This study investigates the need for an alternative "Islamic accounting" which is consistent with the worldview, values and socioeconomic norms of Islamic society. It proposes an outline of an Islamic accounting theory together with empirical investigations of (i) the perception of Malaysian Muslim accountants and accounting academics on Islamic accounting and (ii) the unislamicbehavioural consequences of conventional accounting on users.The researcher starts from a premise that the worldviews and values of a society affect its economic objectives and norms, which in turn affect the accounting system, and vice versa. An examination of the worldviews, values and economic objectives of Western society and the capitalist economic system which underlie conventional (Anglo-American) accounting shows them to be different from those of an Islamic society. This presents a prima fade case for Islamic accounting. The need for an Islamic accounting is classified into "push" and "pull" factors and then examined in detail. It is argued that conventional accounting with its:? Decision-usefulness framework of providing information to increase the wealth of shareholders and creditors in an advanced capital marketframework,? Measurement and valuation characteristics, and? Socioeconomic and behavioural consequences,may be inappropriate for an Islamic society trying to implement an Islamic economic system. Further, recent attempts at the "Islamisation of knowledge"are examined and shown to provide the theoretical imperative for the development of an Islamic accounting system. The study also examines theobjectives, nature and operations of Islamic economic institutions such as Islamic banks together with their accounting implications. It is shown that the accounting requirements of these institutions vary from conventional capitalistic economic institutions. Thus, a practical imperative for thedevelopment of an Islamic accounting system is thereby demonstrated.From the worldview, socioeconomic objectives and values of Islam, an outline of an Islamic accounting theory is developed based on a proposed "Islamic Accountability" model. The model envisages dual accountability for Islamic organisations to take cognisance of the Islamic concept of Khilafa(vicegerancy) which embodies trusteeship of economic resources and accountability not only to finance providers but to God as well by ensuring thecompliance of the organisation's operations to Islamic Law and morality (Shari'ah). Hence, Islamic accounting focuses on various stakeholders inaddition to shareholders and creditors, measures and reports on Shari'ah compliance in addition to economic activities, and may use non-financialquantitative and qualitative measures in its reporting.The theoretical concerns are then investigated using three sets of questionnaires. The first set of questionnaires was posted to Malaysian Muslim Accountants and Accounting Academics. Although the respondents supported retaining the conventional accounting principles of historical cost, prudence and monetary measurement, they generally agreed to the unsuitability of conventional accounting information. They also showed strong support for an Islamic accountability framework and a more holistic, integrated reporting regime to varied stakeholders, instead of focusing on shareholders.The behavioural questionnaires were addressed to executives and employees in the finance and non-finance functions of various companies in Malaysia toelicit evidence on the unislamic behavioural consequences of conventional accounting. Although, there is no strong evidence from this research toindicate that conventional accounting lead to unlslamic behaviour or otherwise, the findings indicate that Islamic organisations are better able to withstand the negative consequences of conventional accounting. Organisations owned or run by Muslims (not specifically Islamic) and Non-Muslim organisations, however, tend to use accounting to focus on profits irrespective of unislamic consequences. This study has made some initial contributions to the Islamisation ofaccounting and can be the basis of future research, which seeks to make Islamic accounting a reality in practice.
