Announcement on the BRSA Board Decision of 24.06.2022 (Being Subject to Independent Audit)

The announcement made by the Public Oversight Authority (KGK) is as follows:

As is known, Board Decision No. 10250 of 24.06.2022 was adopted by the BRSA as a macroprudential measure deemed necessary to strengthen financial stability, to ensure that the credit system operates effectively by using resources in more efficient and productive areas, and to ensure that loans are used for their intended purpose.

Since that Board Decision refers to being subject to independent audit under the provisions of Decree-Law No. 660, it has become necessary, in view of the applications received by the Authority, to make the following explanations:

1. WHICH COMPANIES ARE SUBJECT TO INDEPENDENT AUDIT UNDER TURKISH COMMERCIAL CODE NO. 6102 AND DECREE-LAW NO. 660?

As is known, which companies are subject to independent audit is set out in Article 397/4 of Turkish Commercial Code No. 6102, which provides that the companies to be audited under Article 398 of the Code shall be determined by the President (formerly the Council of Ministers). Accordingly, the Council of Ministers Decision on the Determination of Companies Subject to Independent Audit (the Decision) dated 26/03/2018 and numbered 2018/11597, published in Official Gazette No. 30432 of 26/05/2018, set the criteria for companies to be audited and provided that companies meeting these criteria are subject to independent audit under Turkish Commercial Code No. 6102 and Decree-Law No. 660.

Under the Decision, as of 28.06.2022, contract notifications had been made for 12,630 companies for the independent audit of the 2021 financial period.

The Decision classifies whether companies are subject to independent audit as follows:

A. Companies within the scope of List (I) annexed to the Decision:

Companies within the scope of List (I) annexed to the Decision are subject to independent audit under Turkish Commercial Code No. 6102 and Decree-Law No. 660 regardless of any criteria regarding total assets, annual net sales and number of employees. (Decision Art. 3/1-a)

These are mainly companies subject to the regulation and supervision of authorities such as the CMB, BRSA, SEDDK and RTÜK, authorised institutions permitted to operate in Borsa İstanbul markets, precious metals intermediaries, companies engaged in the production or trade of precious metals, licensed warehouse operators established under Agricultural Products Licensed Warehousing Law No. 5300, and general warehouses established under General Warehouses Law No. 2699.

B. Companies deemed publicly held under Capital Markets Law No. 6362:

Of the companies whose capital market instruments are not traded on an exchange or other organised market but which are deemed publicly held under Capital Markets Law No. 6362 dated 6/12/2012, those that, alone or together with their subsidiaries and associates, exceed the thresholds for at least two of the criteria of:

• Total assets of TRY 15 million,

• Annual net sales of TRY 20 million, and

• 50 employees

in two consecutive financial periods are subject to independent audit under Turkish Commercial Code No. 6102 and Decree-Law No. 660. (Decision Art. 3/1-b-1)

C. Companies within the scope of List (II) annexed to the Decision:

Of the companies specified in List (II) annexed to the Decision, those that, alone or together with their subsidiaries and associates, exceed the thresholds for at least two of the criteria of:

• Total assets of TRY 30 million,

• Annual net sales of TRY 40 million, and

• 125 employees

in two consecutive financial periods are subject to independent audit under Turkish Commercial Code No. 6102 and Decree-Law No. 660. (Decision Art. 3/1-b-2)

The companies in List (II) annexed to the Decision are:

• Companies at least 25% of whose capital belongs directly or indirectly to professional organisations with public institution status, trade unions, associations, foundations, cooperatives and their umbrella organisations,

• Companies publishing daily newspapers nationwide,

• Companies, other than call centre companies, subject to the regulation and supervision of the Information and Communication Technologies Authority under Electronic Signature Law No. 5070 dated 15/1/2004, Electronic Communications Law No. 5809 dated 5/11/2008, Postal Services Law No. 6475 dated 9/5/2013 and Article 1525 of Law No. 6102,

• Companies operating under a licence, certificate or authorisation from the Energy Market Regulatory Authority and subject to its regulations,

• Excluding those within the scope of List (I): affiliates of the Savings Deposit Insurance Fund (TMSF) and companies whose supervision and management have been taken over by the TMSF under the repealed Banks Law No. 4389 and Law No. 5411, excluding affiliates and companies that are inactive or whose activities have been temporarily suspended or cancelled (including those for which the necessary amendments to the articles of association and similar procedures have not yet been completed),

• Excluding those within the scope of List (I): state economic enterprises and their subsidiaries operating under Decree-Law No. 233 dated 8/6/1984 on State Economic Enterprises, and companies at least 50% of whose capital belongs to municipalities.

D. Companies subject to the general audit criteria:

Of the companies other than those mentioned above, those that, alone or together with their subsidiaries and associates, exceed the thresholds for at least two of the criteria of:

• Total assets of TRY 35 million,

• Annual net sales of TRY 70 million, and

• 175 employees

in two consecutive financial periods are subject to independent audit under Turkish Commercial Code No. 6102 and Decree-Law No. 660. (Decision Art. 3/1-b-3)

2. WHICH FINANCIAL STATEMENTS ARE USED IN THE CALCULATIONS TO DETERMINE WHETHER A COMPANY IS SUBJECT TO INDEPENDENT AUDIT, AND WHAT ELSE SHOULD BE CONSIDERED?

The financial statements to be used in the calculations to determine whether a company is subject to independent audit, and explanations on how the calculations are to be made, are set out in Article 5 of the Decision and in the Procedures and Principles on the Council of Ministers Decision on the Determination of Companies Subject to Independent Audit, published in Official Gazette No. 30688 of 16/02/2019.

3. HOW CAN I DETERMINE WHETHER I AM SUBJECT TO INDEPENDENT AUDIT?

The obligation to determine whether a company is subject to independent audit under the criteria in the Decision lies mainly with the company itself. Accordingly, the company must make the calculations on the basis of its own data and, if any, those of its subsidiaries and associates in accordance with the explanations in the Procedures and Principles, determine whether it is subject to independent audit and fulfil its audit obligations under Turkish Commercial Code No. 6102.

In addition, on the basis of data provided to the Authority by the Revenue Administration, the companies assessed as subject to audit for the relevant financial period are published for information purposes on the Authority's website at https://dtsorgu.kgk.gov.tr/giris.aspx, where they can be searched by tax identification number. This work shared by the Authority is for information only and does not give a definitive result on whether a company is subject to audit. Therefore, the absence of a company's data in the search results does not mean that the company is definitely not subject to audit. Indeed, as stated earlier, the responsibility for calculating and determining, in accordance with the Procedures and Principles, whether it is subject to audit on the basis of its own data and those of its subsidiaries and associates, if any, taking into account the criteria in the Decision, the Lists annexed to the Decision and its audit status in previous periods, and for fulfilling its obligations under Turkish Commercial Code No. 6102, lies primarily with the company itself.

Furthermore, whether companies are subject to independent audit will be determined by the company concerned, taking into account the financial statements and other information specified in the Procedures and Principles (data on subsidiaries and associates, number of employees, whether there are long-term construction and repair contracts, etc.), and, as also stated in the BRSA's announcement (https://www.bddk.org.tr/Duyuru/EkGetir/951?ekId=824), by banks under Article 9 of the Regulation on Banks' Credit Transactions.

Announced to the public.

• To access the Information Screen for Companies on Whether They Are Subject to Independent Audit, click here.

• To access the Frequently Asked Questions on Being Subject to Independent Audit, click here.