Assessing the Perceived Usefulness of Accounting Information in Albania

This study attempts to provide a general overview on the use of accounting information in Albania. An extensive use of accounting information by different stakeholders would be a testimony of the quality and reliability of accounting information, but the opposite would indicate otherwise calling for improvement in the area of financial reporting. Data are collected by means of a questionnaire. All respondents are certified accountants, members of the biggest and most prominent-certified accountants association in Albania. The questionnaire reveals that in general accounting, information is not heavily used neither by entities’ management nor by other users. Surprisingly, users of accounting information that are closest to the entity use it very little or not at all, raising big questions on the quality and trustworthiness of accounting information. The study is just an initial assessment of the perceived usefulness of accounting information in Albania. The questionnaire is addressed to certified accountants who answer on behalf of their client companies. The study investigates the usefulness of accounting information as perceived by various stakeholders in Albania. Even though this is a well-researched topic worldwide, to the knowledge of the authors there are no such studies in Albania. Decision-Making. The last two questions address the quality of “alternative” information as opposed to official information. How reliable is alternative information in those few instances when stakeholders require “other” information that bypasses official information? On this topic, 73% of the respondents answer that alternative information is generally not prepared in accordance with generally accepted accounting principles, and 56% of them rate the integrity of such information averagely or less.

Since Albania is a particularly difficult environment for data collection through questionnaires, we decided to address our questionnaire to Certified Accountants with the conviction that such an approach would significantly increase the response rate. In addition to this, to further increase the response rate, we tried to keep the questionnaire simple and short. Data collected by the questionnaire give us a general view of the extent of use of financial information not only by the entities' management but also by other users. We are well aware that more in-depth studies are needed on this topic.
The questionnaire reveals that in general accounting, information is not used heavily by entities' management, but other users too, rely very little on official information coming from the entities' accounting systems. Interestingly, even the government being the primary user of accounting information in Albania is not stringent enough in its requirements on the application of accounting principles and standards, thus leaving room for practices that compromise the quality and usefulness of accounting information.

LITERATURE REVIEW
The importance of accounting information cannot be overemphasized. However, accounting is not the only source of information available to decision-makers. There are opposing views on which information system is more relevant depending on the use of such information. Particularly, when it comes to investment decisions, market information is preferred over accounting information. In a study involving 171 U.S. manufacturing companies, Apergis and Eleftheriou (2012) compared the importance of accounting information against market information in relation to credit decisions. They found that information obtained from accounting is less important than information collected from the market, implying that accounting information might be viewed by the users as less future oriented, making it not useful as a measure of credit risk. However, Das et al. (2009) studied the relationship between accounting information, market fundamentals, and CDS spreads. They conclude that CDS spreads are explained better by information obtained from accounting sources rather than information obtained from the market.
Other studies have focused on specific traits of accounting information quality, such as transparency. Francis et al. (2009) have studied the impact that information transparency has on the efficiency of resource allocation. Their findings show that higher information transparency is strongly correlated with growth rate of industries and countries, meaning that information transparency facilitates resources allocation between industries favoring those performing better. Bhattacharya et al. (2003) have come to a similar conclusion in a study of 34 countries. They conclude that low transparency of accounting information leads to higher cost of capital and in turn to smaller trading volumes, thus affecting adversely capital allocation. Zhai and Wang (2016) has examined the effect of accounting information quality on optimization of capital investment choices of listed firms. Their findings show that higher quality accounting information leads to better capital investment choices especially when the corporate governance environment is poor.
We found a few other studies focusing more specifically on the topic of accounting information usefulness with regard to decision-making processes. In a study on the relationship of accounting information and managerial decision-making, Socea (2012), while acknowledging the importance of such information, concludes that developing the right economic and financial decisions depends not only on the quantity but also on the quality of information obtained by the accounting information system. Alijarde (1997) in an effort to measure the perception of local government finance directors on the usefulness of financial statements concluded that even though information derived from financial reporting in local governments is valued and considered useful for various stakeholders including managers, it is still not being used to the full. Hope et al. (2017) in a study on the need for improving financial reporting in private U.S. firms concluded that accounting information of private firms is useful, and its quality may be improved with increased demand for monitoring by various stakeholders, such as investors, creditors, and suppliers. Gaidienė and Skyrius (2006) attempted to assess the perception of usefulness of management accounting information by managers and accounting specialists. They found that managers view management accounting information as useful, more so than accounting specialists, favoring future and nonfinancial information over historical one. In a study based on a large sample including all listed companies in the Chinese stock market over a period of 8 years, Chen et al. (2001) examined whether accounting information is considered useful and relevant by Chinese investors, and found that investors value accounting information notwithstanding the perception of inadequate accounting and financial reporting practices in China.
Considering all the aforementioned studies on the usefulness of accounting information, the view of the authors of this paper is that, generally speaking, accounting information still has the edge over other sources of information due to its qualities and the extra care and attention given to its preparation and presentation to the interested users. Recognizing its importance, the accounting profession as a whole and a number of other important stakeholders make continuous efforts to ensure that information published on the financial statements is a true and fair representation of the financial position and performance of an entity. However, the intrinsic value or usefulness of accounting information does not always translate to perceived usefulness.
Perceived usefulness even though does not always correspond to the real value, is important nonetheless since it determines to what extent accounting information is used in decision-making. This is why in this study we try to investigate what is the perceived usefulness of accounting information in Albania.

RESEARCH QUESTIONS AND METHODOLOGY
As mentioned above, the focus of our study is the assessment of the perceived usefulness of accounting information in Albania as opposed to its intrinsic or inner value. We attempt to do this by assessing the influence of accounting information on decisionmaking of different users of such information. It should be noted that Albania does not have a functional active stock market, and the majority of business entities are small and medium privately owned enterprises. Nevertheless, capital quotas or shares are still traded although not in an organized market.
The main research questions of this study are the following:

RQ1.
To what extent is accounting information used in decision-making? RQ2. What is the perception of the reliability or trustworthiness of accounting information in Albania?

RQ3. How is accounting information integrity ensured?
To answer these questions, we decided to collect data by means of a questionnaire Table 1. All respondents are certified accountants, members of the biggest and most prominent-certified accountants association in Albania, Certified Accountants Institute of Albania. There are various reasons why the questionnaire was directed to certified accountants. First, because in Albania, there is a general reluctance of the general public, including business entities, to respond to questionnaires. Second, because the opinion of certified accountants on the matter can be trusted. Third, because each certified accountant could provide insight on a number of business entities since they were asked to answer not based on just their own opinion, but on their experiences with their clients. And last, certified accountants were easily reachable through the Certified Accountants Institute membership database. Still, the questionnaire is kept short and simple (15 questions only) in order to increase the response rate.
The questionnaire is designed in such a way that it reveals the extent of use of accounting information for decisionmaking purposes by the entities' management and other external users, such as investors, creditors, employees, customers and suppliers, government agencies, business owners, and judicial authorities in courts of law. By revealing the extent of use, the questions intend to reveal what is the perception of all the aforementioned users on the usefulness and trustworthiness of accounting information when it comes to decision-making. The questionnaire addresses also traditional ways of ensuring accounting information integrity, such as internal control systems and independent audits, statutory, or contractual. Table 1. Questionnaire details.

Number of questions 15
Type of questions Likert Scale (1-5)

Respondents
Certified Accountants

Number of responses 59
Average number of business entities represented by each respondent 10 Estimated number of business entities represented 590 The questionnaire questions and summarized scores are shown in Table 2: To denote underlying factors in the interview structure, we initially tried to detect related questions using the Spearman's rho Correlation Coefficient (Glasser and Winter, 1961). From Table 2, we note that question 1 is significantly and positively correlated with question Q7. Q5 also is related to Q7 and Q8. And finally, Q7 and Q8 are related. These variables are all connected to the trust that the users, both internal and external, have in the accounting information. The Cronbach's alpha coefficient (Table 3) for the 15 variables is 0.879, suggesting that the items have relatively high internal consistency (Cronbach, 1951). The next step was to obtain a set of latent variables and represent each latent variable as a linear combination of the original variables through an exploratory dimension reduction factor analysis in SPPS using a principal component extraction with varimax rotation with Kaiser Normalization (Kaiser, 1958). The number of components was fixed in three after several simulations. The trust in the accounting information following the survey results and the data elaboration can be synthesized in the following factors: I. Trustfulness in the official information II. Trustfulness in external reviewers III. Trustfulness in "alternative information" The results are shown in Table 4. The results of the standardized factor scores are shown in Table 5. The respondents' standardized scores can be categorized further into the following groups (Table 6): The results obtained from Table 6 confirm the general positive perception of the operators about the alternative sources of information, compared to the moderate trust in the official accounting information and lower trust in external evaluation. These results are further evidence of the informal communication systems, typical of developing countries. To be noted that this is not a quantitative evaluation of the trust to be used for inferential purpose, but an overview of the perceived trust.

DISCUSSION
Some of the highlights of the data gathered from our questionnaire are the following:The use of accounting information by managers got an average score of 3.051 which does not suggest a particularly high trust on their part. Sixty-four percent of the respondents think that managers rely on accounting information averagely or less. Although, accounting information is not the only source of information for managers, it was still expected that they would demonstrate a higher trust in accounting information. After all it is the managers who are responsible for preparing the financial statements in accordance with the applicable financial reporting frameworks and for setting up adequate internal controls to ensure that information contained therein is free from error. Although not a conclusive proof, this surprising result could be interpreted as a confirmation of a pervasive practice among Albanian companies of keeping double accounting books, one for internal use and one for external "official" use.
The situation is somehow reversed in the case of creditors. The use of accounting information by creditors got an average score of 3.695. Eighty percent of the respondents think that they rely on accounting information averagely or more. This could well be an indication of a higher trust on accounting information on their part, but could also be explained by the fact that in most cases, creditors, specifically banks, do not have any better option. The alternative of not relying on official information provided by business companies, their clients, would be to accept unverified and uncertified information, usually provided by the very same clients, thus increasing significantly the credit risk and leaving them exposed in eventual litigation cases.
The use of accounting information by investors got an average score of 3.271. Investors seem to have a fairly average use of accounting information. It is worth mentioning that there is no formalized stock market in Albania. Capital shares or quotas are privately traded. Usually the existence of a stock market exerts a positive influence on business entities to report reliable and accurate financial data, since it has a direct bearing on market valuation. In general, Albanian companies have a tendency toward avoiding or minimizing tax payment, in particular income tax and VAT. That requires an understatement of income tax and sales. However, this would be counterproductive in the presence of a stock market, since it would be detrimental to the company's market value. In the absence of a stock market, such positive pressure is nonexistent. As in managers' case, a seemingly average trust on the part of the investors, although not conclusive, could be an indication of unreliable accounting information.
Interestingly, vendors and customers rely less on accounting information. Their question got an average score of 2.695. Roughly, 75% of the respondents think that they use accounting information of their business partners averagely or less. In Albania, cash sales and purchases are widespread, and in many cases, especially in transactions involving large amounts, advance payments are required. In support of our findings, this indicates a low creditworthiness of Albanian companies, suggesting that accounting information might not be reliable enough.
To the question whether the official accounting information presented to government agencies gives a true and fair presentation of the financial situation and performance of the entity, 81% of the respondents gave a score of 3 or above. This question got an average score of 3.576. This result seems to contradict earlier responses; however, since the respondents are all certified accountants, hence preparers of the financial statements, we have reason to believe that their responses on this question might be biased.
Employees are the ones that trust accounting information least of all; they use it averagely or less according to 93% of the respondents. This surprising result could well have a cultural explanation. Employees in Albania are not accustomed at using their employers' accounting information while negotiating their contracts. Actually, few of them would be able to find such information since it is not easily obtainable. But at the same time, the result could reinforce the doubts on accounting information usefulness and trustworthiness.
When it comes to business owners, 68% of the respondents think that they use accounting information averagely or less to assess management's performance, while 50% of them think that they use it averagely or less to evaluate their capital interests and share profits among them. The case of owners is similar to that of investors, with the difference that in most Albanian companies, owners are also managers, since small and medium business entities are predominant in Albania. In light of this fact, it is understandable why they use accounting information slightly less to assess managers' performance as opposed to evaluating capital interests and profit sharing. However, the average score is low for both questions compared to expectations, 2.966 and 3.305, respectively. Because of the typology of Albanian companies, owners are those who have the most access to business information, and such a disappointing score on these two questions is a strong indication of low accounting information trustworthiness. It could also be viewed as a confirmation of the existence of the double record keeping practice mentioned earlier.
The question whether accounting information is used by the courts of law got an average score of 3.678, a fairly higher average score compared to other questions. Eighty percent of the respondents think that accounting information is used averagely or more by the courts of law. This is a comparable result to the average score we got for the use from creditors. The result could be explained using more or less the same rationale. Courts of law are obliged to use official information produced by the companies in compliance with the country's laws and regulations. This in itself does not necessarily indicate a higher degree of trust by the courts.
The first nine questions aim at assessing the degree of trust of the primary accounting users on accounting information. It is easily noticeable that there is general lack of trust on accounting information which is an indicator of the low perceived usefulness from their viewpoint. Of the nine questions, only those on the use of accounting information by creditors and by the courts of law got a slightly higher score, however still well under 4.
The remaining six questions aim at assessing the perceived usefulness from a different angle. They try to evaluate whether the quality and integrity of accounting information is adequately ensured by different mechanisms and measures.
The question on internal controls got an average score of 2.475. Roughly, 85% of the respondents think that companies do not have the adequate internal controls to ensure the integrity of accounting information.
The question on the role of professional accounting organizations to ensure the quality and integrity of accounting information got the highest average score of all questions, 3.966. Is this score an confirmation of the quality and integrity of accounting information? Not necessarily. All respondents are members of the same professional organization of certified accountants in Albania. No doubt their responses reflect, at least to a certain degree, their loyalty to their organization.
The question on the assurance provided by the statutory audit got a fairly average score, 3.169. Sixty percent of the respondents think that statutory audits are averagely or less sufficient to ensure the quality and integrity of information.
Even if the statutory audit did a better job, the number of Albanian companies required by law to be audited is relatively small. An alternative for the other companies would be to turn to voluntary contractual audits; however, more than 91% of the respondents say that companies use voluntary contractual audits averagely or less. This could be explained to a degree by the costs involved, still the fact remains that accounting information of most companies is rarely subjected to independent verification.
The last two questions address the quality of "alternative" information as opposed to official information. How reliable is alternative information in those few instances when stakeholders require "other" information that bypasses official information? On this topic, 73% of the respondents answer that alternative information is generally not prepared in accordance with generally accepted accounting principles, and 56% of them rate the integrity of such information averagely or less.

CONCLUSION
About our research questions set out at the beginning of this research paper, it is evident from the foregoing discussion that accounting information is not used to the full by managers and other stakeholders. Surprisingly, users of accounting information that are closest to the entity use it very little or not at all, raising big questions on the quality and trustworthiness of accounting information. Managers, who are responsible for the preparation of accounting information, rely on such information only partially, while business owners, who for most small and medium companies are managers as well, also use accounting information only partially or not at all. Other users while making a better use of accounting information still do not use it to the fullest extent. Other mechanisms aimed at ensuring the quality of accounting information, such as internal controls and independent audits are less than adequate. Overall, the general picture is one of distrust and low perceived usefulness of accounting information.
This study is just an initial assessment of the perceived usefulness of accounting information in Albania. Even though we suggest reasons behind some of the answers obtained from the questionnaire, further research is needed to ascertain the reasons for such a poor use of accounting information in Albanian reality.