Understandability and Transparency of the Financial Statements of ...

This section has considered how accountability can be discharged by charities first by
looking at accountability documents, such as financial statements, that can be used by
charities to discharge their accountability to their stakeholders. Also four accountability
mechanisms were considered: charities regulatory bodies, rating agencies, assurance
and charities boards looking at the role each mechanism played in discharging
accountability. Next, the relationships between accountability and transparency and
accountability and governance are reviewed to consider whether they shed any further
light on accountability.
5.5 Relationships
It is important to contextualise the accountability concept with both transparency and
governance, as at times these terminologies are used interchangeably. First, the
relationship between transparency and accountability is considered.
5.5.1 Transparency
The relationship between accountability and transparency is clear in the New Zealand
Charities Commission‟s (2009e, p. 3) explanation of the quality of an effective charity,
i.e. accountability and transparency, which they link together by highlighting that a
charity needs to:
Manage its accountabilities to its stakeholders and to the public in a way that is
timely, transparent and understandable.
The work of two authors (Eisenberg, 2005; Roberts, 2009) sheds further light on this
relationship. Firstly, Eisenberg (2005, p. 232), who considers that transparency is a
subset of accountability or rather:
Transparency is the cornerstone of accountability.
Roberts (2009, p. 957) takes this a step further by considering that transparency is not
just the cornerstone but a mechanism of accountability which:
Casts light upon what would otherwise remain obscure or invisible.
Transparency then becomes accountability by turning measures into targets (Roberts,
2009). Thus the development of accountability increases the transparency of charitable
organisations (Roberts, 2009). Hence, transparency is an essential part of accountability
and they are forever integral to each other.
The importance of transparency and accountability in charities is highlighted in the
following quote:
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