Changes in the Criteria for the Determination of Companies Subject to Independent Auditing

With the Decision on the Amendment of the Decision Regarding the Determination of Companies Subject to Independent Auditing [“Decision”] published in the Official Gazette dated 6.4.2024 and numbered 32512, amendments were made to the Decision Regarding the Determination of Companies Subject to Independent Auditing, published in the Official Gazette dated 30.11.2022 and numbered 32029. These amendments include changes in the threshold values and the scope of companies subject to independent auditing.

The said decision came into effect on April 6, 2024, and will be applied in subsequent fiscal periods, including the fiscal period starting on January 1, 2024. The changes made with the Decision follow the previous changes in thresholds mentioned in our article dated December 5, 2022, and primarily involve increase of the monetary thresholds and certain exceptions.

Changes in General Thresholds

With the Decision, the monetary thresholds for companies that are not publicly traded or are not subject to different monetary thresholds specified in the annex to the Decision were amended as follows:

In this context, any company meeting two of the above criteria for two successive fiscal years will be subject to independent auditing.

In addition, changes were also made regarding some of the exceptions. The old regulation exempted companies with at least 50% of their capital owned by the state or public institutions and companies subject to the Privatization Practices iriir [“Law”] from the scope of independent auditing. However, companies listed under the list in annex (I) of the Decision were subject to independent auditing regardless of any criteria, even if they were subject to the Law. The Decision expanded the relevant exception to exclude public economic enterprises and their subsidiaries subject to the Law from independent auditing.

Companies Subject to Independent Auditing Regardless of Any Criteria

Before the Decision, companies under the regulation and supervision of the Capital Markets Board, companies under the regulation and supervision authority of the Banking Regulation and Supervision Agency, insurance, reinsurance, and pension companies, those engaged in the production or trade of precious metals, public warehouses, and media service providers were subject to independent auditing without being subject to the above monetary thresholds, as listed under annex (I) to the decision.

With the changes, the scope of companies subject to independent auditing without any other condition was expanded to include media service providers with the right to broadcast voluntarily on the internet, payment institutions, electronic money institutions, companies operating under the regulations of the Energy Market Regulatory Authority with an independent auditing obligation under these regulations, and public economic enterprises and their subsidiaries not subject to the Law.

Companies Subject to Lower Threshold Values

The scope of companies subject to lower threshold values listed under the list in annex (II) of the Decision Regarding the Determination of Companies Subject to Independent Auditing was also narrowed. The list was reorganized to only include companies under the regulation and supervision of the Information and Communication Technologies Authority excluding call center services, subsidiaries and companies under the supervision and management of the Savings Deposit Insurance Fund excluding inactive or temporarily suspended or canceled ones, and companies with at least 50% of their capital owned by municipalities.

No changes were made to the thresholds applied to these companies, so the existing thresholds will continue to apply. For these companies, if two of the criteria of total assets of at least 60 million TL, annual net sales revenue of at least 80 million TL, and at least 100 employees are met, independent auditing will be mandatory. Companies with at least 25% of their capital directly or indirectly owned by public professional organizations, unions, associations, foundations, cooperatives, and their parent organizations, as well as companies publishing newspapers nationwide daily, which were previously subject to these thresholds, have been excluded from this scope and will now be subject to general thresholds.

Conclusion

With the Decision, the thresholds for total assets and net sales revenue for companies not listed under (I) and (II) have been increased, narrowing the scope of companies required to appoint an independent auditor. The regulation has been simplified, especially for companies listed under (II) subject to lower thresholds. The changes and simplification of audit obligations aim to enhance the accuracy and reliability of financial reports and make audit processes more efficient.