Understandability and Transparency of the Financial Statements of ...

supposition was that a lack of response to requests for information indicates an
unwillingness to be held accountable. In their study 38% of English medium-sized
charities and 22% of Irish medium-sized charities provided usable information. They
considered that possible reasons for the less extensive compliance with the Statement of
Recommended Practice (Charity Commission, 2005) in Ireland were the lack of
research into charity accounting practices, deficiencies in scrutiny and the absence of
any statutory backing. Connolly & Hyndman went further by considering that the
greater focus in England on the issue of quality in financial reporting has led to „good
practice‟ being adopted by many English charities (2001).
The Institute of Chartered Accountants of Scotland published a pre-election briefing
highlighting the need to improve accountability in the charitable sector (The Institute of
Chartered Accountants of Scotland, n.d.) which supports Dellaportas et al.‟s (2008, p.
ii) view that:
There is a strong belief from charity organisations that the public is entitled to
receive quality information on financial performance, suggesting that increased
financial disclosures would be beneficial to the charitable sector.
This directly links accountability to the publication of quality financial statements,
which are the focus of this research.
However, whilst some people focus on the importance of accountability within the
charities sector others consider that accountability contradicts the notion of charity.
Many people who give to charities derive extra pleasure from the act of giving, or the
„warm glow of giving‟ (Andreoni, 1990; Brown & Caughlin, 2009). This implies a
converse view which is that the accountability of a charity to donors may not be an
issue. In fact spending money communicating information to discharge accountability
may be a total waste of time and money for the donor, as the act of giving often bears
no relationship to whether accountability has been discharged but rather the importance
relates to the „warm glow‟ they receive from their donations (Hyndman & McDonnell,
2009).
It is also seen by some within the charities sector that the altruistic nature of charities
avoids the need for accountability, as charities are assumed to act honestly and with
integrity (Connolly & Dhanani, 2009). But as Eisenberg (2005, p. 187) states:
More and more, nonprofit organizations self-righteously argue that because
they provide good works, they need not be accountable to anybody – including
the donors who support their work. Confidence has given way to cockiness.
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