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ABSTRACT
The resurgence of Islam to a loftier pedestal as a way of life opened up an additional dimension to financial reporting to stakeholders. Muslim decision-makers expect corporations to include additional information in their reports to enable them to exercise prudence, both from economics and Islamic jurisprudence point of views. Based on the Islamic theoretical foundation of social accountability and full disclosure, Muslim business owners - or in this study, the shariah-approved companies, must prove that they are operating under Islamic laws. The Islamic capital market has developed at such a rapid pace that the shariah-approved companies are beginning to present a religious aspect to their financial statements by disclosing the fulfilment of its obligations in line with the shariah, like zakat, sadaqa, wages and compensation, and the conduct of business activities within a halal environment; hence, the need for Islamic Social Reporting (ISR). This study attempted to measure the extent of ISR as practiced by shariah-approved Malaysian companies listed in Bursa Malaysia in their annual reports. The study led to a conclusion on the degree of accountability on the part of the companies by way of their conformity to shariah. Based on the descriptive statistics of the disclosure index, it can be concluded that the extent of ISR in the annual report of selected companies is considered minimal.
Keywords: Islamic Social Reporting (ISR), shariah-approved compames
INTRODUCTION
Financial reporting was used by corporations as a means of communicating information to their stakeholders, such as the individual investors, institutional investors and financial analysts. This group used the annual report as their primary influence in decision-making. In Malaysia, the Financial Reporting Standard (FRS) 101 had made it explicit to the management of corporations that additional information should be incorporated into their annual reports if that would assist their stakeholders to make better economic decisions (Zulkifli and Amran, 2006). Information is useful for decision-making when social and environmental information are provided according to the demand of the more influential users (Mohamed Zain, 1999).
Additionally, with the resurgence of Islam, Muslim decision-makers were expecting corporations to disclose more information that would help them fulfil their spiritual needs. This was because the current corporate social reporting initiatives, although they fulfilled a wider audience's needs, lacked the most pertinent...