Understandability and Transparency of the Financial Statements of ...

problems with New Zealand‟s regulatory and conceptual frameworks which are
identified next.
2.5 Problems
There are two key problems with New Zealand‟s regulatory and conceptual framework.
First, a pressing need for knowledgeable people to ensure the integrity of the charities
sector and second, protection from the sector is being used to launder monies from
nefarious acts such as terrorism. These problems will be discussed next.
2.5.1 Lack of knowledgeable people
One component of a regulatory framework operating effectively is knowledgeable
people. The lack of knowledgeable people within the sector can be a problem as
charities can often be let down by the very people who mean well but do not have the
particular skills, such as financial management, that the charity is looking for (Siveter,
2004). In the United Kingdom specific reference was made to the calibre of the people
preparing the financial accounts. Williams and Palmer (1998) felt that this was not of
sufficient level to produce appropriate financial statements, particularly with small-
medium sized charities. In Canada, PricewaterhouseCoopers (2009) has tried to
alleviate this by providing grants of up to CAD5,000 for charities to spend on
professional development.
For members of the NZICA there is self-regulation under their Code of Ethics. Rule 7 -
paragraph 85 of the Code of Ethics (New Zealand Institute of Chartered Accountants,
2003a) states that “a member who accepts or undertakes professional work must have
the competence necessary to carry out the work”. However, not all the people
performing book-keeping duties are members of NZICA. Also the Code relies on self-
regulation and some NZICA members are not always honest about their own abilities,
or lack of them. This research seeks to identify why people record things in certain ways
and whether it is lack of knowledge that causes their action, or inaction in some
situations.
2.5.2 Terrorism funding
One problem with charities is how to distinguish between monies used for charitable
purpose and monies used to fund illicit activities such as terrorism. The European
Parliament (2005) has considered this as it is concerned that massive flows of „dirty
money‟ can not only damage the conduit, such as charities, through which the money is
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