth (Noreng, 1997), made Muslim intellectuals rethink their objectives and led to a new breed who can be called Islamists; these spearheaded many Muslim welfare organisations. These Islamists were mostly highly educated in the Western and local secular universities and through Anglo-American professional institutions (e.g. ACCA), but rejected the superiority of the West except in its science and technology. They combined the fundamental principles of Islam (e.g. they are not apologetic on the issue of polygamy but defend it on rational principles) with the modern science and technology seeking development with an Islamic face. They studied Islam part-time or took some courses in Islam with traditional Muslim teachers as well as modern educated ones.

While it cannot be said, that all Muslim professionals (especially accountants and accounting academics) are Islamists, the researcher suspects that there are a large number with Islamic tendencies  (as shown by their affiliation to Islamic political and social welfare parties). These professionals are not afraid of claiming to be good Muslims as well as professionals and intellectuals. This is especially true in Malaysia where the political environment is favourable and conducive to such identification unlike some other Muslim countries. Hence responses by Islamic intellectuals can be a basis for the production of knowledge (especially accounting knowledge) in Islam.

A further method of knowledge production is through consensus or ijma. Ijma originally referred only to the consensus of the Companions of the Prophet Muhammad (pbuh). Later traditional scholars accepted the ijma of the ‘pious predecessors (or salaf saleheen) i.e the companions’ companions and their companions and very pious ulemas who led schools of jurisprudence called Imams. The Prophet’s traditions, however refers to the consensus of the ummah or the people.  This was restrictively interpreted as all the people.  However Kamali (1991) for example, opines that, as this is impossible, the consensus of a majority of the ulema or intellectuals would be sufficient.  This approach is adopted in this project.  

If a representative sample of Muslim academics and professionals who have some Islamic knowledge can be shown to agree on certain aspects of Islamic accounting, this can then become part of Islamic Shari’ah Muamala (or Islamic Transaction/Business Law). This project through questionnaires hopes to explore the nature and extent of agreement or disagreement amongst this group and is thus important from an Islamic legal perspective.

7.3 THE ISLAMIC ACCOUNTING PERCEPTION QUESTIONNAIRE (IAQ)

 

This was the main device used for the greater part of data collection for this research. It consisted of 4 parts, the objective of the questionnaire and rational for each part, its construction and structure are explained below:

7.3.1 The Objective of the  Questionnaire

 

The objective of this questionnaire was to collect data on the perceptions of accountants and those involved in accounting (accounting academics and Malaysian Muslim professional accountants) on Islamic and conventional accounting, as well as on the socioeconomic responsibilities of Muslim and Islamic organisations. Specifically, the questionnaire was designed to answer the following four research questions listed in Figure 7-1.

(a)   Are the socio-economic principles under which Islamic business organisations operate different from those of capitalist business organisations?

(b)   Are the Islamic sources adequate to be used for developing an economic and accounting system?

(c)    Is conventional accounting appropriate for Islamic business organisations and Muslim users to fulfil their objectives?

(d)   What are the objectives and characteristics of Islamic accounting?

 

Figure 71: Research Questions underlying the Islamic Accounting Questionnaire.

 

In addition, several hypotheses are formulated under each research question herein, which will be tested (see Chapter 9). To facilitate the search for these answers, the Islamic Accounting Questionnaire (referred to herewith as the IAQ) was divided into four sections consisting of: (Section 1) the ethical moral context of Islamic and Muslim business organisations,  (Section 2) suitability (or otherwise) of conventional Anglo-American accounting for Islamic organisations and Muslim users, (Section 3) the objectives, nature and characteristics of Islamic accounting, and (Section 4) personal & organisational details.

 

For the most part, a 5 point Likert scale (Strongly Disagree to Strongly Agree) as well as a 5 point ranking scale (Not at all to Very Much so) was used in the three main sections of the questionnaire.  The fourth section was mainly “fill in the blanks” type of questions with suggestions in brackets. Some questions required only a tick in the boxes. The last part of the Questionnaire had an open ended comment box for participants to comment on the topic followed by notes on some definitions.

To maintain anonymity the name and company of the participants were not asked for although a box was left to give this information should the participants require a summary of the results.

 

7.3.2 The Construction of the Questionnaire

 

 

There are many text books on the methods of constructing questionnaires and scales (e.g. Sekaran, 1992;Nachmias & Nachmias, 1996).  These authors suggest that the wording of the questions, the order in which they are presented and the language used must be carefully constructed. Most questionnaires use one word  (the variable intended to be measured) or a few words which operationalises the concept to be measured.

This advice was born in mind as the questionnaire was developed. However, due to the explanatory nature of this study, this was not always possible, as the variables were not capable of being expressed in one or a few words. Most questions especially in section 1 and 2 were rather long. Although the researcher tried, short straightforward questions were not possible. The researcher had to define some terms or had to give assumptions as to the state of the environment to give more precise meaning to the answers. The Questionnaire went through seven versions before settling down on the 8th version, which was fine tuned. The questionnaire was discussed with fellow PhD students (who mainly consisted of international students, Muslim and Non-Muslim, who were not native English speakers) and faculty in the department of Accountancy and Business Finance at the University of Dundee. 

The sixth and seventh drafts of the questionnaires were pilot tested in the department. The original questionnaire was very long winded with multiple issues in one question. The initial seventeen page questionnaire was reduced to eight pages including the notes as it was thought that it was simply too long and would affect the response rate. Further, some notes, which were placed before each section and were, thought to be directing the participants to answer the question according to the researcher’s preference; these were either modified or deleted.  All definitions were placed on the last page of the questionnaire to be referred by the participants in case of need.

Although the researcher did not pilot test the questionnaire in Malaysia, several were administered to some faculty at the researcher’s home university.  Question 1.4 in the Islamic Accounting Questionnaire seemed to give some problems to the respondents. However, the questionnaire had already gone out by then and it was too late to change. Hence, this particular question has been left out in the calculation of scores and hypothesis testing.

7.3.3 The Structure  of the Islamic Accounting Questionnaire.

 

As stated in section 7.3.1, The Islamic Accounting Questionnaire (IAQ), was structured to elicit answers to certain research questions in three main areas; ethics/values of Islamic business organisations, suitability of conventional accounting and objectives and characteristics of Islamic Accounting.  Each area of the Questionnaire and the rationale for it are described in detail in the following sections.

7.3.3.1 Section 1: The ethical/ moral context of Islamic and Muslim Business organisations.

 

(Abdelgader, 1994) states that Islamic accounting is fairness and just accounting based on the principles of Islam. However fairness and justness depends on the social and ethical context especially of business organisations, since these organisations are those that use accounting to the utmost and in which accounting has the most significant impact on society.  With globalisation, the Muslim world is being forcibly integrated into the world business structure and order. Some parts of this order are not acceptable from an Islamic perspective. For example, the primacy of interest, the concept and structure of the modern business corporation, the concept of maximising profits and the stark materialism accompanying the adoption of modern business techniques including accounting.

There is an extensive literature on business ethics in the West, which attempt to deal with the excesses of capitalism (e.g. Donaldson, 1982).  The modern corporation has also been criticised by those in the critical paradigm (Cooper & Hopper, 1990).  However, since the corporation was never known in Muslim history but an implant from outside, there have been relatively few discussion of business ethics of Muslim and Islamic corporations from an Islamic perspective. There have also been arguments that globalisation means that if certain companies adopt ethical policies not consistent with the mainstream they will be forced out of business because of competition.

In this atmosphere, it was thought that it is important to know the perception of Muslims on the Islamic ethical position of Muslim and Islamic Business Organisations. In the absence of such perceptions, Islamic accounting might not be meaningful, as problems encountered in accounting are mainly those of accounting systems in large organisations such as the corporation.

Islamic organisation is defined in this research as one, which was set up specifically with Islamic economic and social objectives, and operates within the Shari’ah. Muslims should own it mainly but not exclusively. Muslim Business organisations, on the other hand are those corporations and businesses set up by Muslims or controlled by them but which may have high non Muslim participation. Although this type of organisation was not set up with specific Islamic objectives, the Muslim owners or managers, depending on their level of commitment to Islam may wish to conduct their business in an Islamic manner to the extent the business environment allows.

This section therefore is intended to answer two of the research questions indicated in Figure 7-1.  The first research question is:

Are the socioeconomic principles under which Islamic business organisations operate different from those of capitalist business organisations?

To facilitate answering this question, several questions were asked of the respondents in this section (see Figure 7-2) including whether the Muslim Business Organisations should operate within the Shari’ah, given that doing so may in conflict with modern business principles. This section also asked the participants whether the Shari’ah should be interpreted in a literal manner and not inline with its intent.  This was considered important because Islamic banks have been interpreting the Shari’ah in a literal manner, which enables them to provide interest-like financial instruments. While this falls technically within permissible limits, it does not address the objective for which interest was prohibited. It was felt that if there was to be any real benefits to be derived from an Islamic economic system and the corresponding Islamic accounting system, a purposive, objective oriented approach to the interpretations of Islamic Law was required. This is not a novel ideal as scholars such as Al Shatibi (Masud, 1997) and Imam Ibn Taymiyyah  (Islahi, 1988) had already undertaken such interpretations,.  Using the concept of maslaha (public welfare) and maqasid al-Shari’ah (the objective of the Shari’ah), they undertook interpretations which were more in line with the spirit of the Shari’ah (see Chapter 2). Some questions in this section were on the objectives of Islamic Business Organisations on gray and controversial areas e.g. the environment, profit maximisation, stakeholder management, and employee wage payments.

The next group of questions in this section were on the investment policies of Islamic business organisations in the financial market instruments which are controversial not only in Islam but in the West, such as options and futures, short selling and contra trading. There was also a straightforward question on whether Islamic business organisation, should participate in the interest based debt market which is clearly prohibited.  This was designed to test whether the participants held positions, which were regarded as bending over backwards to accommodate the ‘realities’ of a globalised market.


ISLAMIC ACCOUNTING QUESTIONNAIRE

SECTION 1: Focus of Islamic and Muslim Business Organisations

Please tick (Ö) the appropriate box. If you are unable to give an answer, please leave the boxes blank. If necessary, please refer to notes 1-3 at the end of this questionnaire.

 

 

No.

 

Statement

 

Strongly Agree

 

 

Agree

 

Neither Agree nor Disagree

 

 

Disagree

 

Strongly

Disagree

1.     

The Shari’ah should constrain the  activities of  Muslim Business Organisations.

 

 

 

 

 

2.     

Islamic and Muslim Business Organisations should promote the attainment of falah (success) and social welfare and not just concentrate on profits.

 

 

 

 

 

3.     

The Objectives of Islamic Business Organisations (IBO’s) should include:

 

 

 

 

 

 

 

a)    Ensuring all stakeholders are treated in a just and fair manner even if this means profits are lowered.

 

 

 

 

 

 

b)Avoiding damage to  the environment  even in the absence of adequate  legal requirements.

 

 

 

 

 

 

c)Maximising  profits for shareholders.

 

 

 

 

 

 

4.     

In the face of global competition, Islamic business  organisations  should adopt a technical interpretation of the Shari’ah rather than one  which is in line with its objectives and intent .

 

 

 

 

 

5.     

If necessary , please refer notes 8-11  at the end of this questionnaire.

Islamic business organisations should participate in:

 

 

 

 

 

 

(a)       Interest based Debt market.

 

 

 

 

 

 

(b)       Futures and/or Options market.

 

 

 

 

 

 

 

(c)       Short selling.

 

 

 

 

 

 

(d)       Contra Trading.

 

 

 

 

 

6.     

Islamic business organisations should pay sufficient wages to its employees for them to live reasonably,  even  if this means reducing shareholder profits.

 

 

 

 

 

 

 

 

7.     

The socio-economic principles in the Qur’an and Sunnah can  be developed into a business and/or legal framework to meet the current needs of :-

 

 

 

 

 

 

a) corporate industrial and commercial

     organisations

 

 

 

 

 

 

b) financial institutions.

 

 

 

 

 

 

 

c) voluntary and non-governmental   

     organisation

 

 

 

 

 

 

d)government institutions and agencies

 

 

 

 

 

 

Figure 72: Section 1 of the Islamic Accounting Questionnaire


These questions lead to the following hypotheses, which will be tested by the researcher in Chapter 9:

 

Hypothesis No.1:

 

Null Hypothesis:                  Malaysian Muslim accountants and accounting academics believe that Islamic business organisations concentrate more on profits as compared to the attainment of social welfare

Alternative

Hypothesis:                          Malaysian Muslim accountants and accounting academics believe that Islamic business organisations concentrate more on the attainment of social welfare than on profits.

 

Hypothesis No.2:

 

Null Hypothesis:               Malaysian Muslim accountants and accounting academics believe that Islamic business organisations participate in activities, which are not in line with Islamic socio-economic principles.

 

Alternative

Hypothesis:                          Malaysian Muslim accountants and accounting academics believe that Islamic business organisations do not participate in activities which are not in line with Islamic socio-economic principles.

 

The last part of section 1 of the IAQ is intended to answer the second research question:

Are the Islamic sources adequate to be used for developing an economic and accounting system?

 

Specifically the participants were asked their perceptions as to whether the principles in the Qur’an and Sunnah could be developed into a workable business and legal framework to meet the requirements of modern business organisations. This question was mainly asked, not to find out whether this is demonstrably provable, but to elicit the beliefs of mainly Muslim professionals. If the answers to these questions were positive, this would be an indication of a belief in the practicality of Islam in business and economic life in the current era and not obsolete or irrelevant to the needs of today. If there is no widespread belief in this, then secularisation of Muslims can be shown to have been successful and there is no point in looking for solutions to the socioeconomic problems of Muslims (including the development of an alternative Islamic accounting) from Islamic law and traditions.

 These questions lead to the following hypotheses, which will be tested by the researcher in Chapter 9:

 

Hypothesis No.3:

 

 Null Hypothesis:      Malaysian Muslim accountants and accounting academics believe that an economic framework cannot be developed from the socio-economic principles of the Qur’an  and Sunnah to meet the current needs of Islamic organisations.

 

Alternative

Hypothesis                Malaysian Muslim accountants and accounting academics believe that an economic framework can be developed from the socio-economic principles of the Qur’an and Sunnah to meet the current needs of Islamic organisations.

 

7.3.3.2 Section 2: Suitability (or otherwise) of Conventional Anglo-American Accounting for Islamic organisations and Muslim users.

 

The researcher has argued that conventional accounting is not suitable for Islamic and Muslim business organisations due to its inappropriate objectives, characteristics and consequences (Chapter 3). Section 2 of the IAQ (see figure 7-3) was designed in order to elicit the perception of the Malaysian Muslim Accountants and Accounting Academics on the following research question:

Is conventional accounting appropriate for Islamic business organisations and Muslim users to fulfil their objectives?

The first part of this section referred to the basis, objectives, and “unIslamic” consequences of conventional accounting information and to inquire whether conventional accounting needs a major overhaul if at all. The second part of section 2 was intended to elicit the extent to which the participants felt that conventional accounting information (i) satisfied Islamic requirements or (ii) had “unIslamic” consequences.

The third part of section 2 asked the participants to rank the extent to which some conventional accounting concepts thought not suitable from an Islamic perspective were appropriate or otherwise for Islamic organisations. There was also an open-ended question in which the participants were asked to insert other conventional accounting principles that were thought to be inappropriate.

These questions lead to the following hypotheses, which will be tested in Chapter 9:

 

Hypothesis No.4:

 

Null Hypothesis:       Malaysian Muslim accountants and accounting academics believe that conventional accounting provides information, which directs Muslim users towards Islamic behaviour

 

Alt Hypothesis:          Malaysian Muslim accountants and accounting academics believe that conventional accounting provides information, which directs Muslim users towards unIslamic behaviour.

 

Hypothesis No.5:

 

 Null Hypothesis:      Malaysian Muslim accountants and accounting academics believe that Financial Statements provided under conventional accounting provide appropriate information for Muslim users.

 

Alt. Hypothesis:         Malaysian Muslim accountants and accounting academics believe that Financial Statements provided under conventional accounting provide inappropriate information for Muslim users.

 

Hypothesis No. 6:

 

Null Hypothesis:       Malaysian Muslim accountants and accounting academics believe that the conventional accounting concepts of historical cost, prudence and monetary measurement are suitable for Islamic organisations

 

Alt. Hypothesis:       Malaysian Muslim accountants and accounting academics believe that the conventional accounting concepts of historical cost, prudence and monetary measurement are not suitable for Islamic organisations.

ISLAMIC ACCOUNTING QUESTIONNAIRE

SECTION 2 :Suitability of Conventional (Anglo-American) Accounting for Islamic Organisations

Please indicate the extent to which you agree with the following statements by ticking (Ö) the appropriate box. If you are unable to give an answer, please leave the boxes Blank.

No.

Statement

Strongly

Agree

 

Agree

Neither Agree

nor Disagree

 

Disagree

Strongly

Disagree

1.     

The fact that Western cultural values underlie conventional accounting principles may make them  inappropriate for use by Islamic business organisations.

 

 

 

 

 

2.     

The focus given to money and profits by conventional accounting fosters materialism, individualism and competition among Muslim users.

 

 

 

 

 

3.     

Information produced by conventional accounting cannot lead to welfare (falah) in the Islamic perspective through the efficient allocation of resources.

 

 

 

 

 

4.     

Conventional accounting needs major modification to enable it to provide the appropriate information which will allow Muslim users to make the appropriate decisions to ensure the attainment of Islamic objectives.

 

 

 

 

 

Please indicate the extent to which conventional accounting is appropriate or otherwise, to the requirements of Islamic business organisations,  by ticking (Ö) the appropriate box.

(1 signifies “Not at all” and 5 signifies “Very much so”)

 

No

 

Statement

1

Not at all

2

3

4

5

Very Much so

Don’t

Know

5.

Financial Statements prepared in accordance with conventional accounting principles:

 

 

 

 

 

 

 

a)      provide appropriate information  to enable Islamic business organisations (IBO) to  properly disclose their Islamic accountabilities ( e.g. Shari’ah compliance) to all their stakeholders.

 

 

 

 

 

 

 

b)      b)  impede the fair and proper allocation of  wealth between stakeholders e.g. as between shareholders , managers and employees.

 

 

 

 

 

 

 

c)      hinder  the making of the appropriate decisions needed to control Islamic organisations to ensure the attainment of their Islamic objectives.

 

 

 

 

 

 

6.

If necessary please refer to notes 4-6  at end of questionnaire.

The following accounting concepts are appropriate for Islamic organisations:

 

 

 

 

 

 

 

a)    Historic Cost.

 

 

 

 

 

 

 

b)   Prudence/conservatism.

 

 

 

 

 

 

 

c)    Money Measurement.

 

 

 

 

 

 

 

Figure 73: Section 2 of the IAQ

 

7.3.3.3  Section 3: The Objectives, Users,  Nature and Characteristics of Islamic Accounting.

 

The researcher discussed the possible objectives and principles of Islamic Accounting in Chapter 6. Section 3 of the IAQ is intended to elicit the responses of the participants regarding the objectives, the possible nature and characteristics of Islamic accounting information, the type of information Islamic accounting should provide, as well as the relative importance of stakeholders apart from shareholders from an Islamic perspective. It is intended to enable the following research question to be answered:

What are the objectives and characteristics of Islamic accounting?

This section consisted of four main parts:

The first part  (see figure 7-4) asked the participants to tick one of 4 choices or give their own view as to what they thought was the main objective of Islamic accounting.  The choices were obtained from a reading of the Islamic accounting literature (chapter 6) and the conventional accounting literature (chapter 3). The choice basically was between decision usefulness, stewardship, an Islamic version of accountability (Islamic Accountability as proposed in Chapter 6) and social accountability through the Islamic institution of Zakat.

The second part of this section (see figure 7-5) listed several subsidiary objectives of Islamic accounting information and asked the participants to rank the importance of each.


ISLAMIC ACCOUNTING QUESTIONNAIRE

SECTION 3: OBJECTIVES, NATURE AND CHARACTERISTICS  OF ISLAMIC ACCOUNTING

1.

Which of the following should be the MAIN objective of Islamic Accounting?

Please Tick only One of the following Boxes:

 

a) To provide information on the amount, certainty and timing of expected cashflows in order for shareholders to make decision to buy, hold or sell shares. (decision usefulness)

 

 

 

 

(b) To provide information which will enable shareholders to evaluate how efficiently management have safeguarded and enhanced their assets.(stewardship)

 

 

 

c) To provide information that will  enable all stakeholders to ensure that the organisation has discharged its accountability to them in accordance with the shari’ah and to induce economic behaviour  in line with Islamic objectives and values.

(Accountability)

 

 

d)Provide information to enable the proper calculation and distribution  of Zakat hence  reducing the possibility of creative accounting and  thereby automatically fulfilling the needs of other users. (Social accountability through Zakat Accountability)

 

 

 

e) Other, please state:

 

 

Figure 74: IAQ: Section 3 (Part 1)

 

Please indicate the extent to which Islamic accounting should aim at the following objectives by ticking (Ö) the appropriate box.

 

No.

 

Statement

1  

Not at all

2

3

4

5 Very Much so

Don’t

Know

2.

The objectives of Islamic accounting should be  to  provide information:-

 

 

 

 

 

 

 

a)    in order to maximise efficient allocation of capital to the most effective uses.

 

 

 

 

 

 

 

b)   to increase shareholder wealth.

 

 

 

 

 

 

 

 

c)    so that all users (including shareholders,  employees and others)  get their fair share of the wealth generated by an organisation.

 

 

 

 

 

 

 

d)   for the government to assess Zakat properly in order that Zakat beneficiaries can get their proper rights.

 

 

 

 

 

 

 

e)    so that activities of the organisation can be controlled to be  in accordance with the Islamic Shari’ah.

 

 

 

 

 

 

 

f)     to create  an environment conducive to solidarity within  the organisation and co-operation between various stakeholders.

 

 

 

 

 

 

 

Figure 75: IAQ: Section 3 (Part 2)

 

 

 

The third part of this section (see figure 7-6) asked the participants to rank the importance of other stakeholders such as Employees, Government, Community, Customers/Consumer groups and a unique group (Benevolent Loan Creditors) as compared to shareholders. Given the recent emphasis of other stakeholders other than shareholders in the social accounting literature (e.g. Gray et al., 1996), it was thought appropriate to give more or equal importance to other shareholders an Islamic accounting system (see Chapter 6). Here a five scale (from Not important at all to Much more important) was used with an additional column for a Don’t Know response.

 

ISLAMIC ACCOUNTING QUESTIONNAIRE

 

3.

As compared to shareholders, please rank the importance of the following stakeholders as users of Islamic accounting information.

Not

important

at all.

 

 

Less Important

 

 

As important

 

 

 

More important

 

 

 

Much more important

 

 

Don’t

Know.

 

 

 

 

 

a) Employees/Trade Unions.

 

 

 

 

 

 

 

 

 

b) Government.

 

 

 

 

 

 

 

 

 

c)  Community.

 

 

 

 

 

 

 

 

 

d)  Benevolent Loan (Qard Hasan) Creditors.

 

 

 

 

 

 

 

 

e) Customers / Consumer groups.

 

 

 

 

 

 

Figure 76: IAQ Section 3, Part 3

 

The fourth part of section 3 (see figure 7-7) listed various types of information which Islamic accounting could provide and asked the participants to rank the importance of these. The list contained information normally ignored by conventional accounting but which was thought to be important to Muslims.

This part ended with a check question on the disclosure of interest income by Islamic business organisations.  Since interest is prohibited in Islam; the participants were expected to tick the boxes labelled “Prohibited Transactions- Interest Income”. If participants had ticked sundry income box, the ability of the participants to answer the questionnaire would have been doubtful as their Islamic knowledge might have been suspect.

ISLAMIC ACCOUNTING QUESTIONNAIRE

Please indicate the importance you attach to the information which should be provided by Islamic Accounting  by ticking (Ö) the appropriate box.

 

No.

 

Statement

1  

Not important at all

2

3

4

5

Very Important

Don’t Know

 

4.

Islamic accounting should provide information on:

 

 

 

 

 

 

 

 

a) impact of the organisations activities on the  Environment.

 

 

 

 

 

 

 

 

b)Internal Employee-Manager relationships and working conditions.

 

 

 

 

 

 

 

 

 

c) Distribution of salaries, perks and wages among different levels of managers and  employees .

 

 

 

 

 

 

 

 

 

d)prohibited (haram) activities or financing undertaken by the organisation.

 

 

 

 

 

 

 

 

e)social impact on the community.

 

 

 

 

 

 

 

 

 

f) allocation of wealth between National  and Foreign interests.

 

 

 

 

 

 

 

5.

 

Please tick  one of the appropriate boxes:

Interest received by an Islamic business organisation should be classified as:

 

 

                        Interest income                                  Prohibited Transactions - Interest income

 

                       Sundry Income

        

 

Figure 77: IAQ, Section 3, Part 4.

 

The fifth part of section 3 (See Figure 7-8) listed some questions on the characteristics that Islamic accounting should take. These questions were framed after taking into account suggestions from the critical accounting and social accounting literatures (chapter 3) and reviewing their literatures from an Islamic perspective (chapter 6). In addition, some specific Islamic-oriented questions taken from the Islamic accounting literature were also asked.

ISLAMIC ACCOUNTING QUESTIONNAIRE

(e)   Please tick (Ö) the appropriate box. If you are unable to answer, please leave the boxes blank .

 

No.

 

Statement

Strongly

Agree

 

Agree

Neither Agree

 Nor Disagree

 

Disagree

Strongly Disagree

6.     

‘Accounting’ in the Islamic context should NOT be restricted to a mere monetary account-rendering.

 

 

 

 

 

7.     

Islamic accounting  (IA) needs to de-emphasise the focus given by conventional accounting to cash flow, profits and financial position.

 

 

 

 

 

8.     

IA should provide wider holistic information on the activities undertaken (or not undertaken) by the Islamic organisation.

 

 

 

 

 

 

 

9.     

IA should attempt to recognise  and measure externalities.

 (if necessary . please see note 7 at the end of the questionnaire)

 

 

 

 

 

10. 

IA should use current values in the balance sheet in order for Zakat to be calculated fairly.

 

 

 

 

 

11. 

IA should  recognise unrealised profits in order to attribute an equitable share of profit/loss  as between  present and future shareholders.

 

 

 

 

 

12. 

Accounts and annual reports of  large Islamic business organisations should be shari’ah audited to ensure that the organisation has conducted its activities in accordance with the Shari’ah.

 

 

 

 

 

13. 

Islamic accounting should integrate non-financial information reflecting significant activities which cannot be reliably measured in monetary terms.

 

 

 

 

 

Figure 78: IAQ, SECTION 3, PART 5

.

The above questions in section 3 of the IAQ will be used to test the following hypothesis in Chapter 9:


Hypothesis No.7:

 

Null Hypothesis:          Malaysian Muslim accountants and Accounting academics believe that decision-usefulness is the main objective of Islamic accounting.

Alternative

Hypothesis:                  Malaysian Muslim accountants and Accounting academics believe that decision-usefulness is not the main objective of Islamic accounting.

 

Hypothesis No.8:

Null Hypothesis:            Malaysian Muslim accountants and accounting academics believe that Islamic/Social objectives of Islamic accounting are of equal importance to Economic objectives of Islamic accounting.

Alternative

Hypothesis:                    Malaysian Muslim accountants and accounting academics believe that Islamic/Social objectives of Islamic accounting are more important than economic objectives of Islamic accounting

 

Hypothesis No.9:

 

Null Hypothesis:          Malaysian Muslim accountants and Accounting academics believe that shareholders are the most important users of Islamic accounting information.

Alternative

Hypothesis:                    Malaysian Muslim accountants and Accounting academics believe that shareholders are not the most important users of Islamic accounting information.

 

Hypothesis No.10:

Null Hypothesis:            Malaysian Muslim accountants and Accounting academics believe that Islamic accounting emphasises socio-economic information as much as conventional accounting.

 

Alternative

Hypothesis:                  Malaysian Muslim accountants and Accounting academics believe that Islamic accounting emphasises socio-economic information more than conventional accounting.

 

7.3.3.4 Section 4:        Personal & Organisational Details.

 

The objective of this section was to obtain certain characteristics of participants, which are thought to have a bearing on the type of responses given. These are known as independent variables in a positivist framework trying to find cause and effect relationships.  The questions were “fill-in- the blank” types with some suggestions in parenthesis (see figure 7-9). This suggested the type of response to fill in while allowing the participants flexibility to answer other than what was suggested.  In some questions, the participants were asked to tick or not to tick one of the boxes with answers provided.

 

ISLAMIC ACCOUNTING QUESTIONNAIRE

SECTION 4: Personal & Organisational Details

Please fill in the blanks.

1. I work  as  ____________________________________(job title)  in the

________________      _  sector  (e.g. Govt./education/commerce/public practice).

2. I have   ________  years   of working or teaching experience in accounting.

3. My highest degree/professional qualifications is a  ____________ (e.g. BA/MA/PhD D)

majoring in ____________________ from _________________  (country).

4. My highest Islamic qualifications is  ______________________________(certificate/sanawi/jazah/ SPM/STPM/PMR/other )

 from________________________  (country).

Please tick appropriate box for questions 5 -7 , if relevant.

5.    I have formally studied social or environmental accounting.

                           

                        Yes                                                                 No

6.  If you work in public practice, does your firm get technical assistance from a multinational associate accountancy firm?

                                                                                                                                                                                                                                                                                   

                              Yes                                                   No

                                                                                                                                                                                                                                                                                   

7. Please tick this box if you are NOT a Muslim  

 

               

 

Figure 79: IAQ, Part 4: Personal and Organisational Details

7.3.4 The Population and Sample Statistics of Participants Surveyed.

 

There were two populations of participants for this questionnaire i.e. Muslim Accounting academics in Malaysian Universities and Malaysian Muslim professional accountants.


 

7.3.4.1 The Accounting Academics

 

Malaysia has thirteen universities of which ten are publicly funded and three are private. All these universities offer courses in business or accounting. The oldest university is University Malaya, set up in 1957 as the premier university in Malaysia under the British system. It has the oldest accounting degree course in the country and is research oriented. The University with the largest Accounting faculty is Universiti Teknologi Mara with 99 staff in the School of Accountancy. The private universities are relatively new with fairly small number of accounting staff.  All the public universities except Universiti Teknologi Malaysia have Bachelor of Accounting or Management degree courses leading to membership of the Malaysian Institute of Accountants, which is the statutory professional accountancy body in Malaysia. Universiti Teknologi Malaysia and the private universities are working towards setting up a degree and are in the process of getting recognition from the professional institutes. They have already started the courses, in some cases by setting up twinning arrangements with foreign universities.

The accountancy syllabuses of the universities are geared towards the MIA professional status and hence are very technical in their approaches, perhaps with the exception of the International Islamic University, which has an Islamic curriculum. Most universities sited their accounting department in the Faculty of Business or Economics.  Some, such as Universiti Putra Malaysia and Universiti Malaya have both a department of accounting and a department of finance. In such cases, some questionnaires were also given to finance department faculty.

 

It must be noted that all students in Malaysian universities undertake courses in Islamic civilisation as part of their curriculum.  This is a deliberate policy of the Malaysian government although there has been some public debate in this area. Islamic revival is particularly apparent in Universiti Kebangsaan Malaysia, and University of Technology Mara, which have had Islamic accounting seminars recently. Besides the Universities, there are many private colleges offering professional and degree courses in Accounting with twinning arrangements with foreign Anglo-American universities. This research did not include academics from such institutions mainly because most staff and students are non-Muslim and the curriculum of such courses do not have local content at the moment.

The population of Accounting Academics of Malaysian Universities was defined as faculty members of the Accounting Department/School or Management School of the respective universities as the case may be. In the case of universities with separate finance departments under the same faculty, the finance department faculty was chosen as well.  In certain Universities such as Universiti Teknologi Malaysia, an accounting department does not exist separately but only operates as part of the Management School. In these cases, the lecturers teaching accounting subjects were chosen.  In the case of the International Islamic University, the Economics and Management Faculty had three departments at the time of the survey, which were Accounting, Economics and Business Administration. In this university, there were many accounting educated lecturers in the other departments.  As such lecturers with accounting knowledge were surveyed from all three departments of the faculty.

The sample was selected as follows. In some cases, the questionnaires were given to the Departmental of Faculty Head/Dean to be given to the lecturers. To ensure a better response, the researcher went around the department (where the faculty were few) to hand the questionnaires with a personal request to the faculty member to answer it. In some faculties, such as in the Universiti Utara Malaysia and Universiti Teknologi Mara, the researcher selected only participants who were accounting lecturers as there were many law and business lecturers attached to the accounting department who were teaching non-accounting subjects and who did not have an accounting background.  This was done either in consultation with the Head of department or by going through the university prospectus to see what subjects the lecturers thought. This partly accounts for the low number of lecturers surveyed in universities having numerous faculty members. In the case of the Universiti Teknologi Mara, the total number of staff included those at branch campuses in other states, which were not visited. As such, the low number of lecturers reflects those relevant lecturers surveyed in the main campus only.

Table 7-1 shows the Number of accounting academics in each University, the number of Questionnaires sent and the responses received.

University

Accounting

Faculty

Quest.

Delivered

No. of

Responses

Response Rate (%)

% of pop.

tested

University Malaya

34

13

6

 

46

17.6

University Kebangsaan Malaysia

34

15

9

60

26.4

Universiti Putra Malaysia

14

12

6

50

42.8

International Islamic University

72

25

20

80

27.7

Universiti Sains Malaysia

18

15

9

60

50.0

Universiti Utara Malaysia

59

30

25

84

42.4

Universiti Teknologi Malaysia

20

10

7

70

35.0

Universiti Sabah Malaysia

27

0

0

0

0

Universiti Sarawak Malaysia

15

0

0

0

0

Universiti Teknologi Mara

99

15

7

47

7.0

Sub-Total for public Universities.

392

135

89

66

22.7

Universiti Telekom Malaysia

20

10

9

90

45.0

Universiti Tenaga Nasional

24

7

2

29

8.3

Tun Abdul Razak Multimedia University

5

5

1

20

20.0

Sub-Total for private Universities

49

22

12

54

24.5

Grand Total

441

157

101

64

22.9

Table 71:  Population and Sample statistics of Accounting Academics in Malaysian Universities surveyed.

 

The high response rate of 64% (to the nearest %) was encouraging and is felt to be due to personally delivering the questionnaires to the head of department or lecturers concerned rather than posting them.

 

7.3.4.2 The Accounting Professionals

 

The second main group of participants surveyed were Muslim professional accountants in Malaysia. There are two recognised professional accounting bodies in Malaysia; the MIA and the MACPA[2]. For this project, the population identified was only Members of the Malaysian Institute of Accountants (MIA). This is the statutory cum professional accountancy body in Malaysia set up by the Accountants Act, 1967. It had 12127 members as at 31st December 1998. The word Accountant is defined by statute in Malaysia as a person who is a member of the Malaysian Institute of Accountants. The Malaysian Institute of Accountants does not conduct its own professional accounting examinations, although it intends to do so in future. One can become a member by graduating from a local university whose undergraduate degree is recognised by the MIA and getting the required quantum and type of experience. The other route is by becoming a member of a professional accountancy body (mostly UK, Australian and New Zealand professional accountancy bodies) listed in the Accountants Act 1967 and registering with the MIA.

The reasons why only MIA members were chosen for this research are; (i) there are very few Muslim Accountants in the MACPA, (ii) a Muslim accountant who was a member of MACPA would most probably be an MIA member as well, and (iii) most  MACPA members register themselves as MIA members to get formal statutory recognition as an accountant in Malaysia and (iv) the survey of Muslim Accountants in the Big four firms would also get some MACPA members inside the sample. Hence, the Muslim MIA membership can be a proxy for the professional Muslim Accountant population in Malaysia.

Table 7-2 below shows the number of Muslim MIA members surveyed, the response rate together with the Muslim MIA population statistics.

Sector

No. of Muslim MIA Members

No of Questrs. delivered

No of Questrs.Mailed through

MIA

Responses

Respondents as a %

of population

 

 

Del

%

MIA

%

Total

%

 

 

Public Practice

231

35

90

11

31

23

26

34

27

14.7

Commerce & Industry

558

12

90

12

100

34

38

46

45

8.2

Public Sector

325

0

90

0

0

25

28

25

28

7.7

Unclassified

726

0

0

0

0

0

0

0

0

0

Total

1840

47

270

23

55

82

30

105

37

5.7

 

Table 72: Malaysian Professional Accountants Sample Surveyed.

 

The total number of Malay (presumed to be 100% Muslims) MIA members as at 31st December 1998 was 1840 out of a total of 12127 MIA members constituting only about 15% of total membership. Of this 270 (14% of the population) were surveyed through the MIA. This consisted of 90 Muslim Accountants each working in the public, pubic practice and industry sectors respectively. The number of responses received totalled 82 representing a 30 % response rate (to the nearest %). According to MIA, the normal response rates for research surveys were 10%. Hence, the project response rate was much above normal.

A further 42 Questionnaires were delivered to audit firms (through staff partners) and company accountants (through personal contacts) from which a further 23 responses were obtained. In total, the 105 responses obtained constitute about 5.7% of total Muslim MIA members. In other words the sample used in this research constituted about 5.7% of the Qualified Muslim Accountants in Malaysia.

7.3.5 Method of Delivery and Difficulties Encountered

 

The main method of delivery to MIA members was by mail. Although MIA publishes a list of members, their addresses are not published. Hence, the researcher approached the MIA by fax and in person to get a list of members with their addresses. The MIA refused to reveal the addresses stating that it was confidential despite the fact the researcher was a member.  However after several appeals and phone calls, they agreed to a compromise.  MIA would extract a stratified random sample of 270 members categorised by sectors and (race/religion) and would post the researcher’s questionnaires directly to the participants. The researcher placed the questionnaires together with stamped self-addressed reply envelopes and cover letters in stamped envelopes, which were delivered to the MIA for addressing and onward mailing to the participants. Thus the MIA dispatched them directly to members. The researcher was unable to obtain the addresses of the participants. The questionnaire was dispatched in the first week of November 1998. Responses started coming in after a week to the researcher’s home university in Malaysia.

It was agreed that if the response rate were not good, the MIA would allow the researcher to phone the members who had not sent in the responses. However this was difficult because, some participants did not identify themselves. It was suggested by MIA that a second mailing be sent based on the extra set of labels they printed. However due to staff problems and year-end work, MIA could not do this. Hence there was no follow up to the mailed questionnaires.

In addition to the above mailed questionnaires, the researcher personally delivered some questionnaires to Muslim members of the big four firms (i.e. Ernst & Whinney, Price Waterhouse Coopers, KPMG Peat Marwick and Arthur Andersen) to increase the response rate.  A Muslim partner in the firms was contacted, an appointment was made to see him. The researcher met the partner concerned, explained the research to him, and after obtaining information on the number of Muslim qualified accountants in the firm, gave a similar number of questionnaires to the partner or manager concerned.  The partner or manager distributed the questionnaires to his colleagues and collected the questionnaires on the researcher’s behalf.  The researcher later picked up the questionnaires, after a week or two by mutual appointment.

In addition to this method, some questionnaires were sent to accountants working in companies through the researcher’s contacts who were working in the companies.  Malaysian Airlines, Telekoms and TV3 (a Muslim owned TV company) were contacted in this way. The researcher also administered the questionnaire to the Chief Accountant of Bank Islam Malaysia Bhd., who now also heads the retail banking division.

 

7.4 the FINANCE QUESTIONNAIRE ON THE BEHAVIOURAL EFFECTS OF CONVENTIONAL ACCOUNTING.

 

This is a short three-page questionnaire given to finance and accounting personnel to find out whether the conventional accounting resulted in the participants behaving in an Islamic manner. If this were true, there would be a stronger case for an alternative Islamic accounting. Although not grouped into different sections, the questions could be combined into three main areas; (i) investment behaviour (ii) financing behaviour and (iii) operations behaviour.

7.4.1 The Objective of the Finance Questionnaire.

 

The argument for an Islamic accounting was two fold: two theoretical (Chapters 3 and 4) and one practical (chapter 5). It was argued in chapter 2 that the Western philosophical assumptions that underlie conventional accounting make it unsuitable for Islamic organisations who have world views and objectives that reflects those of an Islamic society (Chapter 2). From an Islamic perspective, several additional problems crop up.  From a capitalist perspective, profit maximisation or satisfaction must be carried out irrespective of moral considerations as long as it is legal (Friedman, 1982).  Even when social and moral considerations are discussed (e.g. Gray et al., 1996, Tinker, 1985), the moral and social aspects are not necessarily the same as that of Islam.

A special issue that is not considered as immoral or illegal in the capitalist or Marxist view is the question of taking and giving interest (although early Marxists frowned at interest). In addition the payment of Zakat is not an issue in Western social and critical literature which is very important in Islam. The finance and the non-finance questionnaire (explained in the next section) address these concerns.

The finance questionnaire intends to find out if Muslim Accountants and Financial Managers behave in a manner inconsistent with Islamic values due to the influence of conventional accounting- specifically:

   (i)        Whether Muslim managers make short and long-term investments in interest-based instruments, which are prohibited by Islam.

  (ii)        Whether in making investments, materialist and capitalist values as encouraged by conventional accounting e.g. profit maximisation, high capital gains were demonstrated.

(iii)        Whether Muslim managers take into account social and environmental concerns in line with the broader objectives of the Shari’ah.

(iv)        Whether Muslim managers use sources of finance which are allowed in Islam as opposed to those, which are most profitable (the usual pecking order).

 (v)        The company’s policy on Zakat payment and distribution.

(vi)        The commitment of various groups in a company to Islamic values.

(vii)        Whether managers feel that the information provided by conventional accounting for Islamic investment decisions.

7.4.2 The Structure and Construction of the Finance Questionnaire

 

The finance questionnaire was divided into 2 sections. The first section consisted of questions related to the research questions indicated in the previous section. This section can be grouped into several classes

Some questions related to short term investment decisions.

Question 3 had 9 sub-questions, which listed what the manager looked for when making direct or stock market investments. 

Questions 4-7 asked the participants to rank the importance of environmental, social as well as Islamic factors when making investment decisions.

Question 8 listed six financing instruments  (Islamic and non-Islamic) and asked the managers to rank the extent of their use.

Question 9 asked the managers to what extent they made use of Islamic or conventional banking.

Questions 10 – 11 asked the managers the basis on which Zakat was computed, if at all.

Question 13 asked managers if conventional financial statements met their Islamic investment needs.

Question 14 asked managers the Islamic commitment of 7 employee groups in their company.

A five-point scale ranging from 1 (Not at all) to 5 (To a great extent) was used. A sixth column was used for a Don’t Know response. The questions were mainly factual.

Section 2 of the questionnaire asked personal details such as job title, experience, Islamic and secular education and the religion of the participants to correlate responses in section 1 of the questionnaire. Section 2 was open ended (no choices were given) except for two questions where choices were given to indicate the type of answers required.

 

Both the finance and non-finance questionnaires went through three drafts at the Department of Accountancy and Business Finance at the University of Dundee. It was also pilot tested with the post graduate Ph.D. students of the Department.

7.4.3 Method of Delivery and Difficulties Encountered

 

Initially the questionnaires were intended to be given to finance managers of the Muslim and Islamic business organisations. In practice, it became difficult to access Muslim and Islamic business organisation on a large scale. An unexpected opportunity presented itself to the researcher when he was conducting the empirical study in Malaysia. The researcher’s employer, the International Islamic University (IIUM) was conducting part-time MBA courses. Many of the students were Muslim managers or accountants and finance personnel working in Muslim and Non Muslim organisations. Therefore, instead of going to the companies to meet the managers, it was thought that it would be easier to meet them in class and request them to fill up the questionnaire.

With the co-operation of the Director of the Islamic Management Centre, which conducted the MBA course, the researcher met the students in their classes. The nature of the research was explained to them and they were requested to fill in the questionnaires, which took about 10 minutes. Three such classes were visited. Both the finance and non-finance questionnaires were given at the same time to different individuals depending on their work area. Some finance questionnaires were received later. The questions were straightforward, there was no need for much clarification.

The finance questionnaires were also given to managers in the Tabung Haji Group Divisional Managers and Managers of subsidiary companies as well to some managers in Abrar Unit Trust and Abrar Discounts Sdn. Bhd. The researcher also contacted the executive MBA director of University Teknoloji Mara and handed some questionnaires to his department. However, as the program was in recess, only one response was received.

7.4.4 Sample Statistics and Response Rate for the Finance Questionnaire

 

Table 7-3 below shows some statistics on the questionnaires distributed, number of responses and response rate. The population is the Muslim managers working in commerce and industry or the public sector in Malaysia. However, it is difficult to get the size of the population, as not all the Managers are members of any one organisation or professional grouping.


 


Organisation/

 

Fin.Quest Distributed

 

Responses

Received

Response

Rate (%)

Tabung Haji

10

10

100

Abrar Discounts

4

1

25

Abrar Unit Trust

2

2

100

Europipes

1

1

100

TV 3

2

0

0

Telekom

1

0

0

Executive MBA student IIUM

20

17

85

Executive MBA students MIT

2

1

50

Total

42

 

32

73

Table 73:   :Finance Questionnaires Sample

7.5 NON-FINANCE QUESTIONNAIRE ON THE BEHAVIOURAL EFFECTS OF CONVENTIONAL ACCOUNTING.

 

This questionnaire was given to Muslim and some non-Muslim employees in the middle and lower management as well as clerical employees in various Muslim and Islamic organisations. The objective of this questionnaire was to find out whether conventional accounting systems, especially the budgeting system has any dysfunctional effects on Muslims (and some Non Muslims) in Islamic and Muslim business organisations.

As discussed in chapter 4, various studies from Argyris (1952) to (Roberts & Scapens, 1985;Roberts, 1991) have indicated that the accounting system may result in dysfunctional, confrontational and dominating behaviour. Accounting system through information inductance (Prakash & Rappaport, 1977) may affect the behaviour of users inside the organisation. These effects do not only concern employees in the accounting and finance departments but throughout other functional areas of the organisation. This questionnaire was targeted at functions other than accounting. If the results indicate dysfunctional behaviour from an Islamic perspective, then it would show that conventional accounting has negative pervasive effects throughout Muslim and Islamic business organisations. A stronger case would then be made for different Islamic Accounting especially management accounting systems for Muslim and Islamic organisations.

7.5.1 The structure  of the  Non-Finance Questionnaire

 

The two-page questionnaire was divided into 2 sections. Section 1 asked the participants how their behaviour or their superior’s behaviour was affected by the accounting and budgeting systems. Section 2 was on personal details regarding the participants’ job, experience, religion, and secular and Islamic educational qualifications.

Section 1 starts with questions on how head office policies are determined and whether accounting numbers are used to assess performance.

The next set of questions are intended to elicit the nature and effects of the budgeting system on their Islamic and social behaviour. The third set of questions were the same as those used in the finance questionnaire regarding the commitment of various employee organisation groups to Islamic values. The fourth set of questions asked about the Islamic culture in the organisation.

A 5 point Likert scale from Strongly Disagree to Strongly Agree was used throughout section 1 of the questionnaire.

7.5.2 Sample Statistics for the Non-Finance Questionnaire, Delivery and Difficulties Encountered.

 

The questionnaire was initially intended to be used in case studies.  However, because the researcher could not gain access to as many companies as he hoped, the questionnaire was handed over mostly to working Muslim and Non Muslim executive MBA students, in addition to executives  in Islamic organisations (Lembaga Tabung Haji,  Abrar Unit Trusts and Abrar Discounts Sdn. Bhd. In these companies, the questionnaires were handed to the managers of companies, who in turn gave it to their managerial and clerical employees. Most of the questionnaires were returned to the researcher on the same day while a few were collected at a later date.

Table 7-4 shows the sample surveyed and the response rates for this questionnaire.

Organisation

Non-Finance

Questionnaires

given

Number of

Responses

Response

Rate (%)

Tabung Haji

20

15

70

Abrar Group Trust

10

3

30

UNITAR

1

1

100

TV 3

5

0

0

Telekoms

7

0

0

Europipe

2

0

0

Executive MBA  Students

55

46

92

Total

99

65

66

Table 74:Non finance Questionnaire sample and responses

 

7.6 Conclusion

 

The researcher believes that the Islamic Accounting Questionnaire survey was successful in that 17% of the Malaysian Muslim Professional Accountant population was surveyed and responses representing 5.7% of the population were received.

As in all research, the researcher did not achieve 100% of what he wanted to achieve in the data collection phase. The failure to gain access to Muslim business organisations was disappointing, as there was no opportunity to gain deeper insights into the behavioural consequence of conventional accounting in Islamic and Muslim business organisations. However, this could be the subject of future research.

The research would have been richer as Muslims in business organisations which are not specifically Islamic would face more tensions with their values and accounting.  However the results of the finance and non-finance questionnaires given to the working MBA students does provide a clue to the type of results which could be expected. This would be a suitable area for further research. The misunderstandings in Question 1.4 in the Islamic Accounting Questionnaire was another set back which did not allow full confidence in the results obtained for this question, which was the reason for its exclusion in computing the aggregate scores.   However, this did not affect the overall reliability and validity of the results as the concepts measured were tested by multiple questions.

In the next chapter (chapter 8) a descriptive analysis of the IAQ is undertaken and findings and interpretation presented. In Chapter 9, this is followed up with the testing of the hypotheses presented in this Chapter. The final empirical chapter 10 presents the descriptive analysis of and the findings from the behavioural accounting (finance and non-finance) questionnaires before the thesis is concluded in Chapter 11.



[1]  For example: “Behold, in the creation of the heavens and the earth, and the alternation of Night and Day- there are indeed signs for men of understanding.” (Al-Qur’an 3:190)

[2] The Malaysian Association of Certified Public Accountants (MACPA) is the second professional accountancy body in Malaysia. The MACPA is widely recognised in the Malaysian profession, government and industry. It conducts its own professional examinations which are considered as difficult as the examinations of the Institute of Chartered Accountants in England & Wales. The pass rate is very low.  So far merger talks held between the MIA and MACPA to unite the profession in Malaysia have failed.

 

 


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