From our perspective of providing counsel to boards, audit
committees, and stakeholders of both publicly traded and privately
held companies, a recurring advisory theme pertains to the
comparative effectiveness of internal audits versus statutory
audits in the prompt identification of compliance deficiencies. The
significance of these issues is heightened in light of the
Companies Act, 2013, the regulations established by the SEBI, and
industry-specific legislation, including the Prevention of Money
Laundering Act, 2002 (PMLA) and the Information Technology Act,
2000. An internally identified failure can be rectified with
minimal regulatory intervention, avoiding the need for SEBI
adjudication or scrutiny by the MCA. This article, situated in the
context of the Indian legal and regulatory environment, analyses
the fundamental distinctions between the two auditing frameworks
and elucidates the rationale for which internal audit generally
serves as the primary line of
