Understandability and Transparency of the Financial Statements of ...

Palmer & Randall (2002) summarise several codes of good practice into eight
dimensions: (1) Effectiveness; (2) Accountability; (3) Standards; (4) User involvement;
(5) Governance; (6) Volunteers; (7) Equality and fairness; and (8) Staff management.
Here, accountability and governance co-exist as two separate parts of the whole picture
of good practice.
Palmer & Randall (2002, p. 31) define accountability as “evaluating effectiveness and
performance, dealing with complaints fairly and communicating to all stakeholders
whose responsibility will be fulfilled” whereas they define governance as “having a
systematic and open process for making appointments to the governing body, setting out
the roles and responsibilities of members”. Palmer & Randall‟s (2002) definition of
governance is quite narrow and appears to focus on the appointments to charities
governing bodies and ensuring those appointed are clear on their responsibilities.
By contrast, another view of governance, as shown in Figure 5-1, has two dimensions:
conformance, and performance where accountability is a subset of conformance
(International Federation of Accountants, 2009b). However, IFAC (2009b, p. 19) also
considers that the principles of: integrity; accountability; and transparency govern the
processes involved with providing information to upward stakeholders. This repositions
accountability as part of the whole organisation rather than a subset of the conformance
dimension. This viewpoint is implicitly supported by IFAC, offering two definitions of
accountability. First, a narrow focus of accountability as the responsibility to
stakeholders, i.e. part of conformance; and second, a wider view of accountability as the
process whereby entities are:
Responsible for their decisions and actions, including their stewardship of
public funds and all aspects of performance; and submit themselves to
appropriate external scrutiny (International Federation of Accountants, 2009b,
p. 20).
Figure 5-1 Governance Framework (IFAC, 2009)
Research (Eisenberg, 2008; Fishman, 2007; Flack & Ryan, 2004; Keating & Frumkin,
2003) focused on charities and the wider NFP sector tend to look at governance as a
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