Advantages And Disadvantages Of Islamic Accounting

The Disadvantage of professional islamic prictitioner

Nowadays, most of the countries in the world has adopting islamic financial in their accounting because of many benefit and justice. However, there also have disadvantage of professional prictitioner in islamic financial comparing to conventional. There are a few disadvantage of professional islamic prictitioner in islamic financial such as:

1) Risk for depositors The first problem is the reduction of danger of insolvency is counter balanced by increased risks for depositors.The profit and loss sharing model means depositors ' interest can fluctuate. Even if the depositors can monitor the bank, their scope of managing is very restrained to the voting measures against the management or

Also this situation can generate conflicts of interests due to the fact that the same scholars can assist the Shariah boards of two competitors.Some countries like Malaysia have tried to sort this lack by training scholars but the process is slow and costly.

5) Lack of uniformity of Shariah standards The existence of different Shariah boards and different Shariah opinions promotes inconsistent interpretation and application of Shariah rules. A contract can be legal in one jurisdiction (like lease and sale back) and completely illegal in the others.

The lack of Shariah scholars of high standards is a major problem is Islamic finance. Shariah scholars can be counted as 60 worldwide and earn high fees. They also sit on the boards of several different companies most often competitors which lead to a massive conflict of interest.

6) Limited supply and inadequate financing The Islamic financial institutions need a secondary market for Islamic financial instruments.Their financial ratios are pretty high. However, the inability to invest the money affects their benefits and their competitiveness.The creation of a secondary market in Pakistan is a good step on the right path. It helps Islamic institutions seek liquidity in case of

7) Unfamiliarity with the Islamic Banking System The first problem, is that despite the growth of Islamic banks over the last 30 years, many people in the Muslim and non-Muslim world do not understand what Islamic banking actually is. The basic principle is clear, that it is contrary to Islamic law to make money out of money and that wealth should accumulate from trade and ownership of real assets. However, there does not appear to be a single definition of what is or not an Islamic-banking product; or there is not a single definition of Islamic banking. A major issue here is that it is the Shariah Councils or Boards at individual Islamic banks that actually define what is and what is not Islamic banking, and what is and what is not the acceptable way to do business, which in turn can complicate assessment of risk for both the bank and its customer. More generally, the uncertainty over what is, or is not, an Islamic product has so far prevented standardization. This is difficult for regulators as they like to know exactly what it is they are authorising. It is also an added burden on the banks that have to educate customers in new