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    Islamic Worldview and effective Corporate Governance

    Islamic Worldview and effective Corporate Governance
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    Corporate governance has become the corporate buzzword since the last two decades (Chapra and Ahmed, 2002). Not until the recent corporate scandals involving gigantic corporations such as Enron, WorldCom, Global Crossing and so forth, the response of corporate entities as well as amongst the public themselves towards the significance of corporate governance are very disappointing. Nevertheless, increasing number of collapses have made public especially investors more aware of the importance to demand high level of corporate governance practices from business entities which they have entrusted their money in them. The bankruptcy of Enron Corp. has evolved into a scandal of enormous proportions involving allegations of fraud, corruption and unethical practices such as financial manipulation and questionable accounting practices on the part of Enron’s corporate executives, members of its board of directors, external auditors and high government officials in the USA (Baker, 2002 and Chatzkel, 2003). The weaknesses in US Generally Accepted Accounting Principles (GAAP) and Financial Accounting Standard Board (FASB) gave enough room to the Enron’s management to get an advantage from it by inflating income. Enron had “legally” hide substantial amount of its cost and liabilities into its “special purpose entity (SPE)”. The company that uses this practice explicitly has an intention to confuse the public and investors. This is done with the help of its close “business partner”, Arthur Andersen that collapse together with Enron. The conflicts between Enron and its auditors are too obvious because the ties between these two gigantic companies went even deeper when Arthur Andersen was not just appointed as an external auditor but also as an internal auditor in the mid-1990s. The auditors had been in conflict to act independently and at this situation auditors have always been in the uncomfortable position of having to judge the financial integrity of the companies that pay them. Arthur Andersen had begun to be a business partner of Enron instead of the auditor that governed by professional ethic.