The Presidential Decision No. 6434 on Determination of Companies subject to Independent Auditing (the “Decision”) was published in the Official Gazette on November 30, 2022.
The Decision provides significant changes to the independent auditing thresholds compared to the Decision No. 2018/11597 on Determination of Companies subject to Independent Auditing, which will remain in force until January 1, 2023. With the effect of the Decision, publicly-traded companies that exceed two of the below three thresholds for two consecutive accounting periods shall be audited by an independent auditor.
- Assets worth over TRY 30 million (previously TRY 15 million)
- Net annual sales over TRY 40 million (previously TRY 20 million)
- Number of employees more than 50
Companies that are listed in Annex-II of the Decision shall be subject to independent auditing provided that they exceed the following limits for two consecutive accounting periods:
- Assets worth over TRY 60 million (previously TRY 30 million)
- Net annual sales over TRY 80 million (previously TRY 40 million)
- Number of employees more than 100 (previously 125)
Annex-II involves companies where professional organizations with public institution status, unions, associations, foundations, cooperation and their parent companies directly or indirectly hold more than 25% of the shares or where municipalities hold more than 50% of the shares; as well as national daily newspapers, state-controlled enterprises, certain companies running business in communication and energy sectors, and companies whose control is undertaken by the Saving Deposit Insurance Fund.
On the other hand, companies that are listed in Annex-I of the Decision shall require to appoint an independent auditor, regardless of any thresholds. These are mainly financial institutions such as banks, financial holdings, factoring companies, insurance and reinsurance companies and also media service providers holding broadcasting license for terrestrial TV, satellite TV, or cable TV covering multiple provinces. It should also be noted that saving finance companies that are recently introduced to the Turkish financial markets also need to appoint an independent auditor, irrespective of their financials and employment status.
Other companies that do not fall within the above categories shall be subject to independent auditing provided that they exceed the following thresholds for two consecutive accounting periods:
- Assets worth over TRY 75 million (previously TRY 35 million)
- Net annual sales over TRY 150 million (previously TRY 70 million)
- Number of employees more than 150 (previously 175)
In a general sense, the new thresholds are expected to narrow the scope of companies that will need to appoint an independent auditor, due to increased financial conditions as explained above. Notwithstanding, the condition for employee number has become more inclusive for companies listed in Annex-II and those that do not fall within any specific category. Therefore, the new thresholds should be followed closely in order to avoid any incompliance.