The impact of financial management practices on accountability of Islamic social enterprise (ISE)

Abstract

Purpose This study aims to examine the role of financial management practices, which consist of financial disclosure, internal control, financial planning and budgeting and financial performance on Islamic social enterprises’ (ISEs) accountability. Design/methodology/approach Questionnaires were administered to financial officers of 102 Malaysian ISEs. Findings were analysed using Smart-PLS to examine the relationships between financial management practices and accountability. Findings Results of this study indicate a direct relationship exists between internal control and accountability. Relationships between other financial management practices and accountability are indirect through internal control. Hence, the data demonstrates that internal control has a mediating role on other financial management practices, which are financial disclosure and financial performance management with the accountability of ISEs. Research limitations/implications This study has implicated the significant role of financial management practices in ISEs in the pursuance of their accountability especially internal control to achieve public trust. Practical implications Appropriate financial management practices, especially internal control, are essential for the ISEs to achieve good accountability. Originality/value This study contributes to the field of management and social accounting by providing empirical evidence on ISE practices specifically on financial management practices and accountability. This framework thus presents among the early attempts in studying accountability issues in ISEs.