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The Application of the Reporting Entity Concept by Australian Charities

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  • Phil Saj
  • Chee Cheong

Abstract

We provide evidence on the application of the reporting entity concept by Australian charities by correlating the type of financial report with the indicators of reporting entity status posited under Statement of Accounting Concepts 1 (SAC1). In addition, we present evidence on the quality of charity financial reporting by investigating compliance with certain requirements of Australian accounting and auditing standards. We examine a random sample of 574 charities, comprising 10% of large charities that lodged financial reports with the Australian Charities and Not‐for‐Profits Commission in 2014. We find that while some indicators of reporting status are statistically significant in explaining reporting choice, their economic significance is weak. Consequently, we conclude that the application of the reporting entity concept is inconsistent, and raise questions about the effectiveness of SAC1 and the quality of charity financial reporting.

Suggested Citation

  • Phil Saj & Chee Cheong, 2020. "The Application of the Reporting Entity Concept by Australian Charities," Australian Accounting Review, CPA Australia, vol. 30(4), pages 283-299, December.
    • Handle: RePEc:bla:ausact:v:30:y:2020:i:4:p:283-299
    DOI: 10.1111/auar.12306
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    References listed on IDEAS

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    1. R. G. Walker, 2007. "Reporting entity concept: a case study of the failure of principles‐based regulation," Abacus, Accounting Foundation, University of Sydney, vol. 43(1), pages 49-75, March.
    2. Michelle H. Yetman & Robert J. Yetman, 2012. "The Effects of Governance on the Accuracy of Charitable Expenses Reported by Nonprofit Organizations," Contemporary Accounting Research, John Wiley & Sons, vol. 29(3), pages 738-767, September.
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    Cited by:

    1. Michael Bradbury & Bryan Howieson, 2020. "Editorial: Promoting the Usefulness of Research to Standard Setters," Australian Accounting Review, CPA Australia, vol. 30(4), pages 229-230, December.
    2. Dominic Cyr & Suzanne Landry & Anne Fortin, 2023. "Financial Disclosure Management by Charitable Organisations: A Conceptual and Operational Framework," Australian Accounting Review, CPA Australia, vol. 33(1), pages 46-65, March.

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