A Look at Recent Amendments to Independent Audit Thresholds

Introduction

Independent auditing refers to auditing of a company’s financial statements, records, accounting practices and internal controls and other related matters by an independent auditor.  

According to Article 397 of the Turkish Commercial Code numbered 6102, companies with limited liability (sermaye şirketleri) that exceed certain thresholds will be subject to independent auditing.

The applicable independent audit thresholds were revised with a decision of the Council of Ministers numbered 2018/11597, published in the Official Gazette dated 26 May 2018 and numbered 30432 (the “Decision”).

The updated independent auditing thresholds, effective as from 1 January 2018, will be as follows.

General Thresholds

Companies that exceed at least two of the below thresholds (together with their subsidiaries and associates, where applicable) for two consecutive accounting periods will be subject to independent auditing:

• a minimum total asset value of TL 35 million;


• a minimum net sales turnover of TL 70 million; or


• a minimum of 175 employees.

Specific Thresholds

Public companies whose securities are not traded in stock markets or an organised exchange will be subject to independent auditing if they exceed at least two of the below thresholds (together with their subsidiaries and associates, where applicable) for two consecutive accounting periods:

• a minimum total asset value of TL 15 million;


• a minimum net sales turnover of TL 20 million; or


• a minimum of 50 employees.

Companies listed under the Schedule 2 of the Decision (e.g. companies that operate in the electricity market, state-owned entities) will be subject to independent auditing if they exceed at least two of the below thresholds (together with their subsidiaries and associates, where applicable) for two consecutive auditing periods:

• a minimum total asset value of TL 30 million;


• a minimum net sales turnover of TL 40 million; or


• a minimum of 125 employees.

Companies Subject to Independent Auditing Without Regard to Thresholds

Companies listed under Schedule 1 of the Decision, which are predominantly companies operating in heavily regulated markets and already subject to strict regulatory supervision and oversight such as banks, insurance companies and factoring companies, will continue to be subject to independent auditing without regard these thresholds.

Conclusion

The Decision reduces applicable independent auditing thresholds, thereby extending the scope of independent auditing requirements.

Note that the Decision will take effect retroactively as from 1 January 2018.

Authors

Serdar Bezen

Pınar Babaoğlu

Eren Soydan

Aykut Aydın