Lei Zou

Assistant Professor

Lei Zou earned her Ph.D. in Accounting from Maastricht University in 2017 with the dissertation Economic consequences of public oversight of the auditing profession: insights from the capital and audit market. She is currently an Assistant Professor of Accounting at Texas A&M University (College of Arts and Sciences). Her research focuses on audit regulation, public oversight, and their economic impact on audit markets and audit quality. She has published in journals such as European Accounting Review, examining PCAOB inspections, audit fees, and quality control deficiencies among audit firms.

Internal Controls
The importance of internal control over financial reporting (ICOFR) has increased over the past few decades. All over the world, governments are reinforcing regulations related to internal controls, forcing firms as well as their auditors to direct more attention to the quality of internal controls in place. Along with the growing importance of ICOFR, researchers have conducted studies examining different aspects relating to internal controls. To provide a broad overview of the current understanding of internal control systems, this literature review provides a summary and synthesis of studies conducted.  
Read PDF
More Info
Internal controls
The auditor’s reliance on client internal controls has always been a contentious issue. If clients have high quality internal controls, auditors should be able to rely on these controls, making the audit more efficient. However, what constitutes a “good” internal control system is unclear, which makes it difficult for the auditor to determine how to integrate a client’s internal control system into the auditing procedures. Research suggests that the quality of a client’s internal control system very much depends on the context of the firm, and no clear guidelines exist. This is worrisome, given that a high proportion of audit clients shows significant shortcomings in their internal control over financial reporting. Clear evaluation criteria are lacking and necessary, but the rise of data analytics is likely to partially solve this issue. Computer algorithms facilitate large-scale tests by the auditor and may flag suspicious transactions, reducing the need for the auditor to depend on their clients’ internal control systems.
Read PDF
More Info
The evolution of performance measurement, career development, and compensation for audit partners in the context of public scrutiny
The study examines how audit firms changed their policies regarding audit partner performance measurement, career development, and compensation during a period of heightened public scrutiny of audit quality (2007–2017).
Implementing such policy changes requires a delicate transition in organizational design and internal processes and may not always translate effectively into day-to-day practices. Using proprietary performance management policies and individual partner performance and compensation data from the eight largest Dutch audit firms provides an in-depth understanding of the evolution of performance management for audit partners.
Findings indicate that most policy changes have real consequences. For example, audit quality becomes more influential in career development, while profit sharing is increasingly linked to quality and long-term performance.
Overall, audit firms appear responsive to public scrutiny, aligning partner incentives more closely with societal expectations of audit quality.
Read PDF
More Info
Performance Measurement, Career Development, and Compensation for Audit Partners
This study examines how Dutch audit firms changed their policies for audit partner performance measurement, career development, and compensation during a period of heightened public scrutiny (2007–2017), and whether those changes translated into day‑to‑day practices. Using proprietary policy documents and partner‑level performance and compensation data from the eight largest audit firms in the Netherlands, the authors find that audit quality became more consequential for promotions, demotions, and job retention, while profit sharing shifted toward longer‑term performance and was complemented by penalties (and claw‑backs) for low quality. Overall, firms appear responsive to public scrutiny, aligning partner incentives more closely with societal expectations of audit quality.
Read PDF
More Info
Auditor reliance on internal controls: challenges, insights, and the future of data analytics
Auditors have long grappled with how much they can trust a client’s internal control system. Strong internal controls can make audits more efficient, but what defines “high quality” controls remains unclear and many companies still fall short. Research shows that internal control quality depends heavily on firm-specific factors like size, complexity, governance, and risk profile. While robust controls improve financial reporting, reduce operational risk, and even lower audit fees, a significant number of firms continue to exhibit material weaknesses, raising concerns about audit reliability.
For auditors, evaluating internal controls is now a mandatory part of the process under standards like Sarbanes-Oxley Section 404 and ISA 315. Yet, this evaluation is challenging: controls vary widely across organizations, and clear guidelines are lacking. Auditor independence and a deep understanding of the client’s operations are critical, but experience alone doesn’t guarantee better assessments. Looking ahead, technology promises to reshape this landscape. Data analytics and AI can help auditors test entire populations of transactions, flag anomalies, and reduce reliance on client controls. Continuous auditing and machine learning may soon make audits faster, more comprehensive, and less dependent on traditional control systems, though these benefits will mostly apply to large-scale clients. In short, internal controls remain central to audit quality, but their evaluation is complex and context-driven. As technology advances auditors must adapt and balancing traditional judgment with innovative tools to ensure trust and transparency in financial reporting.
Read PDF
More Info
No related podcasts.
No related news.

Filter projects: 

Project Lead
Theme Filter
University Filter
1 - 10 of 51 projects