Understandability and Transparency of the Financial Statements of ...

their decision making. One auditor would not give a clean audit report until donations
were moved into the balance sheet and labelled „unconditional gifts‟. The same auditor
changed the statement of accounting policies to have the charity as a company, even
though it was a charitable trust. Other interviewees uncovered similar instances:
I would ask questions of the accountant and he would give me an explanation I
couldn‟t understand. (Interviewee 8 B)
We were told not to use the balance sheet anymore; it‟s a statement of financial
resources now. (Interviewee 16 M/T/B)
This is the interesting thing, but because it [donations] has no GST part, we
can‟t put it into sales and income, because sales and income generates GST. All
of these funds [donations] here that we‟ve been given we can‟t use for anything
else. … I had to explain to [the funder] look, we haven‟t made a loss, it‟s just
that the income GST money, and the donations and unconditional gifts, are on
different pages [i.e. income shown over two statements – income statement and
balance sheet]. I said that‟s all I can tell you, they‟re just on different pages for
GST purposes. (Interviewee 16 M/T/B)
Having been a member of NZICA for 24 years, and priding myself on being a chartered
accountant, during the course of this study the researcher found it frustrating and
embarrassing to observe many instances of poor quality financial statements prepared
by so-called qualified accountants. These resulted in meaningless financial statements
that did not tell the story of the charity and appear to indicate that the accountant did not
understand the charities sector sufficiently, as shown in the following quotations:
The record keeping was absolutely meticulous. But if anybody said, last month,
did we make a surplus or a loss; there was absolutely nothing that indicated
that. I suppose because I knew that the record keeping was very good, I assumed
that the rest of it was too. I found being able to report to [the Charity‟s Board]
and tell them something meaningful was quite hard. (Interviewee 7 T)
The accountant they work with, he doesn‟t want the accounts presented in the
way that actually is most useful for [the charity]. (Interviewee 15 M/B)
You know, I think sometimes they [accountants] kind of miss the point of some of
the subheadings. (Interviewee 23 T)
Well you do need to help them [financial statements] communicate. And at the
end of the day that‟s the fundamental purpose of financial statements, but most
people are caught up in the „we‟ll just do what we have to do and that‟s it‟. They
[charities] don‟t [pause] in the main go the extra step of going how we can make
this more usable and readable for our stakeholders? (Interviewee 18 A)
This has also gained media attention, where in one television interview (Television New
Zealand, 12 August 2009) the presenter said:
We also gave these accounts to … another accountant and said look, try and
make sense of it. A qualified accountant said look, it‟s unclear, and we can‟t
work it out.
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