The Definition Of Accountability Accounting Essay


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The accountability is real imperative for the efficient operation of both the public and private organizations. The hefty size and intricacy of the government and private sector businesses means that the shareholders and the public cannot administer these institutions. The shareholders and the citizens on their behalf appoint the manager who operates the society's institution and organizations and gives an account of his stewardship. Usually accountability has been identified as "rendering an account of actions and decisions." Thus, an inefficient accountability leads to extreme corruption and wastage of all the resources. In an insufficient accountability the resources are used unproductively and fruitlessly and often the decisions are made either in favour of one person or a specific group. As a result of these decisions the states elites would amass the wealth at the expense of the people.

On the other hand, accountability is comprehensive and is multifarious and makes an account of one party's use of resources to another party. The New Public Management considers accountability as insufficient. According to Hood (1995), "the basis of New Public Management is the lessoning or removal of differences between the private and public sector and a greater emphasis on accountability for results. These changes have called forth a change of the concept of accountability."

However, this study determines how managers and councillors of Sharjah, for performance perceive and understand accountability. In recent years the local government has undergone many changes out of these changes many are part of new public management (Kluvers 2001). The local government of Sharjah is subjected to control by the State government to such an extent that the past governments forced the local one's to integrate as well as to replace the appointed commissioners for elected councillors.

Accountability, under the new public management goes beyond rendering an account of the resources used but also includes the efficient use of those resources and the effectiveness of policy decisions. Under the new public management the traditional accountability relationship, which includes judiciary responsibility, stewardship and probity between elected councillors and mangers appears to have less relevance since mangers are required to be more entrepreneurial, more concerned with performance and involved in policy decisions. The relationship appears further complicated by the contracting out of a number of traditional local government functions.

Parker and Gould (1999) state that the new public management has changed the fundamental orientation of public sector accountability from one of accountability in the public at large for the many dimensions of public sector activity to one of accountability for financial outcomes to be exercised mostly within the hierarchy of public sector organizations themselves. Effectively, if Parker and Gould are correct, then under the new public management accountability in the public sector has been reduced in scope and meaning.


Gray and Jenkins (1986) are of the view that accountability is an obligation to present an account of an answer for the execution of responsibilities to those who entrusted those responsibilities. Accountability relationship occurs in every sector of society, including the commercial sector; however, in the public sector accountability relationships are different. Fountain (1991), say that accountability is the basis of Westminster system of government because the electorate has the right to be informed about the actions and expenditures of the executive and the legislative arms of the government.

There are a number of accountability relationships in the public sector, those between elected officials and managers, between elected officials and citizens and those between the managers and the citizen. There are similarities with the accountability relationships between directors of a company and shareholders and management. Public sector organizations are not judged by the profits they make or the dividends they declare but on policies that are developed. The fundamental importance of accountability is the maintaining of trust and the possible effects on public administration of a changed understanding of the nature of accountability relationships in the public sector.

Financial accountability is concerned with the provision of financial information concerning all legal authorizations as well as commitments, agreements, encumbrances, obligations, expenditures that use any part of the authorization granted. This reduces the accountability to a contractual relationship with its emphasis on the financial and audit reports, which Glyn (1987) considers to be inadequate. According to Rentscheler and Potter (1996) accountability should not be confined to just the financial. The risk is that if accountability is seen in pure financial terms then the issues of effectiveness.

Moreover, Foster (2000) is critical of the traditional notion of accountability, "maintain that it is declining in effectiveness because it is based on historic and forensic motions of accountability. Accountability is seen in terms of ministerial responsibility and the detection of fraud. Among the most important aspects of accountability is the securing the annual improvements in the efficient, effective and economic operation of public services and the other resource consuming activities of government." Moreover, Foster argues that "measurable objectives and accurate performance data linked to rewards will ensure a robust accountability. This system of accountability would be supported by the availability of disaggregated financial information and frequent value for money audits.

Similarly, Foster (2000) argues that "accountability can be best achieved by the use of contracts relying on the ability to reduce all accountability relationships to ones of obligation, where there is a principle agent relationship. So long as the contract is clear then the obligations under the relationship are also clear." In addition, it is argued that some relationships cannot be accurately defined by a contract and to define accountability in terms of a contractual relationship limits the understanding of the concept.


On the other hand, Parker and Gould (1999), that the New Public Management has changed the fundamental orientation of public sector accountability. The concept of accountability has changed from one of accountability to the public at large for the many dimensions of public sector activity to one of accountability for financial outcomes to be exercised mostly within the hierarchy for public sector organizations themselves. Managerial accountability, under the new public management has expanded its scope beyond the traditional administrative accountability, to include the monitoring of inputs, outputs and outcomes. The focus has increasingly moved to outputs (Parker and Gould 1999).

However, two major sources of tension are identified by Parker and Gould (1998), firstly, the differing interpretations of accountability and secondly, the accountability tensions between the roles of different stakeholders. Further Bowerman (1998) states that the "new public management focus upon individuals and a particular group in society, thereby fragmenting accountability and reducing the higher level accountability to society at large."

Hence, the new public management is achieved at least in principle, by the invisible hand of the marketplace, so that if end users are dissatisfied with policy or service provision they will go elsewhere, leaving providers at a loss. However, only in truly competitive markets does the invisible hand provide accountability. Ryan (2001) disputes the assumption that the market is an appropriate mechanism in the public sector. He argues that the relationship between a government and its citizens is more complex than a consumer-provider relationship; Patton (1992) makes a similar claim.

Another Feature of new public management is a greater reliance on contracts that are underpinned by a principal agent relationship. Broadbent and Guthrie (1992) highlight the problems of information asymmetry and ignorance in the principal agent relationship. Ignorance may arise from information asymmetry or from the nature of the information itself, for example where tasks are based on tacit rather than explicit knowledge. A related issue is the measurement of outputs based on indeterminate processes. Both hidden information and hidden action can be present in complex processes.

The notion that contracting can ensure accountability is further criticized by Glynn and Murphy (1996). Accountability is often post hoc accountability for what has happened. Conflict between purchasers and providers is inevitably created rather than the trust which is essential to working in effective partnerships for the provision of effective and high-quality services as there is an inspection mentality prevailing. They conclude that measuring output and ensuring accountability for output is problematic, as many of the benefits of the contract inevitably fall outside an individual contractual period.

In order to achieve accountability for performances are comprehensive mission statements, outcome related goals and a description of how these goals will be achieved. However, substantial problems arise in obtaining accurate and reliable data for measurement over longer time periods and of the costs associated with doing so. There is a temptation to use data for comparisons. This may lead to the manipulation of performance data degenerating into a "number game" and an obsession with counting numbers for questionable purposes.

The literature discussed is normative in nature. The authors have constructed their arguments from the writing of others but using little empirical data. The literature has raised important issues regarding the definition of accountability and the consequences for accountability in the public sector under the new public management. Assumptions have been made about accountability relationships in the public sector; however, to date these assumptions have not been tested by research. An exercise is Sinclair (1995) who reports the interviews of public sector managers. Her research shows that accountability changes; it exists in many forms and is sustained and given extra dimensions of meaning by its context.


Various people defined accountability in a number of ways. Auditors discuss accountability as if it is a financial or numerical issue, political scientists view accountability as a political imperative and legal scholars as a constitutional arrangement, while philosophers treat accountability as a subset of ethics.

The changes introduced by the new public management in the public sector require a substantial change to the understanding of accountability and therefore an understanding of accountability of the participants. The new public management has broadened accountability beyond traditional concerns to also include accountability for organizational performance. Given the emphasis on performance and the concerns raised in the literature, a number of questions are raised: firstly, how important is accountability for performance? Secondly, which of the stakeholders consider themselves accountable for organizational performance, including contracts? Thirdly, does information asymmetry between stakeholders in regard to performance information affect accountability? While the normative literature describes the concept of accountability and the changes that it has undergone, it remains largely unsubstantiated by research findings.


The data was collected through a survey. The survey instrument was developed on the basis of the issues raised in the literature. The questionnaire was submitted to a number of academics and the local government of Sharjah. The survey instrument consisted of questions regarding gender, position held and whether the municipality was regional or metropolitan, followed by 40 statements. The respondents were required to indicate their opinion by circling a number on a seven-point licker scale indicating the following:

Very strongly agree

Strongly agree




Strongly disagree

Very strongly disagree

However, for ease of presentation of the results of the cross-tabulations "strongly disagree" was collapsed into "disagree" and "strongly agree" was collapsed into "agree"; in the tables these are denoted using 1 for "agree" 2 for "undecided" and 3 for "disagree".

Each of Sharjah's towns and cities were sent two envelopes containing 10 survey instruments and 10 prepaid return envelopes each; one set was for councillors and the other for tier one and two managers. A covering letter accompanied each set, one addressed to the ruler of Sharjah, Sheikh Sultan bin Mohammed Al-Qasimi III and the other addressed to the chief executive officer.

The main purpose of the research was to establish a concept of accountability that has been accepted by managers and councillors in Sharjah's local government. The need to address the large number of issues and the desire for the greatest possible coverage conditioned the choice of research method. The more extensive the coverage of the Sharjah government, the larger the expected number of responses; this would allow conclusions to be drawn with greater confidence.

Local government was also selected as the environment in which to conduct the research as it is characterized by diversity; in geographic size and location; population size; its ability to raise revenue; and in the size and composition of its expenditure. Given the level of diversity, the findings should be applicable to other contexts. Also, there had been significant development of the new public management in the local government of Sharjah.


The analysis for this paper is based on 330 useable responses. Respondents strongly agreed with the statement that over the last decade accountability for performance has become increasingly important. Most respondents agreed that their council was using a very good set of performance has become increasingly important. Most respondents agreed that their council was using a very good set of performance indicators that showed whether objectives had been achieved. However, they rejected the proposition that if a council operates efficiently then it has met all its accountability obligations.

Respondents agreed that councillors, managers and providers were responsible for the level of performance under contracts. There was also agreement with the propositions that performance audits have or should be conducted by external auditors.

There was strong disagreement with the proposition that manager cannot be held accountable for the performance since councillors provide the resources. The notion that performance data cannot be used to hold managers accountable because they cannot capture every aspect of performance was rejected. Respondents disagreed with the statement that rate payers are not interested in performance information. While 165 respondents rejected the statement that councillors do not understand performance data presented to them by management, 120 agreed with the proposition and 44 were undecided. There was a similar response to the statement that management determines what performance is to be measured and how it is to be measured: 159 agreed, 133 disagreed and 36 respondents were undecided.

On the other hand, accountability for performance is considered by respondents to be very important. According to the respondents, managers, councillors and providers are considered to be responsible for organizational performance and contractual performance. The response to statement that councillors do not understand the performance data presented to them by management is ambiguous with 120 agreeing, 165 disagreeing and 44 undecided.

Similarly, in the belief that accountability for performance has become increasingly vital and the rejection of the idea that ratepayers are not interested in performance information. A large majority of respondents accepted the former while rejecting the latter. The belief that ratepayers are interested in performance information reinforces the notion that accountability for performance has become increasingly important.

The idea that ratepayers are interested in performance information is also associated with the rejection of the statement that performance data cannot be used to hold managers accountable. The majority of respondents rejected both statements. The association between the two statements is statistically significant.

The importance of accountability data the respondents agreed with the statements that councils have performance audits conducted by external auditors and that the respondent's council was using a good set of performance indicators. The majority of respondents agreed that councillors, managers and providers are responsible for the performance of contracts.

A significant minority believe that councillors do not understand the performance data presented to them by management and a majority of respondents do agree with the proposition that management determines what is to be measured and how it is to be measured.

On the other hand, 86.5 percent respondents disagreed with the proposition that under competitive tendering local government managers cannot be held accountable for the performance of contracts. However, there is statistically significant association with the statement that the principal agent relationship can distort the concept of accountability. Thus, while the respondents recognize that managers are accountable for the performance of contracts they also reported an awareness of the negative impact of the principal agent relationship that managers find themselves in.

A large majority of respondent's agree with the statement that public sector managers have conflicting accountability relationships, while there is less clear result for the proposition that management determines what performance is to be measured and how it is to be measured. The two statements have a statistically significant association. Managers are perceived to be I ambiguous situation in respect to who they are accountable to and the degree of control they have over performance.

The association between the statements that the degree of accountability will depend upon the relative power of the stakeholders and performance data cannot be used to hold managers accountable. A majority of respondents disagreed with the proposition that managers could not be held responsible for performance measurement is inadequate; opinions were divided about the role of power in accountability. While respondents believe that managers are accountable for performance about 48 percent agreed that the degree of accountability is dependent upon the managers relative to other stakeholders. Respondents strongly disagreed with the statement that under competitive tend local government managers cannot be accountable for the performance of contracts.


The results answered the three questions posed in this paper. Accountability for performance is considered to be important. This result is in keeping with Parker and Gould (1999), who argue that new public management has broadened the scope of accountability.

The results also provide answers to which of the stakeholders are considered to be accountable for organizational and contractual performance. The answer to that appears to be that councillors, managers and providers in the case of contracts are considered accountable for performance. This reflects the philosophy of the new public management and would appear to reflect the concept of accountability argued by Foster (2000). However, Foster does not take the principal agent relationship into account, or the role of power and information asymmetry. The issues raised by Broadbent about principal agent relationship are relevant. Respondents have little difficulty understanding the concept of accountability. However, the issues of power and information asymmetry appear to qualify this understanding.

Lovell's (1996) concern about equating accountability with audit is left unresolved since the direct question was not posed, but respondents reported that audits are or should be conducted and there is an acceptance of the veracity of performance information. While accountability may not be equated with audit there is a general acceptance of performance measurement as an integral part of an accountability system. However, the problematic nature of accountability for performance is reinforced if it is seen to be reduced to the provision of performance information.

Given the importance of accountability for performance the issues of information asymmetry and the integrity of the information are relevant. Patton 1992) has already expressed concern about the integrity of performance information. Glynn and Murphy (1996) have argued that the measurement of output is problematic. The respondents reported that the principal agent relationship could distort accountability that the power of stakeholders could affect the degree of accountability and the management had a significant influence over the measurement of performance.


The new public management has broadened the concept of accountability to include accountability of performance and the emphasis that has been laid on performance is recognized by the managers and councillors in the local government of Sharjah. The issues raised in the literature are reflected in the data. The results show that the accountability for performance is considered to be vital in the local government and mangers and councillors are both responsible for it.

However, the underlying problems related to information asymmetry and accountability relationships, subject to power, have an impact on the operation of accountability. Therefore, maintaining accountability requires measures that reduce asymmetry, clarify accountability relationships and counter balance the influence of power. Such measures might include a greater emphasis on communal accountability based on participative decision-making, greater use of qualitative performance. Finally, the findings presented in Kloot (2001) point to the lack of performance targets in the local government of Sharjah corporate plans which makes the determination of performance improvement problematic. The development of performance targets, accepted by all stakeholders, would lead to the enhancement of accountability performance.

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