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This paper reviews empirical studies with a particular interest in Islamic finance literature and highlights future research directions. The earlier literature on Islamic finance was built on the Islamic economic foundation of social justice and fairness, which was formed theoretically from the primary sources of Sharia coupled with some analytical frameworks. Subsequent studies emphasized the empirical investigations without including far-reaching analytical and theoretical postulations in the area. Although empirical studies on Islamic banking are plenty, there is a new body of emerging empirical literature on Islamic finance focusing on corporate finance and Takaful, whereas Islamic accounting studies are mostly qualitative. The literature provides a mixed picture of Islamic financial markets and instruments, showing that the Islamic ones perform better most of the time but also perform worse at times than their conventional counterparts. This paper discusses issues that are relevant to Islamic finance and identifies avenues for future research and policy implications.

Islamic banks and financial institutions have demonstrated an unprecedented success since their emergence in commercial form in 1970s. The expansion of the asset base of the industry and its diffusion into main financial centers in the world is a clear indication of its success. While Islamic finance is constituted through Islamic normativeness as expressed through Sharia compliance process coupled with the standards developed by the Accounting and Auditing Organization for Islamic Financial Institutions and the Islamic Financial Services Board within dual banking system, their accounting system follows conventional system of accounting which is based on the fictitious claim that accounting is value free. However, this chapter is developed through the assumptions that neither economics and finance, nor accounting and management is value free as value system and ontologies determine their nature and operations. In expanding this assumption, this chapter aims to identify the Islamic accounting implication for Islamic finance with the hope that Islamic banks and financial institutions, in particular, and Muslim societies, in general, can move onto authentic accounting system and philosophy shaped by Islamic ontology and epistemology. This chapter hence aims to develop and identify the way Islamic accounting can apply to Islamic finance transactions and contracts as well as institutions such as zakat. It also presents some critical reflections on the practice of Islamic accounting and accounting standards.

The emergence of the Islamic economics movement in the post-colonial period aimed at developing a system of Islamic economy with the normative worldview of Islam and Sharia rules. This is rationalized on the grounds that economics, finance, management, and accounting are not value free as assumed by conventional thinking, which is imposed on the rest of the world as the truth by the West. In this authentic search, Islamic finance proved to be a successful proposition, and therefore, the trajectory of development has been unprecedented, which is constituted through the Sharia compliance process. However, in order to develop a system understanding, the governance, management, and accounting of the Islamic financing institutions should reflect the same worldview and the value system. As the literature indicates, research, practice, and institutional formation have been scarce in these areas. This is due to the subaltern assumption that these areas are value free. Accepting such an operating assumption has resulted in asymmetry in the knowledge base and operation of Islamic banks and financial institutions. While their financing operations are constituted in Sharia-compliant manner, their management and accounting are left to the conventional system. However, Islam, through its value system and worldview (tawhid), has implications for accounting too. This chapter, therefore, aims to identify the ontological and epistemological construct of Islamic accounting through its value system and worldview to overcome the observed asymmetry through social constructivism. In doing so, historical contribution of Muslim scholars and practice within the Islamic realm is used to bring historical evidence for the proposition developed in this study. Thus, this study argues that Islamic accounting is a subdiscipline of the system of Islamic economics or Islamic moral economy and essentializes it through Islamic normativeness, which urges the use of Islamic accounting, beyond the standards of Accounting and Auditing Organization for Islamic Financial Institutions, to establish consistency within the Islamic finance sector.

With the increased number of Islamic institutions, the necessity for a standardized Islamic accounting framework has emerged. The origin of Islamic accounting can be traced back further than conventional accounting. Many studies show that Islamic accounting was the primary source of the basic accounting fundamentals. Besides, the critical role of Islamic accounting is to provide financial reports which adopt the Islamic objectives and laws. The Islamic beliefs hold ethics and morals that drive and influence accounting, auditing, and reporting procedures of the Islamic financial institutions. Accordingly, many studies have emphasized the morality and characteristics of Islamic accounting and economic disciplines required in different institutions and banks. This chapter has adopted the systematic literature review technique to explore the overall available articles and studies on Islamic accounting and the growth of these studies over the years. The researchers have addressed 30 papers retrieved from a variety of online databases according to a set of inclusive and exclusive criteria. The systematic literature review methodology results synthesize different aspects of the topic, methods, and theories used in Islamic accounting studies. This chapter indicates broad concepts and objectives of Islamic accounting retrieved from various online databases with a set of recommendations for further research to fill the gap in this field.

Forensic accounting is a modern occupation that covers many services, including fraud investigation, IT forensics, litigation support, and business valuation. Few, if any, have come across forensic accounting based on an Islamic perspective. The religion of Islam ascribes to a wide spectrum of the highest morals and virtues. Our research involved a review of the previous research on forensic accounting, and we benchmarked it to the Islamic Sharia and law within the Jordanian context. The findings show that Islamic perspectives would lend robust foundations to forensic accounting in its endeavors to detect and prevent fraud and assist the trier of fact. This chapter contributes to the previous literature on forensic accounting by providing an optimal set of Islamic concepts that might be of benefit to forensic accounting practitioners, academics, and regulators.