Turkish 'President’s Decision on Determination of Companies Subject to Independent Audit' published in Official Gazette

On 30 November 2022, Turkey published the President’s Decision on Determination of Companies Subject to Independent Audit in the Official Gazette, repealing the former Decision on the Determination of Companies Subject to Independent Audit dated 26/03/2018 and numbered 2018/11597, which was put into effect by the then Council of Ministers.

The Decision introduces a change to the determination of the companies which are subject to independent audit as per the Decree Law on the Organisation and Duties of the Public Oversight, Accounting and Auditing Standards Authority Numbered 660. The Decision has entered into force on 1 January 2023.

Companies subject to independent audit

According to the Decision, the companies subject to independent audit include:

• Without being subject to any criteria, companies listed in the Annex-1 of the Decision;
• Other companies exceeding the thresholds of at least two of criteria set by the Decision, which is mentioned below, in two consecutive accounting periods.

In that regard, the relevant thresholds are re-determined by the Decision.

New thresholds

The thresholds for companies whose capital market instruments are not traded on the stock exchange or other markets, but are considered publicly traded under the Capital Markets Law are as follows:

• Total assets of TRY 30 million;
• Annual net sales revenue of TRY 40 million;
• At least 50 employees.

The thresholds for companies listed in the Annex-2 of the Decision are as follows:

• Total assets of TRY 60 million;
• Annual net sales revenue of TRY 80 million;
• At least 100 employees.

The thresholds for other companies not covered above are as follows:

• Total assets of TRY 75 million;
• Annual net sales revenue of TRY 150 million;
• At least 150 employees.

Therefore, companies falling under one of the three categories listed above will be subject to independent audits if they exceed the new thresholds of at least two of the criteria corresponding to the relevant category.

Situation for savings finance companies

While Annex-1 of the Decision includes savings finance companies, listing the companies subject to independent audit without being subject to any criteria, it excludes savings finance companies which the Banking Regulation and Supervision Agency (Agency) decided to liquidate in line with the Provisional Article 7 of the Financial Leasing, Factoring, Financing and Savings Finance Companies Law Numbered 6361, with the liquidation process being conducted by the liquidation commissions appointed by the Savings Deposit Insurance Fund of Turkey (SDIF).

According to the above Article, the Agency can decide to liquidate the savings finance companies

• that have applied to the Agency, and; (i) whose assets are unable to meet their liabilities according to their independently audited financial statements, (ii) that fail to bring their situation into compliance with the provisions of this Law within the stipulated period of time, or (iii) whose submitted plan is deemed insufficient by the Agency; and
• that collected money from their customers within the scope of their savings finance activities before the effective date of this article, but did not apply to the Agency.

Conclusion

Effective 1 January 2023, the Decision re-determines the thresholds for determining if a company is subject to independent audit, and those considerations of utmost importance for companies when assessing the obligations the legislation requires them to fulfil.

For more information on the Decision and how it could impact your company or business, contact your CMS partner or local CMS expert: Dr. Döne Yalçın, Arcan Kemahlı or Ayşe Duranay.