Financial Reporting and Audit Requirements
Accounting and auditing practices must be evaluated within the framework of the New Turkish Commer¬cial Code (TCC). To ensure more effective auditing and public oversight system, the Public Oversight Accounting and Auditing Standards Authority (KGK) was established in accordance with Public Oversight Account¬ing and Auditing Standards Authority’s Organization and Responsibili¬ties Decree Law No. 660 of 2 November 2011. Members of the management board were appointed on 14 December 2011 and the Authority started its operations as of 22 December 2011. Pursuant to the Decree Law, the Authority is the only body authorized to publish accounting and auditing standards in Turkey.
According to the new TCC, companies are obliged to maintain statutory books and individual or consolidated financial statements in accordance with Turkish Accounting Standards and Turkish Financial Reporting Standards (TAS/TFRS), a direct translation of the International Financial Reporting Standards (IFRS).
However, the KGK has decided that for accounting periods beginning on or after 1 January 2013, the following companies must use TAS/TFRS to prepare individual or consolidated financial statements:
- Companies specified in Decree No. 660 as organizations of public interest
- Companies subject to statutory audit by the decision of the Council of Ministers within the framework of the new TCC, Article 397
- Companies listed in the second paragraph of the new TCC, Article 1534.
According to Law No. 6455 (amending the new TCC), all joint stock companies not covered by the above list, cooperatives under Law No. 4572, and their parent organizations that are not subject to audit will be audited. Supervisory rules and procedures of the audit regulations will be issued by the Ministry of Customs and Trade after consultation with the KGK. Pending more specific instructions from the KGK, other companies should continue to use the Uniform Chart of Accounts in accordance with Turkish tax laws.
Companies meeting at least two of the following criteria by the end of 2016 (alone or together with their affiliates and/or subsidiaries) are subject to statutory audit for 2018:
- Total assets ≥ TRY 35 million
- Annual net sales ≥ TRY 70 million
- Number of employees ≥ 175.
In case of at least two of three criteria mentioned in above decision consecutively exceed their limits in two accounting period, and then the companies will be subject to statutory audit from the subsequent accounting period.
As to the determination of whether these criteria are met for current year, the financial statements for last 2 years shall be taken into account regarding total assets and annual net sales revenue. Average number of employees for past 2 years shall be taken into account regarding the number of employees.
According to the List No. I of the Article 397 Public Oversight Accounting and Auditing Standards Authority’s Organization and Responsibilities Decree Law No. 660, the following companies are also subject to statutory audit:
- Companies under control of Capital Markets Board of Turkey regulations
- Companies under control of Banking Regulation and Supervision Agency regulations
- Insurance, reinsurance and pension companies that are regulated by the law of individual retirement savings and investment plan and law of insurance
- Institutions authorized by the Istanbul Gold Exchange and allowed to operate as a member; precious metals intermediary institutions; joint-stock companies engaged in the production or trade of precious metals
- Companies licensed for warehousing of agricultural products established as a joint-stock company according to legislation on licensed warehousing of agricultural products
- Companies established as a joint-stock company in accordance with provisions of the law of public malls
- Media companies that are owners of national terrestrial satellite and cable television.