ACCT 531 Week 5 Article Critique 2 Example

Do Internal Auditors' Analytics Make Financial Reporting More Reliable? A Critique of D'Onza and Rakipi's Survey-Archival Study

Summary of the Article

D'Onza and Rakipi (2026) ask whether internal auditors' use of data analytics is associated with more reliable and timelier financial reporting. To answer, they combine two kinds of data: a large survey of chief audit executives describing how extensively their internal audit functions use data analytics, and data on the public firms where those executives work. This combination lets them relate a practice that is rarely visible from outside a company, how internal auditors work, to outcomes that are publicly observable, such as reported material weaknesses, accruals, restatements and the timing of earnings announcements. The question matters because internal audit departments increasingly ask for budgets to buy analytics software and train staff, and boards want to know whether the spending improves the reliability of what the company reports. Evidence linking the practice to outcomes outsiders can observe is therefore unusually valuable.

Findings

The authors document a lower likelihood of material weaknesses in internal control over financial reporting, and lower discretionary accruals, at firms that use data analytics extensively in internal audit tasks. They also report fewer restatements, fewer material weaknesses in number and timelier earnings announcements. Looking at specific techniques, they find a positive association between the use of several analytics techniques in internal audit and financial reporting reliability and timeliness. The authors present their findings as initial empirical evidence of the benefits of internal auditors' analytics use (D'Onza & Rakipi, 2026). They direct the findings to researchers, practitioners and standard setters, which signals that they see the results as a basis for further work and for professional guidance rather than a final answer.

Critique

The study's main strength is its design. Survey studies of internal audit often stop at respondents' perceptions of their own effectiveness, but by linking survey responses to archival outcomes, the authors measure results the respondents cannot shape. The outcomes chosen are well suited: material weaknesses and restatements are direct indicators of reporting failures, and the timeliness of earnings announcements reflects the efficiency of the close process. The findings are also consistent with other recent work. Wagener et al. (2025) surveyed chief audit executives in 2020 and again in 2023 and found that internal audit functions moved toward more sophisticated analytics, and that analytics maturity was associated with higher internal audit quality, an association that strengthened in the later data.

The design also has limits that a reader should weigh. First, analytics use is self-reported by chief audit executives, who may describe their functions favorably, and the measure captures how extensively analytics are used rather than how well. Second, the associations may reflect selection: firms that invest in internal audit analytics may also have better-funded finance functions, stronger audit committees or simpler operations, any of which could produce fewer weaknesses and faster closes. A company sophisticated enough to adopt analytics in internal audit may have been reporting reliably already. The authors describe their evidence as initial, and that caution fits a design that cannot fully separate the practice from the kind of firm that adopts it. A third consideration is timing: if analytics use was surveyed at one point while reporting outcomes span several years, the order of cause and effect is harder to establish. Designs that follow the same firms before and after they adopt analytics, or that exploit a change outside the firm's control, would strengthen the case considerably.

Relevance to Accounting Information Systems

Gelinas et al. (2015) present monitoring as a component of internal control and describe how information systems can support it, and the article offers evidence that analytics-based monitoring by internal audit is associated with better outcomes. For practice, the findings suggest that organizations weighing an investment in audit analytics can expect benefits in reporting reliability, while the study's limits suggest piloting the tools and measuring results within the organization rather than assuming the published associations will transfer automatically. Appelbaum et al. (2017) note that standards and methods have not fully caught up with full-population analytics, which is another reason to treat early adoption as a managed experiment.

Conclusion

D'Onza and Rakipi (2026) provide useful early evidence, drawn from an unusual combination of survey and archival data, that internal audit analytics go together with more reliable and timelier financial reporting. Self-reported measures and possible selection effects mean the evidence supports adoption as a promising practice rather than proving that analytics cause the improvement.

References

Appelbaum, D., Kogan, A., & Vasarhelyi, M. A. (2017). Big data and analytics in the modern audit engagement: Research needs. Auditing: A Journal of Practice & Theory, 36(4), 1-27. https://doi.org/10.2308/ajpt-51684

D'Onza, G., & Rakipi, R. (2026). The impact of internal auditors' data analytics use on the reliability and timeliness of financial reporting. Journal of Information Systems. Advance online publication. https://doi.org/10.2308/isys-2024-104

Gelinas, U. J., Dull, R. B., Wheeler, P. R., & Hill, M. C. (2015). Accounting information systems (10th ed.). Cengage Learning.

Wagener, M., Eulerich, M., & Bonrath, A. (2025). From pen-and-paper to technology-driven analytics: Technology usage in internal auditing. Journal of Information Systems, 39(3), 39-66. https://doi.org/10.2308/isys-2024-052