From accounting point of view, the objectivity principle states that accounting information and financial reporting should be independent and supported with unbiased evidence. This means that accounting information must be based on research and facts, not merely a preparer’s opinion. The objectivity principle is aimed at making financial statements more relevant and reliable. Objectivity in Islamic perspective is also the same concept as accounting perspective which focused on two aspects that are financial measurement and disclosure. Islamic corporations are expected to disclose any prohibited transactions for the basis period more detailed than conventional accounting disclosure. Adequate disclosure requires that financial statements be designed and prepared to disclose accurately the economic events that have affected the firm for the period and to contain sufficient information to make them useful and not misleading to users and average investors. In Islamic perspectives, the contract fulfillment principles is not effective as it is assume that historical cost will disclosing the truth and forbidding the withholding. However, using of historical cost is applicable in reflects to the conservatism which will understate the valuation.
The objectivity principle, from an Islamic point of view, is a desired principle for fairness accounting, especially when recording different transactions, example such as assets, goods and services at the price prevailing during the date of acquisition. However, objectivity turns out to be anything but objective when valuation is taken according to historical cost in an inflationary environment. Therefore, the objectivity realised by using cost price at acquisition date is not necessarily achieved when valuation is made at a later date. As a result, it is believed that objectivity can be accepted for recording transactions at the prices of the date of acquisition in Islamic financial institutions (Eltegani Abudlgader Ahmed, 1994)
The framework also mentions the use of financial statements to assess the decision usefulness, stewardship and accountability of management. Financial reports should provide the information which is useful for users, such as information about the Islamic bank’s compliance with the Islamic Shariah. Financial reports also should include information about the economic resources and obligations and the effect of transactions, other events and circumstances and related obligations. It is stated that the financial statement should provide information that is useful to present and potential investors and creditors and other users in making rational investment, credit and similar decisions. Both the AAOIFI and the FASB accept the traditional view that relevant information for users is information about the company’s financial position and performance which is useful in making business and economic decisions.
The concept of stewardship in accounting has referred to the separation of ownership and capital, which resulted from the development of the joint stock company structure. The current stewardship concept is quite close to the decision usefulness concept, but the information for stewardship is basically less than the decision usefulness. This is because in stewardship, potential investors and creditors are not included as users. Besides, it is not intended for the prediction model of users and it mainly looks at the past to see what has been accomplished (Mathews and Pereira, 1996). AAOFI points out that the objective of financial accounting is to contribute to the safeguarding of the assets, and to the enhancement of the managerial and productive capabilities of the Islamic bank while encouraging compliance with its established goals and policies.
The objective of accounting is to provide fair information flow between recipient and accountant (Sulaiman and Abdul-Latiff, 2005). Using such a framework, the recipient of information are assumed to be the society at large and groups within society, and the financial reporting is assumed to be responsibility driven. From an accountant’s perspective, Sulaiman (1997) defines accountability as “requirement or responsibility to provide an account or the reckoning of the actions for which one is responsible”. In Islam, the accountability based framework is even broader that what is generally understood in conventional way. Therefore, issues pertaining to social and environmental matters would be specifically disclosed in the annual report. In addition, what is prohibited by Shariah, monopoly, bribes and neglecting of contract should be also disclosed, so true believer will refrain from undertaking such activities. In conclusion, in Islam, taking in consideration ethics and accountability, corporate reporting has much “deeper” meaning than conventional. The ultimate accountability is to Allah (S.W.T.), however individual is also accountable to society.
In conclusion, users’ decision may be guided by factors other than information on the financial position and performance. Some users may base their decision on their environmental, political or moral convictions. Muslim users in particular, base their decision on their religious injunctions in Al-Quran and Sunnah. The term Islamic corporate report has been used by writers to denote a report which displays financial and non-financial information in manner congruent with Islamic principles.