nancial institutions in Malaysia Siti Zaleha Abdul Rasid International Business School, Kuala Lumpur, Malaysia Abdul Rahim Abdul Rahman Department of Accounting, Kuliyyah of Economy and Management Science, International Islamic University, Malaysia, Kuala Lumpur, Malaysia, and Wan Khairuzzaman Wan Ismail International Business School, Kuala Lumpur, Malaysia Abstract Purpose The purpose of this paper is to explore whether there is any difference in the management accounting systems (MAS) of conventional and Islamic Financial Institutions (IFIs) in Malaysia. Design/methodology/approach The paper was based on a survey of 45 conventional and IFIs listed on the Malaysian Central Banks web site. The respondents were the chief nancial ofcers (CFO). Post-survey semi-structured interviews were also conducted with eight respondents to gain further insights into the survey ndings. Findings The survey results indicate that IFIs use MAS information that is broader in scope, more timely, more integrated and more aggregated than conventional nancial institutions. The post-survey interviews provide deeper and contextualised insights into this issue. The interview ndings illustrate that IFIs normally develop and adopt an integrated accounting and enterprise system. Within this comprehensive enterprise system, the management accounting function is integrated with other functions of the organization. Research limitations/implications Since this study was conducted in the context of Malaysian nancial institutions, the results may not be generalizable to other organizations. The ndings of this study highlight the importance for IFIs to have integrated enterprise systems. Besides assisting in complying with Shariah and regulatory requirements, the integrated systems also support better decision making. Originality/value The paper lls a gap in the literature, as very few studies have examined the issue of management accounting in nancial institutions. The paper is also one of the limited studies that explore the issue of MAS in IFIs. Keywords Malaysia, Islam, Financial institutions, Accounting systems, Management accounting systems, Shariah Paper type Research paper 1. Introduction Management accounting systems (MAS) refers to the systematic use of management accounting techniques to achieve organizational goals. The International Federation of Accountants (IFAC, 1998) denes management accounting as the process of identication, measurement, accumulation, analysis, preparation, interpretation, and communication of information (nancial and operational) used for the planning, control and effective use of resources by an institutions management. Thus, management The current issue and full text archive of this journal is available at www.emeraldinsight.com/1759-0817.htm MAS in Malaysia 153 Journal of Islamic Accounting and Business Research Vol. 2 No. 2, 2011 pp. 153-176 qEmerald Group Publishing Limited 1759-0817 DOI 10.1108/17590811111170557 accounting becomes an integral part of the management process in an organization providing information essential for: . controlling the current activities of an organization; . planning its future strategies, tactics and operations; . optimizing the use of its resources; . measuring and evaluating performance; . reducing subjectivity in the decision-making process; and . improving internal and external communication (IFAC, 1998). In short, the use of MAS can be expected to satisfy a managers information needs (Govindarajan, 1984; Mia and Chenhall, 1994). In the past, nancial services were highly regulated with many of the products offered and the rates charged controlled. There were also strict regulation and control of geographic expansion. In a highly regulated industry, there was less need of management accounting information for performing day-to-day and longer term tasks. However, deregulation, rapidly advancing technology, competitive forces and globalization have all put an end to this complacent approach (Kafaan, 2001). In addition, emphasis on nancial innovation and shareholder value as well as mergers and acquisitions activities between insurers, banks and asset management companies, have resulted in the emergence of nancial conglomerates that further exacerbates the competitive environment, especially for stand-alone entities. To function effectively in a dynamic environment undergoing rapid transformation, nancial institutions have to enhance their competitive advantage. Amanagers ability to make informed decisions is closely linked to the quality of management accounting information available (Kafaan, 2001; Rezaee, 2005). Agood management accounting programme serves as an important tool for providing good decision-making information (Cole, 1988) and this is particularly important in the case of nancial institutions as their collapse would affect the stability of the whole economy. Hence, it is critical for all nancial institutions to have efcient MAS for internal decision making, planning and control (Siti Zaleha and Abdul Rahim, 2009) in order to maintain their stability. The Malaysian nancial system is based on the dual banking system in which the conventional nancial system operates alongside the Islamic nancial system. The development of the Islamic Financial Institutions (IFIs) has contributed to the strengthening of Malaysia as an International Islamic Financial Centre (MIFC). IFIs are different from conventional nancial institutions as their objectives, operations, principles and practices must conform to the principles of Islamic Shariah ( Jurisprudence) and Islamic ethics as enunciated by Shariah. The IFIs have to adhere to the Shariah compliance framework and they are also exposed to certain risks that are specic only to them. The complex nature of the IFIs requires a governance structure that is more comprehensive. Besides adhering to Shariah, they are also required to remain competitive in order to survive in the changing business environment. MAS, which has a wider scope covering internal, external, past, future, nancial and non-nancial information and able to be provided in an integrated, aggregated and timely manner, are ideal for providing the necessary information to aid decision making, planning and control. However, MAS for IFIs has received limited attention as most prior literature on accounting for IFIs focuses mainly on nancial accounting related JIABR 2,2 154 to measurement and reporting issues (Abdul Rahim, 2003; Abdel Karem, 1990; Talib, 2000). Hence, the purpose of this paper is to explore whether there is any difference in the MAS of conventional and IFIs in Malaysia. The current study is intended to ll the void in the literature on management accounting in IFIs. The remainder of the paper is structured as follows. The next section reviews the relevant literature and develops the hypotheses, followed by the research method in Section 3. Results and discussion are presented in Section 4 and nally, Section 5 presents the conclusions. 2. Literature review A well-designed MAS will assist managers to be more effective in decision making. Traditionally, management accounting information has been delineated in nancial terms, but recently it has been expanded to include non-nancial (operational or physical) information, including quality and process times, as well as more subjective measurements such as customer satisfaction, employee capabilities and new product performance (Atkinson et al., 2001). The enhanced role of MAS to assist managers in attention directing and problem solving has resulted in the evolution of MAS to incorporate external and non-nancial data focusing on marketing concerns, product innovation, strategic planning and predictive information related to these areas (Mia and Chenhall, 1994). Hence, MAS are now viewed in a broader aspect (Mia, 2000; Hussain, 2000). Besides fullling the traditional function of providing quantitative and nancial information, MAS have expanded to include information relevant for innovation, marketing and organizational design. In fact, there is little difference today between the information provided by MAS and that provided by a management information system (MIS) (Mia, 2000). The challenge faced by nancial institutions is in sustaining their competitive edge by being cost efcient without compromising the quality of their services. In fact, nancial problems and failures in nancial institutions are no longer considered unique (Hussain, 2000). The key to survival is to have an internal management reporting system that can signal problem areas and allow management to react swiftly and assuredly. Following the deregulation of the nancial sector and the rapid advances in technology, information on pricing, product mix and market share strategies have become more important to the nancial services sector (Rezaee, 2005; Kafaan, 2001) and such information will be available through the MAS within an organization. The current pace of technological and economic innovation in the nancial markets illustrates the critical needfor information as anaidto sounddecision makingby nancial institutions (Hussain, 2000). By providing nancial and non-nancial information, MAS facilitates the decision-making process, as the scope has expanded to include effectiveness, control, market analysis, quality assessment, customer satisfaction, empowerment and competitive status management (Ostinelli and Toscano, 1994 as cited in Hussain, 2000). MAS in a nancial institution can play an important role by providing information on the effectiveness of a sales promotion programme, revenue bybusiness units, product lines andcustomer category(Rezaee, 2005; Kafaan, 2001; Mia and Patiar, 2001). By having MAS as an internal information system, the investments required for a programme and their outcomes can be monitored closely. Managers can use MAS information to benchmark the organizations performance against competitors to determine whether they are offering products and service attributes to customers MAS in Malaysia 155 at a competitive price. This is possible since MAS provides information on performance of each business unit, each product and even each customer. With an integrated system, performance can be monitored to every possible detail, as performance management is seen as the main task of the management accounting function (Otley, 2001). The management of nancial institutions depends on concise and relevant information to help them carry out their daily duties. Well-managed rms should have good information structures and MAS can be seen as a tool for managing resources, measuring performance, warning of risks, aiding decisions, and providing data for planning. Cole (1988) specically argues that a good MAS does the following: . tells the cost and protability of doing business by organization, product, and major customers; . avoids surprises; . allows all managers to explain their performance as it is reported; . allows everyone to participate in planning via plan-to-actual reporting used as a management tool; . provides timely, accurate, relevant, and understandable reporting; . ensures that only one set of numbers is circulating within the organization; and . reduces or eliminates complaints about information non-availability. Some nancial institutions have turned to activity-based costing (ABC) as a way to measure accurately the consumption of shared resources by a particular customer or product (Max, 2004; McDonald, 2004; Robinson and Chappelear, 2002; Kafaan, 2001). In fact, Max (2004) asserts that the application of ABC in the nancial services sector today identies new and unique ways to leverage cost and protability information, including: . activity-based pricing, particularly for business-to-business services; . linking ABC information to performance management scorecards and processes; . providing information on a process view of costs, both to support cost improvement needs and to enable ongoing accountability for management by the business process; and . information on the protability of discrete customer relationships. As nancial organizations continue to consolidate, diversify, and become more competitive, the management accounting and information functions need to also grow rapidly and become more important. Table I presents a summary by Kafaan (2001) of the types of management information that is currently utilized by the nancial industry to meet new challenges. Table I shows that in the planning process, strategic planning and budgeting information are used. In addition, nancial institutions also utilize Asset/Liability Management (ALM) information, responsibility reporting and protability analysis. Furthermore, nancial institutions also have a number of support functions that provide various information to aid management decision making, planning and control. The information needs of MAS can be considered in terms of its general information characteristics scope, timeliness, integration and aggregation (Chenhall and Morris, 1986; Chia, 1995; Lal and Hassle, 1998; Bouwens and Abernethy, 2000; JIABR 2,2 156 Moores and Yuen, 2001; Tillema, 2005; Agbejule, 2005). MAS is considered sophisticated when it produces information that is broad in scope, timely, integrated and aggregated. The balance scorecard (BSC) is an example of a MAS tool having all the four information characteristics (Tillema, 2005) while ABCsystems provide information that is only integrated and aggregated (Choe, 2004). Owing to the challenges of deregulation, diversication and competition, the nancial services sector needs to use sophisticated MAS. The development of management accounting and information functions should move in tandem with the changing environment of the nancial services sector. 2.1 Relevance of MAS to IFIs The management of IFIs needs management accountinginformationas anorganizational control mechanism. Since all IFIs activities shouldcomplywith the norms of Shariah and Islamic ethics, they need more management information for decision making, planning and control activities to meet both business and religious objectives. The process of product innovation in IFIs is more tedious and more stringent to ensure that the contracts associatedwiththe transactions are not inviolationof Shariah. Infact, the presence of the Shariah Supervisory Board (SSB) requires MAS to be more sophisticated as this board has the power to examine all information related to Islamic bank transactions to determine whether religious objectives are met (Islam et al., 2000). The need of MAS can also be argued from the sources of funds perspective. Unlike conventional banking systems where customers are entitled a guaranteed return, the return on investment for Islamic bank investment holders is uncertain since they share the prot or loss incurred by the bank (Haron and Shanmugam, 2001; Errico and Farahbaksh, 1998; Mannan and Fazlul Hoque, 2006). In fact, they are also exposed to the risk of losing all of their initial investment. Therefore, their decision to invest will depend on their evaluation of the banks ability to realize acceptable rates of return and to maintain its capital at a level sufcient for solvency purposes (Noraini, 2005). Potential investment account holders will normally refer to the annual reports, web sites and brochures before making their decisions. For this reason, transparency The planning process Strategic planning Budgeting ALM Responsibility reporting Protability analysis Line of business Organizational Branch Product Customer/relationship Market segment Opportunity Support functions Funds transfer pricing Item costing/activity-based-costing/ performance measurement Data warehousing Marketing customer information le Data mining/data mapping Source: Kafaan (2001) Table I. Types of management information utilized by nancial institutions MAS in Malaysia 157 in reporting plays an important role (Noraini, 2005). Reporting can be more transparent if external reporting is supported by the internal reporting functions supplied by the MAS because it serves as an organizational control mechanism facilitating control via reporting and creating visibility in the action and performance of its members (Chia, 1995). Thus, the implications of the Shariah compliance framework on the use of MAS information need to be explored. The researchon this issue is still scant, withthe onlystudy available to date being one by Islamet al. (2000). Islamet al. (2000) studied the information adequacy of MAS in the banks in Bangladesh. They argue that the adoption of a prot-sharing system of mudarabah and musharakah by Islamic banks in their nancing activities requires a different set of MAS information in terms of scope and integration. In mudarabah activities, where banks share the prot and bear the losses of their business, the managers need a relatively broad scope of information about the day-to-day business operations and prospects of their clients. Abroad scope of information is also required in musharakah activities as they involve direct participation of the banks. In contrast, non-Islamic bank managers place more emphasis on securing collateral from business clients instead of entering into venture capital with their clients, and consequently they require a narrower scope of information (Islam et al., 2000). The results of Islamet al. (2000) showthat managers of Islamic banks inBangladesh, in contrast to those in non-Islamic banks, believe that they have better designed MAS in terms of scope and integration. Their ndings support the argument that prot-sharing systems inthe nancingactivities of mudarabahandmusharakahinIslamic banks require broadscoped and integrated MAS information (Islamet al., 2000). However, more research is needed to conrm their conclusion as the study only considers the prot-loss sharing mode of nancing, which is not widely practiced by Islamic banks. This issue should be arguedfroma broader Shariahcompliance perspective that includes informationrequired in managing the various types of products that need a variety of contracts. In addition, similar issues should be consideredfor other IFIs, suchas Islamic insurance organizations. 2.2 Development of hypotheses The scope of an information system consists of three sub-dimensions, which are focus, quantication and time horizon (Gordon and Miller, 1976; Gordon and Narayanan, 1984; Chenhall and Morris, 1986). A broad scope MAS provides information which is externally focused (e.g. economic conditions, etc.), non-nancial (e.g. customer preferences, etc.) and future oriented (e.g. probabilistic) (Chenhall and Morris, 1986; Gul and Chia, 1994; Choe, 1998; Bouwens and Abernethy, 2000). The main difference between IFIs and conventional nancial institutions is that their objectives and operations, as well as principles and practices, must conform to the principles of Islamic Shariah ( Jurisprudence) and Islamic ethics as enunciated by Shariah. The principles are: (1) prohibition of riba (interest); (2) application of al-bay (trade and commerce); (3) avoidance of gharar (ambiguities) in contractual agreements; prohibition of maisir (gambling); and (4) prohibition of conducting business involving prohibited commodities (Saiful Azhar, 2005). JIABR 2,2 158 Transactions in IFIs involve different Islamic contractual relationships in which various underlying Shariah principles have been used. In the Islamic banking sector for example, the relationship between investment account holders and the banks and the relationship between the banks and their customers (borrowers) are different from conventional banking systems. In conventional banking system, all deposits are treated as liabilities. In Islamic banks, savings are categorized into Al-Wadiah (safe custody) and Al-Mudarabah (prot sharing) saving accounts. Under Al-Wadiah, banks act as a trustee for its customers (Alam, 2000; Razali, 1999) while under Al-Mudarabah, banks act as a manager for the funds of its customers. The deposits will be invested and prots and losses will be shared with the account holders based on mutual agreement (Alam, 2000; Razali, 1999). Looking at the asset side of the balance sheet, in conventional banking systems, the banks are the lenders and customers are the borrowers and all transactions are subject to interest payment. Hence, IFIs require a broader scope of information to comply with the various Shariah principles. Although equity-based nancing (mudarabah and musharakah) is not widely used at the moment, some arguments related to MAS information may still be considered. Equity-based nancing is risky since there is no xed assured return to the banks (Taylor, 2003; Sarker, 1999). It takes into consideration risk-sharing, thus the capital involved in trade might grow or decrease over time (Haron and Shanmugam, 2001; Mannan and Fazlul Hoque, 2006; Hassan and Ahmed, 2002). In the case of mudarabah for example, prots are to be shared according to an agreed proportion but losses will be borne by the bank (Taylor, 2003; Alam, 2000; Dar and Presley, 2000). Therefore, Islamic banks have to carefully scrutinize the feasibility and projections provided by the customers and at the same time undertake stringent credit analysis and risk assessment (Taylor, 2003). In short, they have to be selective in choosing clients to nance under equity-based nancing modes (Sarker, 1999). Islam et al. (2000) argue that the adoption of this equity-based form of nancing requires a different set of MAS information in terms of scope and integration. A relatively broad scope of information is required to assess the prospects of their clients and to carry out day-to-day business operations. Thus, we offer the following proposition: H1. There is a signicant difference regarding the scope of MAS between IFIs and conventional nancial institutions. Timeliness of information refers to the provision of information on request and the frequency of reporting collected information. Timeliness inuences the managers ability in responding quickly to events. MAS, together with timely information, is able to report upon the most recent events and provide rapid feedback on decisions (Chenhall and Morris, 1986; Bouwens and Abernethy, 2000). In Islamic banks, the prot rate for their nancing are xed. However, the return on the deposits uctuates depending on market conditions. Therefore, to prevent mismatch between assets and liabilities, timely information is required by IFIs in calculating their prot distribution. At the same time, IFIs take a partnership position in their equity-based nancing, and timely information is required so that decision making, planning and control can be made effectively since the IFIs themselves become a stakeholder in the businesses to which they provide nancing (Greuning and Iqbal, 2007). By being partners with their customers, it is critical for IFIs to have reliable andtimelyinformation (Greuningand Iqbal, 2007). Based on the arguments above, the following proposition is proposed: MAS in Malaysia 159 H2. There is a signicant difference in the use of timely MAS between IFIs and conventional nancial institutions. Coordination of the various segments within a sub-unit is an important aspect of organizational control. Integrated MAS characteristics that may assist coordination include information about the activities of other departments within the rm and information on the impact that decisions in one department have on the performance of another. The information may relate to input, output, operating processes and the technology employed by other departments (Bouwens and Abernethy, 2000; Chenhall and Morris, 1986). In the Islamic banking system, different products require different contracts, which lead to different kinds of relationship. For example, unlike nancing in conventional banking where the bank is the lender and the customer is the borrower, in murabahah (deferred sale) nancing, the customer is the buyer and the bank is the agent who buys and sells the product to the buyer. Therefore, it is a trading contract which is permissible by Shariah. In ensuring compliance with Shariah, a regulatory body called the SSB is set up (Abdul Rahim, 2006; AAOIFI, 2001; Haron and Shanmugam, 2001). The Islamic insurance operators are also answerable to their SSBs. They are only allowed to invest their funds in Shariah-approved avenues. In order to comply with Shariah, the extent and nature of MAS information needed by IFI managers for day-to-day monitoring and decision making will be more complex than that required by managers in conventional nancial institutions (Islam et al., 2000). The presence of SSB requires MAS to be more integrated since this board has the power to examine all information about an IFIs transactions to ensure adherence to Shariah principles (Islamet al., 2000). The study by Islam et al. (2000) found evidence that the extent of integration of information is greater in Islamic banks than in non-Islamic banks. Hence, it is proposed that: H3. There is a signicant difference in the use of integrated MAS between IFIs and conventional nancial institutions. Information aggregation deals with a variety of ways to collect and summarize the data within periods of time or area of interest, such as responsibility centers or functional areas (Choe, 1998). Aggregate information represents summarized information that covers periods of time or diverse management area while disaggregated information represents excessively detailed information that may include only one period or one functional area (Choe, 1998). Owing to the unique nature of the IFIs, they are also exposed to specic risks in addition to the normal credit, market and operational risks faced by conventional FIs. These specic risks include equity investment risks, displacement risks, liquidity risks and Shariah risks. Contrary to conventional FIs, IFIs invest on the basis of equity-based assets (including partnership based Mudarabah and Musharakah investments) that expose the IFIs to volatility in earnings due to liquidity, credit and market risks associated with equity holdings (Iqbal and Mirakhor, 2007). Loss of capital is also possible in Mudarabah and Musharakah contracts despite proper monitoring. Therefore, aggregated information by product is required by IFIs to determine the capital charge for each type of product. Thus, we offer the following proposition: H4. There is a signicant difference in the use of aggregated MAS between IFIs and conventional nancial institutions. JIABR 2,2 160 3. Research method Data were collected using postal questionnaires and semi-structured interviews. This study considered the whole population of nance and insurance companies listed on the Malaysian Central Bank web site. The population was 106 nancial institutions with 45 FIs randomly selected for this study. The choice of single industry will minimize environmental heterogeneity (Moores and Yuen, 2001). The environment is further controlled by selecting institutions that provide banking and insurance services only. Although restricting the sample will limit the ability to generalize the results, it is believed that specic industry analysis will substantially raise the internal validity over a multi-industry analysis (Ittner et al., 2003). 3.1 Development of questionnaire Aquestionnaire was developed to measure the extent of use of information provided by the MAS in the surveyed organizations for decision making, planning and control. The characteristics of the information were divided into four main dimensions, namely, scope, timeliness, levels of integration and levels of aggregation. The characteristics of the MAS information were measured based on Bouwens and Abernethy (2000), Chong and Chong (1997) and Chenhall and Morris (1986). The measurement developed by Chenhall and Morris (1986) has been shown to be robust across a variety of settings (Chenhall, 2003). The extent of use of these MAS information characteristics were also used by other studies (Mia and Chenhall, 1994; Chong and Chong, 1997; Agbejule, 2005). The dimensions of scope (six items), timeliness (four items), integration (four items) and aggregation (six items) were measured based on Bouwens and Abernethy (2000) and Chenhall andMorriss (1986). FollowingBouwens andAbernethy(2000), the wordingof the items were changed slightly to ensure that the instrument was applicable to the context of this study. Likert scales of 1 (not at all) to5 (to a verygreat extent) were usedfor this section. The questionnaire was rst pre-tested on seven academics fromthe local universities. They were either experts in management accounting and nancial systems or experts in research methodology. Pilot testing is important to ensure validity and reliability of research instruments (Sekaran, 2000). Pilot testing was also conducted with two senior nance managers and six managers fromthe nancial institutions. Arevised version of the questionnaire was prepared accordingly. 3.2 Administration of questionnaire The questionnaire was mailed to the chief nancial ofcer (or the most senior position in the Finance Department) of each nancial institution. They were chosen because they were the ones responsible for management accounting in the organizations. According to Rodeghier (1996), in using the survey research, contacts are very important and there should be at least three contacts with the sample, each slightly different in tone and content, to ensure a high return. Thus, one week after the survey packets were sent, phone calls were made to ensure that the organizations had received the packets. Five weeks after the rst mailing, another set of questionnaires was sent to non-respondents. Follow-ups were made again through email and telephone calls after the second mailing. 3.3 Proles of respondents and nancial institutions As shown in Table II, the largest category of respondents was head of nance/general manager nance/vice president nance (35.6 per cent), followed by nance manager MAS in Malaysia 161 (24.4 per cent), senior manager nance/assistant vice president nance (17.8 per cent), CFO/Director of Finance (15.6 per cent), and others (6.7 per cent). A total of 25 (55.6 per cent) respondents have been holding their current position between one and three years, 14 (31.1 per cent) between three and ten years, and 4 (8.9 per cent) for more than ten years. Table III summarizes the prole of the organizations involved in the survey. About 27 (60 per cent) organizations offer only conventional nancial services, while 18 (40 per cent) offer only Islamic nancial services. The majority of the organizations (conventional 85.1 per cent and Islamic 55.7 per cent) had more than 100 employees. This indicates that the majority of the organizations involved in this survey may be considered large in size. In terms of total annual revenue, 70.3 per cent of the conventional FIs and 44.5 per cent of the IFIs had a total annual revenue of more than RM100 million. In terms of total assets, 51.8 per cent of the conventional FIs and 61.2 per cent of the IFIs had more than RM1 billion worth which further suggest that most of the rms surveyed were large in size. The majority of the conventional FIs (71.1 per cent) had been in operation for more than ve years. However, most of the IFIs (66.7 per cent) had been in operation for less than ve years. It has been only in the last ve years that the growth of IFIs has contributed to the strengthening of Malaysia as an International Islamic Financial Center (MIFC). Most of the IFIs (88.9 per cent) were locally owned while only 51.9 per cent of the conventional FIs were locally owned. 3.4 Post-survey semi-structured interviews Semi-structured interviews were conducted to gain in-depth understanding of the issues surveyed. The respondents who were involved in the questionnaire survey provided the basis for the sample selection for the interviews. Eight interviews were conducted with respondents with similar backgrounds: they were in senior position and experienced enough to represent their organization as almost all of themwere in the top management team, with an average age of 44 years, and had on average served the company for 11 years and had on average held their current position for four years. All the eight interviewees were from IFIs (Table IV). Conventional (n 27) Islamic (n 18) Total (n 45) Background variable Categories Freq. % Freq. % Freq. % Job designation CFO/director of nance 4 14.8 3 16.7 7 15.6 Head of nance/GM nance/vice president nance 10 37 6 33.3 16 35.6 Senior manager nance/ assistant VP nance 3 11.1 5 27.8 8 17.8 Finance manager 7 25.9 4 22.2 11 24.4 Others 3 11.1 0 0 3 6.7 Length of time holding current position Between 1 and 3 years 13 48.1 12 66.7 25 55.6 Between 3 and 10 years 10 37.0 4 22.2 14 31.1 Between 10 and 20 years 1 3.7 1 5.6 2 4.4 More than 20 years 2 7.4 0 0 2 4.4 No information provided 1 3.7 1 1 2 4.4 Table II. Prole of respondents JIABR 2,2 162 4. Results and discussion This study has investigated whether there is any difference in the MAS of conventional and IFIs. Since IFIs have to meet both business and religious objectives, they are expected to have a broader scope, more timely, highly integrated and highly aggregated MAS information than conventional FIs. Table V presents the descriptive statistics for each MAS item for IFIs and conventional FIs. As can be seen, the mean scores of each item for IFIs are higher than those for conventional FIs. The hypothesis was then tested by comparing the mean scores for use of MAS by IFIs and conventional nancial institutions using an independent-samples t-test. Table VI presents the results of the t-test. The data in Table VI indicate that the mean scores for scope, timeliness, integration and aggregation for IFIs were higher than the mean scores for conventional nancial institutions. The observed signicance level for all the MAS dimensions is evidently lower than the 0.05 condence level, thus supporting the hypothesis that there is a signicant difference between the use of MAS between IFIs and conventional nancial institutions. The results suggest that in order to meet religious as well as business Conventional (n 27) Islamic (n 18) Total (n 45) Background variable Category Freq. % Freq. % Freq. % Number of employees Less than 100 3 11.1 8 44.4 11 24.4 100-499 13 48.1 5 27.8 18 40.0 500-999 8 29.6 1 5.6 9 20.0 1,000-1,499 2 7.4 1 5.6 3 6.7 1,500-1,999 0 0 1 5.6 1 2.2 Above 2,000 0 0 2 11.1 2 4.4 No information 1 3.7 0 0 1 2.2 Annual revenue Less than RM100 million 5 18.5 6 33.3 11 24.4 RM100 million to RM499 million 11 40.7 3 16.7 14 31.1 RM500 million to RM999 million 5 18.5 4 22.2 9 20.0 More than RM1 billion 3 11.1 1 5.6 4 8.8 No information 3 11.1 4 22.2 7 15.6 Annual total assets Less than RM500 million 3 11.1 3 16.7 6 13.3 RM500 million to RM999 million 6 22.2 1 5.6 7 15.6 RM1billion to RM4.99 billion 11 40.7 5 27.8 16 35.6 RM5 billion to RM9.99 billion 1 3.7 3 16.7 4 8.9 More than RM10 billion 2 7.4 3 16.7 5 11.1 No information 4 14.8 3 16.7 7 15.6 Firms age Less than 5 years 1 3.7 12 66.7 13 28.9 5-10 years 4 14.8 2 11.1 6 13.3 11-20 years 1 3.7 2 11.1 3 6.7 21-30 years 6 22.2 1 5.6 7 15.6 31-40 years 5 18.5 0 0 5 11.1 41-50 years 3 11.1 0 0 3 6.7 More than 50 years 7 25.9 1 5.6 8 17.8 Ownership structure Local 14 51.9 16 88.9 30 66.7 Foreign 12 44.4 2 11.1 14 31.1 Joint venture 1 3.7 0 0 1 2.2 Table III. Prole of sample rms MAS in Malaysia 163 objectives, IFIs use MAS information that is broader in scope, more timely, more integrated and more aggregated than conventional nancial institutions. The results can be summarized as follows (Table VII). Interviews were conducted with eight interviewees from IFIs to further examine the possible reasons for IFIs to use more sophisticated MAS than their conventional Interviewee Position Length of service in the company (years) Length of time in current position (years) Gender Age 1 Head of nance 23 10 Male 47 2 Senior manager nance 17 4 Male 53 3 Head of nance 2 2 Male 37 4 Senior manager nance 14 2 Male 38 5 Assistant general manager nance 17 2 Male 39 6 Manager nance a 12 4 Male 38 7 Senior vice president/ company secretary nance and administration 3 3 Male 50 8 Chief nancial controller 2 2 Male 46 Note: a Representing the head of nance Table IV. Background of the interviewees IFIs Conventional FIs Mean SD Mean SD Scope Information relates to future events 3.89 1.183 2.85 1.099 Quantication of the likelihood of future events 3.94 1.110 2.52 0.893 Non-economic information 3.89 0.832 2.59 1.047 Broad factors external to organization 3.94 0.802 2.93 1.107 Non-nancial relates to productivity 3.67 0.767 2.63 0.967 Non-nancial relates to market information 3.89 0.832 3.19 0.962 Timeliness Immediately upon request 3.89 0.900 3.52 0.935 Given automatically 3.89 0.758 3.26 0.944 Provided frequently 4.28 0.575 4.04 0.808 Reported without delay 4.00 0.907 3.44 0.751 Integration Precise targets activities of all departments 3.89 0.758 3.26 0.859 Impact on different departments decision 3.72 0.895 3.11 0.892 Cost and price information of the departments 3.67 0.840 3.11 0.934 Impact of your decision and inuence of others 3.78 0.647 2.93 0.917 Aggregation Different sections or functional areas 3.83 0.924 3.44 0.801 Effect of events on particular time periods 4.11 0.758 3.74 0.764 Inuence of events on different functions 3.61 0.916 3.00 0.832 Effect of different departments activities 3.83 0.985 3.56 0.801 Input into decision models 3.61 0.850 2.74 0.903 What-if analysis 3.67 0.840 2.85 0.864 Table V. Descriptive statistics of MAS items JIABR 2,2 164 counterparts. Four interviews were conducted with Islamic banks, one interview with a bankthat offers Islamic nancial services onlyandthree withIslamic insurance companies. Most of the interviewees stated that there was not much difference in the overall nancial accounting systems for recording and reporting purposes between IFIs and conventional FIs, as both are subject to the Malaysian Accounting Standards Board (MASB) and International Accounting Standards (IAS). However, since IFIs and conventional business transactions are based on totally different concepts they have to do a great deal of customization to the support or the application systems (i.e. the system used to process the transaction inputs into outputs). In expressing his views, the Head of Finance for a local Islamic bank said: We ride on the parents accounting system. They create a separate GL book [. . .]. so funds are managed separately. But the terms are all based on the conventional system and we have to make some adjustments [. . .]. We try to modify the system to suit the Islamic products, but there will still be some problems because it was not designed for Islamic products. Islamic and conventional system is totally different. Recording and reporting is not an issue [. . .] the major issue is actually the support system. Similarly, the Senior Finance Manager of another Islamic bank said: The present conventional accounting system is sufcient. However, adjustments have to be made for Islamic products. A simple example is the xed rate for BBA house. The current conventional application system does not recognize selling price and purchase price. When the application system does not recognize both prices, the same will occur in the GL system because of the interface between GL and application systems [. . .]. So at the end we have to do further enhancement to both systems. MAS dimensions Services n Mean t-value Sig. (two-tailed) Scope Conventional 27 2.7840 24.518 0.000 Islamic 18 3.8704 Timeliness Conventional 27 3.5648 22.346 0.023 Islamic 18 4.0139 Integration Conventional 27 3.1019 23.00 0.004 Islamic 18 3.7639 Aggregation Conventional 27 3.2222 22.800 0.008 Islamic 18 3.7778 Table VI. Results of t-test on use of MAS Hypotheses Results H1. There is a signicant difference in the use of broad scope MAS between IFIs and conventional nancial institutions Supported H2. There is a signicant difference in the use of timely MAS between IFIs and conventional nancial institutions Supported H3. There is a signicant difference in the use of integrated MAS between IFIs and conventional nancial institutions Supported H4. There is a signicant difference in the use of aggregated MAS between IFIs and conventional nancial institutions Supported Table VII. MAS in Malaysia 165 The interviews above reveal that although there is little difference in terms of overall nancial accounting system, additional elds or features of the systems are required to cope with the various Islamic products that require different contracts and different relationships. Thus, to address the issues of Shariah, IFIs require more information than conventional FIs. 4.1 Scope The empirical evidence from this study suggests that in order to be Shariah compliant, IFIs use a broader scope of MAS information than conventional FIs. In a related interview, the Senior Finance Manager for an Islamic bank reected on the need for non-nancial information in decision making: Last time, when we were windows [1], the environment was different; we were just a side business. Now we are an entity by itself. We have to work on the bottom-line but at the same time we have to ensure that all the Shariah compliance issues are addressed. Besides looking at business operations, other aspects of the organization also have to be Shariah compliant. For instance, the Senior Vice President Finance and Administration of an Islamic Insurance Company said: We have four Shariah committee members from outside and we have a Shariah compliance department. They liaise with the Shariah committee. We need their approvals from the introduction of the products to the delivery of the products and other things related to Shariah have to be endorsed by the Shariah committee [. . .]. Our Shariah compliance department looks at Shariah compliance for the company as a whole. Not just on the products, but also looks at the ethics of the staff. The ndings fromthe survey (Table VI) and the interviews are consistent with Islamet al. (2000) who nd that managers of Islamic banks need a relatively broader scope of information about their business operations and the prospects of their clients. IFIs require more non-nancial informationespeciallythose relatedtothe issue of Shariahcompliance. As managers of customer funds, IFIs have to make sure that the funds are managed in accordance with the principles of Shariah. Hence, more non-nancial information related to Shariah compliance is required by them. For example, IFIs have to make sure that revenues come fromactivities permitted by Shariah. Cleansing activities will be carried out if there is any doubt as to the source of the income. To do this, IFIs have to check the sources of the income. For instance, the Head of Finance for an Islamic bank stated: We closely monitor our source of income. Normally we will quantify the non-halal income and we will not record it as income in our income statement. It will be recorded in one account to become a special fund to be distributed to the public under maslahah ummah [. . .]. Example would be the interest received that was not contracted before, and this normally happens when we deal with non-muslim or conventional banks. In addition, in conventional commercial banking systems, there is a lender and borrower relationship where each transaction is subjected to interest payments. However, in the Islamic banking system, a different relationship exists depending on the nature of the product. For example, murabahah nancing is a trading contract, while mudarabah and musharakah involve participatory contracts that are founded on equity-based nancing contracts. Thus, to ensure that the contracts associated with the transactions are not against Shariah, the process of product innovation in IFIs is more rigorous. JIABR 2,2 166 Various underlying Shariah principles are used. This again requires a huge amount of non-nancial information related to Shariah issues. IFIs have to go through more processes thanconventional inorder to get approval for product introduction. Inexpressing his view related to product innovation, a senior nance manager for an Islamic bank said: Whenever we want to introduce a new product we cannot just show one piece of paper to the Shariah committee saying this and that with modus operandi that is very skeleton [. . .]. Now it is going to be a thick document, to the extent that the operation manual also has to be vetted through by the Shariah committee. In equity-based nancing, Islamic banks need to be selective in choosing their clients as the returns are not guaranteed. In dealing with mudarabah nancing, the Head of Finance for an Islamic bank stated: We analyze documents closely at the application stage [. . .]. Once nancing is approved, we review their business performance yearly [. . .]. It is purely business and indirectly on Shariah [. . .]. When non-compliance issue arise, then we will report. Furthermore, in musharakah nancing, once a partnership has been established with the client, Islamic banks have to participate directly in the business. Aside from the constant monitoring conducted to ensure that business activities are in accordance with Shariah, IFIs must ensure that the business activities provide the expected return to both parties. In making business decisions both parties have to consider market, economic and technological factors, which are all external information. Business decisions are also made based on the forecasting of information. As for the Islamic insurance business, management has to monitor funds collected from customers and certify that they are invested in Shariah compliant businesses. Thus, more external and future information is required to ensure that operation and day-to-day activities of the IFIs are in accordance with Shariah. When talking about investing their funds, the Senior Vice President for Finance and Administration for an Islamic Insurance company stated: If we want to invest in the stock market, we only invest in the Shariah approved counters. Like in the money market, if we want to invest in banks, then we have to go to Islamic banks. We cannot invest in the conventional banks. And for bonds, we have to buy suku k. Investments must be Shariah certied. 4.2 Timeliness The empirical ndings from the survey reveal that IFIs use more timely information than their conventional counterparts. A possible explanation for this is quite possibly that IFIs take a partnership position (Greuning and Iqbal, 2007). Furthermore, in Islamic banks, deposits are not based on guaranteed return but based on prot sharing, with a xed amount on the asset side and a varied amount on the liability side. If prots are overly distributed, then banks may have insufcient funds to meet their obligations. Thus, calculation on prot distribution has to be prepared and submitted monthly to the Central Bank. According to the Head of Finance for an Islamic bank: We have to submit our prot distribution report to Bank Negara every month. This is the biggest and the most comprehensive information that we have to gather but conventional banks are not required to do this. MAS in Malaysia 167 The same view was echoed by the Assistant General Manager Finance of a bank offering Islamic nancial products only: Deposits are taken under murabahah and the rates are not xed unlike the loan. So the income side is xed. What happens if next year there is an economic crisis? The rate of return on deposits increases, but income is xed. Then margin will be reduced. Thus, we must have sophisticated information to simulate all these scenarios. With timely information, decisions on prot distribution can be made effectively and the possible mismatch of assets and liabilities can be monitored closely. Another possible reason for this is the size of the IFIs themselves. The IFIs in this study are mostly smaller than conventional FIs and in smaller organizations, bureaucracy can be expected to be lower. With advances in information technology, information can be stored and retrieved quite efciently. 4.3 Integration Consistent with Islam et al. (2000), the ndings of this study suggest that IFIs use more integrated information than conventional IFIs. IFIs use information about the activities of the various departments within the rm alongside information on the impact of decisions on them (Chang et al., 2003; Bouwens and Abernethy, 2000; Chia, 1995). The issue of Shariah compliance in product innovation gives a possible explanation for these ndings. Product innovation requires the integrated effort of various departments; including the SSB, product development, legal, marketing and nance. IFIs have to make sure that the contracts associated with the new products conform to Shariah. The need for more integrated MAS in IFIs is increased because all transactions are monitoredby SSBto ensure Shariah compliance (Islamet al., 2000). Infact, withShariah audit coming into practice, highly integrated MAS will be required so that compliance throughout the value chain can be easily tracked. When describing their information system, the Senior Vice President of a new Islamic insurance company remarked: Ours is a full package systemstarting fromthe point of sale. We have the package which I think other insurance companies do not have [. . .]. The advantage of our system is that when they key-in at the front line, it will be updated automatically in the General Ledger system. 4.4 Aggregation The ndings of this study also suggest that IFIs use more aggregated information than conventional FIs. The aggregation of information by product is required by IFIs in calculating their capital charge for risk management. Under the capital adequacy ratio (CAR) requirements, IFIs have to identify the Shariah concept of each product because the weight ratio for each product varies according to whether the products have collateral or not. In explaining this new development, the Senior Finance Manager for an Islamic bank stated: Our system must now have new features regarding our products. Previously we disregarded the Shariah concept. We did not put any indication as whether it is BBA, murabahah, etc. [. . .]. Now, if you have a housing loan under BBA and musharakah, you cannot join them together because they are based on different concept. For Islamic insurance operators, aggregated information is very important in evaluating potential investment and also in monitoring the performance of the JIABR 2,2 168 companies where the funds are invested. On this issue, the Chief Financial Controller for a foreign Islamic Insurance company noted: When we invest, we have a system in place to monitor the performance of the investment. If we go to the equity market, we have to make sure that we can manage them [. . .]. Now it is very difcult to follow each company individually. So we make use of those indices available such as the Dow Jones [. . .]. We also rely on the Securities Commissions lists of Shariah approved counters. The empirical ndings fromthe survey was supported in the interviews, which revealed that in order to be Shariah compliant, IFIs rely on a broader scope of information in addition to the traditional nancial and quantitative nature of accounting information. The empirical ndings fromboth the survey and the interviews also reveal that IFIs use more integrated and aggregated information than conventional FIs. In addition, IFIs are expected to be more transparent in reporting and consequently require more integrated and aggregated information that covers a wider scope of information. Realising that riding on the parents company conventional system may not be sufcient for Islamic banks, one Islamic subsidiary converted their accounting system into a new system called iMAL. According to the senior nance manager of this company, iMAL will be more suitable for Shariah compliance objective and he claimed that the company will be the rst to use this system in Malaysia. Some of the big Islamic banks in other countries like the Kuwait Finance House have also started using the system. In explaining about this solution, he said: The conventional system is not suitable for Islamic banks because many calculations such as prot are different. The terms used are also different. Conventional FIs use the word loan and interest, but Islamic banks call it nancing and prot. The implementations are also different. In implementing this project, the bank gets advice from a group of experts. According to the senior executive who handles the project: There are two main characteristics of iMAL. First, it involves a real time posting, so when the users key in the transactions they can see the result straight away [. . .]. The Islamic products are already in the chart of accounts and the chart of accounts has been categorized into for example murabahah, wakalah,, etc. It is suitable for Islamic banking system since the Shariah concept is already in the chart of accounts. The iMAL can be integrated into the customer information system and information about the customers can be extracted easily. In fact, the iMAL system can be linked to many other application systems to extract the information required for decision making. He stressed that: The integration will be more universal and comprehensive, where you can use the system for budgeting, for employees attendance, for stock taking of stationery, time taken to serve a customer, etc. Besides having real-time posting, where information can be provided in a timely manner, the second characteristic highlighted by the senior executive is the capability of the system to navigate into detailed information. In explaining this, he stated: The uniqueness of the system is that you can drill down. Lets say at 11.30 am you have deposits amounting to RM1 million, and in the next 10 minutes the amount increases MAS in Malaysia 169 to RM2 million. Then the headquarters will know from which branch or customer the increment originated. Posting and results are real time. Owing to the high linkages and the real-time processing, aggregated or summarized information by products, by branch or by time period can be obtained easily and in a timely manner. Related to this, he added: If the Central Bank wants a report, we just select a date, at a nger tip we have all the information required. Thus, this iMALsystemis an example of a systemthat is able to capture a broader scope of information. At the same time, it is built on Shariah rules and regulations. It can be integrated or easily linked to other application systems, thus banks can easily obtain the information required to support their operations. The integrated and real-time posting enables summarized or aggregated information to be retrieved in a timely manner. Hence, iMAL ts the criteria of a sophisticated MAS. Besides complying with the Shariah and other regulatory requirements, the system can bring a competitive advantage to the IFIs. The availability and use of sophisticated information allows managers of the IFIs to make more effective decisions, which in turn improves organizational performance. The above ndings are to be expected, as MAS is part of a wider MIS (Upchurch, 2002; Bouwens and Abernethy, 2000). MAS can also be viewed more broadly (Mia, 2000; Hussain, 2000) and there is not much difference between the information provided by a specic MAS and that provided by other MISs. With the advancement in IT, many organizations are adopting strategic enterprise management systems in which management information across all functions and disciplines is integrated into a common database (Brignall and Ballantine, 2004). Hence, MAS has become part of the enterprise management system. Thus, as found in this study, MAS may not be the only major factor that contributes to the difference between the MAS of IFIs and those of conventional nancial institutions. The difference might be due to the difference in the overall MIS of the organization. The MIS for IFIs might be broader in scope and more integrated to cover Shariah compliance issues (Islam et al., 2000). 5. Conclusion The aim of this study has been to determine whether there is any difference between the MAS of conventional and IFIs. A survey on nancial institutions in Malaysia was conducted and semi-structured interviews were carried out to gain further insights into the survey ndings. The study shows that IFIs use MAS information that is broader in scope, more timely, more integrated and more aggregated than conventional nancial institutions. In order to meet both religious and business objectives, IFIs require sophisticated MAS information, which is available through the use of strategic management accounting (SMA) tools and techniques such as the BSC and ABC. The use of these techniques brings a competitive advantage to IFIs, as SMA places customer needs at its top of priority. The study has illustrated that IFIs normally develop and adopt an integrated accounting and overall enterprise system. With this comprehensive enterprise system, the management accounting function is integrated with other functions in the organization. This study is subjected to the usual limitations associated with questionnaire-based surveyresearch. It is important tointerpret the results inthe light of the studys limitations. JIABR 2,2 170 This study covers only nancial institutions in Malaysia, thus the ndings cannot be generalized to other enterprises or to other countries. As for the respondents, this study involved top management as the sole respondents and representatives of their respective organizations. Nonetheless, the information sought is not beyond their knowledge as top management are normally well-versed in the diverse aspects of the organization. Future researchcanconsider collectingdata fromindividuals at various levels of the organization. This study has provided an avenue for further investigation on issues of MAS for IFIs. A future focus might be on how MAS helps in strategic and operational decision making by considering the need for Shariah compliance. Researchers might also focus on the role of MAS in promoting transparency and accountability in IFIs. A case study approach would be able to provide a deeper and richer understanding of this issue. In addition, future studies might examine the signicance of supporting activities (departments) in the delivery of Islamic nancial products. It is also worth including for further study the need to explore value chain components in IFIs, and how they help contribute to the value of the products they offer. Note 1. Conventional bank that offers Islamic nancial services under the interest-free banking system. References AAOIFI (2001), Accounting, Auditing and Governance Standards for Islamic Financial Institutions, Accounting and Auditing Organisation for Islamic Financial Institutions, Bahrain. Abdel Karem, R.A. (1990), Standard setting for the nancial reporting of religious business organizations: the case of Islamic banks, Journal of Accounting & Business Research, Vol. 20 No. 10, pp. 299-305. Abdul Rahim, A.R. (2003), Contemporary accounting regulatory issues on investments in Islamic bonds, International Journal of Islamic Financial Services, Vol. 4 No. 4, available at: www.iiibf.org/journal.htm (accessed 20 May 2008). Abdul Rahim, A.R. (2006), Accounting, Auditing and Governance for Islamic Financial Services, paper presented at the Seminar on Islamic Banking and Capital Markets, Products & Instruments, Kuala Lumpur, May. Agbejule, A. (2005), The relationship between management accounting systems and perceived environmental uncertainty on managerial performance: a research note, Accounting & Business Research, Vol. 35 No. 4, pp. 295-305. Alam, M.N. (2000), Islamic banking in Bangladesh: a case study of IBBL, International Journal of Islamic Financial Services, Vol. 1 No. 4, available at: www.iiibf.org/journal.htm (accessed 15 March 2008). Atkinson, A.A., Banker, R.D., Kaplan, R.S. and Young, S.M. (2001), Management Accounting, 3rd ed., Prentice-Hall, Upper Saddle River, NJ. Bouwens, J. and Abernethy, M.A. (2000), The consequences of customization on management accounting system design, Accounting, Organizations and Society, Vol. 25 No. 3, pp. 221-41. Brignall, S. and Ballantine, J. (2004), Strategic enterprise management systems: new directions for research, Management Accounting Research, Vol. 15, pp. 225-40. MAS in Malaysia 171 Chang, R.D., Chang, Y.W. and Paper, D. (2003), The effect of task uncertainty, decentralization and AIS characteristics on the performance of AIS: an empirical case in Taiwan, Information & Management, Vol. 40, pp. 691-703. Chenhall, R.H. (2003), Management control systems design within its organizational context: ndings from contingency-based research and directions for the future, Accounting, Organizations and Society, Vol. 28, pp. 127-68. Chenhall, R.H. and Morris, D. (1986), The impact of structure, environment, and interdependence on the perceived usefulness of management accounting systems, The Accounting Review, Vol. 61 No. 1, pp. 16-35. Chia, Y.M. (1995), Decentralization, management accounting system (MAS) information characteristics and their interaction effects on managerial performance: a Singapore study, Journal of Business Finance & Accounting, Vol. 22 No. 6, pp. 811-30. Choe, J. (1998), The effects of user participation on the design of accounting information systems, Information & Management, Vol. 34 No. 3, pp. 185-98. Choe, J. (2004), Impact of management accounting information and AMT on organizational performance, Journal of Information Technology, Vol. 19, pp. 203-14. Chong, V.K. and Chong, K.M. (1997), Strategic choices, environmental uncertainty and SBU performance: a note on the intervening role of management accounting systems, Accounting & Business Research, Vol. 22 No. 4, pp. 268-76. Cole, L.P. (1988), Management Accounting in Banks, Bank Administration Institute, Rolling Meadows, IL. Dar, H.A. and Presley, J.R. (2000), Lack of prot loss sharing in Islamic banking: management and control imbalances, Journal of Islamic Financial Services, Vol. 2 No. 2, available at: www.iiibf.org/journal.htm (accessed 10 April 2008). Errico, L. and Farahbaksh, M. (1998), Islamic banking: issues in prudential regulations and supervision, working paper of the International Monetary Fund, Washington, DC. Gordon, L.A. and Miller, D. (1976), A contingency framework for the design of accounting information systems, Accounting, Organizations and Society, Vol. 1 No. 1, pp. 59-69. Gordon, L.A. and Narayanan, V.K. (1984), Management accounting systems, perceived environmental uncertainty and organization structure: an empirical investigation, Accounting, Organizations and Society, Vol. 9 No. 1, pp. 33-47. Govindarajan, V. (1984), Appropriateness of accounting data in performance evaluation: an empirical examination of environment uncertainty as an intervening variable, Accounting, Organisation and Society, Vol. 9 No. 2, pp. 125-36. Greuning, H.V. and Iqbal, Z. (2007), Banking and the risk environment, in Archer, S. and Abde Karim, R.A. (Eds), Islamic Finance: The Regulatory Challenge, Wiley, Singapore, pp. 11-39. Gul, F.A. and Chia, Y.M. (1994), The effects of management accounting systems, perceived environmental uncertainty and decentralization on managerial performance: a test of three-way interaction, Accounting, Organizations and Society, Vol. 19 Nos 4/5, pp. 413-26. Haron, S. and Shanmugam, B. (2001), Islamic Banking System: Concepts and Applications, Pelanduk Publications, Kelana Jaya. Hassan, M.K. and Ahmed, M. (2002), Islamic banking versus conventional banking: a questionnaire survey of their apparent similarities and differences, paper presented at The First International Conference on Islamic Banking, Finance and Insurance: Reshaping Global Financial Architecture through the Islamic System, January, Labuan, Sabah, available at: www.iiibf.org/journal.html (accessed 15 June 2008). JIABR 2,2 172 Hussain, M.M. (2000), Management Accounting Systems in Services: Empirical Evidence with Non-Financial Performance Measurement in Finnish, Swedish and Japanese Banks and other Financial Institutions, Universitas Wasaensis, Vaasa. IFAC (1998), International management accounting practice statement (IMAP # 1): management accounting concepts, Financial and Management Accounting Committee, March, pp. 84-100. Iqbal, Z. and Mirakhor, A. (2007), Theory and practice, An Introduction to Islamic Finance, Wiley, Singapore. Islam, J., Taylor, D.W. and Islam, A. (2000), The information adequacy of management accounting systems amongst Islamic and non-Islamic banks in Bangladesh, Accounting, Commerce and Finance: The Islamic Perspective, Vol. 4 No. 1, pp. 1-29. Ittner, C.D., Larcker, D.F. and Randall, T. (2003), Performance implications of strategic performance measurement in nancial services rms, Accounting, Organizations and Society, Vol. 28, pp. 715-41. Kafaan, R.E. (2001), Keys to community bank success: utilizing management information to make informed decision, The Journal of Bank Cost & Management Accounting, No. 1, pp. 3-4. Lal, M. and Hassel, L. (1998), The joint impact of environmental uncertainty and tolerance of ambiguity on top managers perceptions of the usefulness of non-conventional management accounting information, Scandinavian Journal of Management, Vol. 14 No. 3, pp. 259-71. McDonald, R.B. (2004), True activity-based management for banks, Journal of Performance Management, Vol. 17 No. 3, pp. 41-52. Mannan, M.A. and Fazlul Hoque, A.K.M. (2006), Functions of an Islamic bank, in Pramanik, A.H. (Ed.), Islamic Banking: How Far Have We Gone, International Islamic University Malaysia, kula lumpur, pp. 121-6. Max, M. (2004), ABC trends in the banking sector: a practitioners perspective, Journal of Performance Management, Vol. 17 No. 3, pp. 23-40. Mia, L. (2000), Just-in-time manufacturing, management accounting systems and protability, Accounting & Business Research, Vol. 30 No. 2, pp. 137-51. Mia, L. and Chenhall, R. (1994), The usefulness of MAS functional differentiation and management effectiveness, Accounting, Organizations and Society, Vol. 19 No. 1, pp. 1-13. Mia, L. and Patiar, A. (2001), The use of management accounting systems in hotels: an exploratory study, International Journal of Hospitality Management, Vol. 20, pp. 111-28. Moores, K. and Yuen, S. (2001), Management accounting systems and organizational conguration: a life-cycle perspective, Accounting, Organizations and Society, Vol. 26, pp. 351-89. Noraini, M.A. (2005), Enhancing transparency and risk reporting in Islamic banks, unpublished doctoral thesis, University of Surrey, Surrey. Ostinelli, C. and Toscano, G. (1994), Putting quality to work in banking through management accounting systems: three Italian banks alternative approaches, paper presented at the 17th Annual Congress of European Accounting Association, Venice, April. Otley, D.T. (2001), Extending the boundaries of management accounting research: developing systems for performance management, British Accounting Review, Vol. 33, pp. 243-61. Razali, N. (1999), Islamic Law on Commercial Transactions, CT Publications, Corona, NY. Rezaee, Z. (2005), The relevance of managerial accounting concepts in banking industry, Journal of Performance Management, Vol. 18 No. 2, pp. 3-16. Robinson, S. and Chappelear, B. (2002), Decision support by design: managing the information in your legacy systems, The Journal of Bank Cost & Management Accounting, Vol. 15 No. 1, pp. 17-26. MAS in Malaysia 173 Rodeghier, M. (1996), Survey with Condence: A Practical Guide to Survey Research Using SPSS, SPSS, Chicago, IL. Saiful Azhar, Rosly (2005), Critical Issues on Islamic Banking and Financial Markets, Dinamas Publishing, Kuala Lumpur. Sarker, M.A.A. (1999), Islamic banking in Bangladesh: performance, problems and prospects, Journal of Islamic Financial Services, Vol. 1 No. 3, available at: www.iiibf.org/journal.htm (accessed 15 March 2008). Sekaran, U. (2000), Research Methods for Business: A Skill Building Approach, 3rd ed., Wiley, New York, NY. Siti Zaleha, A.R. and Abdul Rahim, A.R. (2009), Management accounting and risk management practices in nancial institutions, Jurnal Teknologi, Vol. 51(E), December, pp. 89-110. Talib, A.A. (2000), Islamic banking nancing instruments and the concept of substance over form: the case of Bai Bithaman Ajil, Journal of Accounting, Commerce & Finance: The Islamic Perspective, Vol. 4 Nos 1/2, pp. 48-59. Taylor, J.M. (2003), Islamic banking the feasibility of establishing an Islamic bank in the United States, American Business Law Journal, Vol. 40 No. 2, pp. 385-416. Tillema, S. (2005), Towards an integrated contingency framework for MAS sophistication: case studies on the scope of accounting instruments in Dutch power and gas companies, Management Accounting Research, Vol. 16, pp. 101-29. Upchurch, A. (2002), Cost Accounting Principles and Practice, Prentice-Hall, Upper Saddle River, NJ. JIABR 2,2 174 Appendix Please indicate the extent of use of the following information provided by your management accounting systems (MAS) for decision making, planning and control by circling the appropriate number. MAS INFORMATION CHARACTERISTICS (The information system should include: files, reports, documents, minutes, accounts, and notes, available for decision making and provided within the organization) SCOPE (a) Information which relates to possible future events (e.g possible changes in government regulations). 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 (b) Quantification of the likelihood of future events occurring (e.g., probability estimates). (c) Non-economic information, such as customer preferences, employee attitudes, labor relations, attitudes of government and consumer bodies, competitive threats, etc. (d) Information on broad factors external to your organization, such as economic conditions, population growth, technological developments, etc. (e) Non-financial information that relates to the productivity information such as hours of computer breakdowns, employee absenteeism, customer services, etc. (f) Non-financial information that relates to market information such as market size, growth share, etc. TIMELINESS (a) Information that is provided immediately upon request. (b) Information that is given automatically upon its receipt into information systems or as soon as processing is completed. (c) Reports that are provided frequently on a systematic, regular basis such as daily reports, weekly reports, etc. (d) Relevant information that is reported without delay after occurrence of certain event. Not at All To a very great extent Not at All To a very great extent 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 INTEGRATION (a) Information on precise targets for the activities of all departments within your organization. (b) Information that relates to the impact of different departments decisions on performance of overall organization. (c) Cost and price information of the departments in your organization. (d) Information on the impact of your decisions throughout your organization, and the influence of other departments decisions on your area of responsibility. Not at All To a very great extent MAS in Malaysia 175 Corresponding author Siti Zaleha Abdul Rasid can be contacted at: szaleha@ic.utm.my To purchase reprints of this article please e-mail: reprints@emeraldinsight.com Or visit our web site for further details: www.emeraldinsight.com/reprints 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 1 2 3 4 5 Not at All To a very great extent AGGREGATION (a) Information provided on the different sections or functional areas in your organization, such as marketing and production, or sales, cost, or profit centers. (b) Information on the effect of events on particular time periods (e.g. monthly/ quarterly/annual summaries, trends, comparisons, etc.). (c) Information which has been processed to show the influence of events on different functions, such as marketing or services associated with particular activities or tasks. (d) Information on the effect of different departments activities on summary reports such as profit, cost, revenue reports for the overall organization. (e) Information in formats suitable for input into decision models (such as discounted cash flow analysis, incremental or marginal analysis and credit policy analysis) (f) Information in forms which enable you to conduct what-if analysis. JIABR 2,2 176
Effects of Transformational Leadership, Organisational Learning and Technological Innovation On Strategic Management Accounting in Thailand's Financial Institutions
Financial Management and Decision Making Enhancement Through Integration of Accounting Information System Among Multi Purpose Cooperatives in General Santos City Chapters 1 and 2 Edited