Independent audit is the evaluation of the financial statements and other financial information of the companies in terms of compliance and accuracy with the relevant financial reporting standards. In this process, sufficient and appropriate audit evidence is collected from books, records and documents by applying the independent audit techniques stipulated in the auditing standards. In the light of the evidence obtained, reasonable assurance is provided as to whether the financial information reflects the truth and the audit result is presented to the public or relevant stakeholders by attaching an independent audit report.

According to the Turkish Commercial Code and related regulations, independent audit is mandatory for companies that exceed certain size criteria. These criteria are generally determined by annual turnover, asset size and number of employees.

Whether companies other than publicly held companies or companies considered publicly held within the scope of the Capital Markets Law will be subject to independent audit in 2025 will be determined by taking into account the years 2024 and 2023. A company that is assessed to be subject to independent audit for the first time in 2025 will be subject to independent audit in 2025 if it exceeds the threshold values ​​of at least two of these three criteria determined for 2025 in two consecutive accounting periods in 2023 and 2024.

The application of Turkish Financial Reporting Standards (TFRS), which are fully compatible with International Financial Reporting Standards (IFRS), by businesses increases the comparability of financial statements on an international scale. This application enables businesses to present their financial information on the same principles as foreign companies they compete with in the markets they operate in, making it easier for existing and potential investors to make comparisons between businesses.

The application of IFRS offers businesses with subsidiaries in countries where IFRS is mandatory or permitted to be applied the opportunity to use a single and consistent accounting language throughout the group. Similarly, this is also valid for subsidiaries in Türkiye of a parent company that applies IFRS and ensures integrity in financial reporting.

In addition, the financial statements of companies reporting in accordance with IFRS are more reliable, consistent, transparent and investor-focused. These qualities allow companies to access financing more easily and operate more effectively in international capital markets, contributing to their becoming more attractive to foreign investors.

Yes, the independent auditor may use the work of internal auditors during the audit process. This is clearly stated in paragraph 1 of Standard on Auditing (SA) 610 – Using the Work of Internal Auditors. There are two basic situations in which the work of internal auditors may be used within the scope of SA 610:

• Using the work carried out by the internal audit function in obtaining audit evidence,
• Internal auditors provide direct assistance under the direction, supervision and review of the external auditor.

However, using the work of internal auditors is not appropriate and the provisions of ASA 610 do not apply in the following situations:

• If the activities and responsibilities of the internal audit function are not directly related to external auditing,
• If the internal audit work is deemed unreliable based on the understanding gained about the internal audit function as a result of the risk assessment procedures applied within the scope of ISA 315.

Therefore, the independent auditor may evaluate the adequacy and objectivity of the internal audit function and, if deemed appropriate, utilize the work of internal auditors during the audit process.

In order for a company to be required to make sustainability reporting; it must be included in the list below and meet the criteria regarding the size of the business.

1) Types of companies in scope:

1. a) CMB Companies

 Investment institutions,

Collective investment institutions,

Portfolio management companies,

Mortgage finance institutions,

Central clearing houses,

Central depository institutions,

Data storage organizations,

Joint stock companies whose capital market instruments are traded on a stock exchange or other organized markets or whose prospectus or issuance document is approved by the Capital Markets Board for the purpose of being traded,

Joint stock companies that issue capital market instruments, other than shares, without being offered to the public, although they are not traded on a stock exchange or other organized markets, or that have an issuance document with a validity period approved by the Capital Markets Board for this purpose,

1. b) BRSA Companies

Banks,

Rating agencies,

Financial holding companies,

Financial leasing companies,

Factoring companies,

Financing companies,

Asset management companies,

Companies that have qualified shares in financial holding companies and banks,

Savings finance companies.

1. c) Insurance, reinsurance and pension companies.

ç) Authorized institutions, precious metals brokerage firms, companies engaged in precious metals production or trade, which are permitted to operate in Borsa Istanbul Markets.

2) If a company included in the list exceeds the threshold values ​​of at least two of the following criteria in two consecutive reporting periods, it is within the scope of mandatory application.

• Total assets 500 million Turkish Liras
• Annual net sales revenue is 1 billion Turkish Lira
• Number of employees: 250 people

Banks are subject to mandatory reporting without being subject to any threshold value.

In determining whether a company is subject to an audit for the first time, the total assets and annual net sales revenue of the company are calculated according to the financial statements of the last two accounting periods. The basic issues to be considered in these calculations are summarized below:

What are the financial statements to be used as a basis?

• Calculations are made based on the balance sheet and income statement prepared to be submitted to public administrations within the framework of tax legislation.
• For foreign subsidiaries and affiliates, audited financial statements in accordance with international accounting standards are used as basis, if any. If such statements are not available, financial statements prepared in accordance with the legislation of the country to which they are subject are used.

What Should Be Considered When Calculating Total Assets and Sales Revenue?

1. a) Consideration of Subsidiaries and Affiliates:

When calculating total assets and annual net sales revenue, the company’s subsidiaries and affiliates are also taken into account.

1. b) Total Assets Calculation Method:

The registered values ​​of the subsidiaries and affiliates are subtracted from the company’s own total assets. Then:

1. • The total assets of the subsidiaries,
   • From the total assets of the affiliates, the part corresponding to the company’s affiliate ratio is added.

1. c) Annual Net Sales Revenue Calculation Method:

The company’s own annual net sales revenue;

1. • All sales revenues of affiliated partnerships,
   • The amount corresponding to the company’s participation rate is added to the sales revenue of the affiliates.

How will the intra-group elimination procedures be carried out?

In assets, liabilities, income and expenses arising from intra-group transactions;

• • All transactions with affiliated companies,
  • In transactions with direct affiliates, the portion corresponding to the affiliate ratio is eliminated.

What to Consider in Indirect Ownership Cases?

• Indirect subsidiaries and affiliates owned by the company through its subsidiaries are also taken into account.
• Example:
  If Company M owns 70% of Company N, N owns 60% of Y and 15% of V;
• Y, a subsidiary of M,
• V is considered as a 15% affiliate of M.

What are the Points to Consider in the Case of Participation of a Partner?

• Subsidiaries and associates owned by a company that is an affiliate of the company are taken into account only according to their value in the financial statements of the relevant affiliate.
• Example:
  If Company M owns 40% of N, N owns 60% of Y and 15% of V;
• M only considers N as its subsidiary.
• Y and V are not considered as direct subsidiaries or affiliates of M.
• In this case, transactions made with Y and V are not subject to elimination.

What to Consider if There Are Foreign Subsidiaries and Affiliates?

Total assets and annual net sales revenues of subsidiaries and affiliates abroad are also included in the calculations.