Understandability and Transparency of the Financial Statements of ...

shock when their accounts are either audited or prepared by chartered accountants who
follow appropriate standards and thus value their work accordingly.
This lack of professionalism must be addressed by accounting professional bodies to
ensure the integrity of the accounting profession is maintained. The researcher has been
involved with the national committee that seeks to act as a bridge between NZICA
members and the charities sector by raising issues and educating both sides as
appropriate. Further, education of preparers and users of charities‟ financial statements,
including donors and funders, is needed as the lack of understanding of the financial
management of charities is a sector problem that must be rectified to improve the
public‟s perception of charitable organisations. Next, the insights gathered about
fiduciary accountability are reviewed.
9.3.2 Fiduciary accountability
Fiduciary issues were considered under legislation and monitoring (Chapter Seven).
This study identified three insights of particular interest to fiduciary accountability in
terms of legislation. These related to: the charitable purpose definition; the registration
of charities with similar names; and whether there was a need for charities to be
accountable for taxation that they would otherwise have paid.
One insight from this study was the fact that New Zealand‟s definition of charitable
purpose does not include advocacy i.e. the active support of their cause, which many
within the charities sector consider an important part of a charity‟s role. There is a need
for the Charities Commission to reconsider the limitation of charitable purpose
comprising only the four heads of charity, and perhaps follow England‟s Charities Act
2006 by including the „advancement of‟ charities‟ causes. Especially with many of the
advocacy groups in New Zealand being refused funding due to their not being registered
charities.
Another legislation problem was that charities can have similar names, which could
cause confusion amongst potential donors. This needs to be considered by the New
Zealand Charities Commission when they next review the registration of charities, to
limit confusion by stakeholders.
The final aspect of legislation looked at the need for not only charities, but the wider
NFP sector, to acknowledge the taxation benefits they gain and be accountable for
justifying them. This is especially the case for charities that have chosen not to register,
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