Audit Requirement For Turkish Companies

As in many other countries, bookkeeping, accountancy and compliance are much attached to legal matters.
I notice that foreign companies with more flexible tax regimes, such as Middle Eastern countries working in Turkey, mostly face problems due to underestimating tax regulations. In most cases, these foreign investors complain about the quality of communication with their accountants. Usually an accountant only receives invoices and looks at the figures without communicating with their client or understanding their business. An accountancy report prepared in English must be received for a foreign company every month. Simple bookkeeping procedure is not very complex, but must be handled with care and with good communication with the client. The input of the client and the accountant understanding the client is necessary to see proper results.
I have written a couple of articles about this topic and updated my readers on a number of changes introduced by the new Turkish Commercial Code (TTK).
This article in particular concerns independent audit requirements. The accounting and auditing system has changed through the new TTK, which came into force as of July 1, 2012. At that time, there were several questions and unclear areas along with this new regulation. The good news is that regulations introduced by the law are becoming clearer day by day via communiqués released by the relevant ministries and decrees by Cabinet, and the new TTK is now pushing companies to become more transparent by applying the new Turkish accountancy standards almost in full compliance with International Financial Reporting Standards (IFRS) rules. Most big companies, especially ones with multi-national ties, had already been asking for reporting in IFRS, but now this is becoming even more important.
According to the new TTK, individuals and real entities are also required to comply with the rules and regulations declared by the Ministry of Finance while keeping their commercial books and preparing their financial tables. Firstly, the new TTK has set conditions so merchants have to comply with Turkish accounting standards in their commercial books. Also, the new code has permitted the implementation of specific and exceptional standards to enterprises of different scales and sectors.
One of the major changes to the TTK regards the auditing of the financial tables of joint-stock companies, which will be realized by the auditor according to Turkish auditing standards. The Cabinet decided the thresholds to show which size of companies will undergo an independent audit. Additionally, the Cabinet determines the establishment and working rules along with the qualifications of audit personnel of independent audit companies with the new TTK.

What are the thresholds for independent audit?

The Cabinet's Decree to Determine Companies Subject to Independent Audit was amended in March 2014, but this decree came into force on Jan. 1, 2014.
It introduced a greater coverage area (lowered the thresholds), and more companies will be undergoing independent audit. To meet the threshold requirements, a company must meet the following requirements:
1) The total assets of the company are equal to or above TL 75 million.
2) The annual net sales revenue of the company is equal to or above TL 150 million.
3) The number of employees is equal to or above 250.

Companies with subsidiaries that meet two out of the aforementioned thresholds in two consecutive fiscal years will also be subject to independent audit.

In addition to the figure requirements, particular industries and/or companies specified in the decree are still subject to independent audit, regardless of the above criteria.

These include companies subject to regulation and supervision of the Capital Markets Board (SPK); companies subject to regulation and supervision of the Banking Regulation and Supervision Agency (BDDK); and media service providers that own national TV broadcasting stations.
NOTE: Berk Çektir is a Turkish lawyer and available to answer questions on the legal aspects of living and doing business in Turkey. Please kindly send inquiries to b.cektir@todayszaman.com. If a sender's letter is published, names may be disclosed unless otherwise is expressly stated by the sender.
DISCLAIMER: The information provided here is intended to give basic legal information. You should get legal assistance from a licensed attorney at law while conducting legal transactions and not rely solely on the information in this column.

BERK ÇEKTİR (Cihan/Today's Zaman)