Appointing and Registering the Independent Auditor: TCC Article 399 Step by Step

For a company subject to independent audit, appointing the auditor is an obligation that comes before the audit itself and is often overlooked. When the deadline is missed, the appointment passes to the court, year-end procedures (stock counts, confirmations) are missed and the cost of the audit rises. This guide summarises the process step by step under Article 399 of Turkish Commercial Code No. 6102.

Who appoints the auditor?

The auditor is elected by the company's general assembly. For a group (consolidated) audit, the parent company's general assembly also appoints the group auditor. The board of directors puts a proposed auditor to the general assembly; the proposal is usually prepared by comparing proposals from several audit firms.

When should the auditor be appointed?

The auditor must be elected before the end of the financial year it will audit. In practice, the soundest approach is to elect the auditor at the ordinary general assembly meeting, in the first months of the year. This allows the auditor to:

• plan interim audit work during the year,
• attend the year-end stock count,
• send bank and account confirmations on time.

Registration and announcement

After the election, the board of directors registers the auditor with the trade registry without delay; the election is announced in the Turkish Trade Registry Gazette and on the company's website. The auditor's engagement is not considered to have actually begun until registration is complete; this step is critical for the validity of the audit report.

What happens if the deadline is missed?

If no auditor has been elected by the fourth month of the financial year, the auditor is appointed by the court where the company's head office is located, at the request of the board of directors, any board member or any shareholder. In that case the company loses the ability to choose its own auditor.

Can the auditor be dismissed?

An elected auditor cannot be removed at will. The auditor can be replaced only on the just grounds provided for in the law and by court decision. This rule exists to protect the auditor's independence. Appointing an auditor should therefore be seen as a one-year commitment.

Checklist

1. Check with the current thresholds whether your company is subject to audit.
2. Obtain written proposals covering scope, team and timetable from at least two audit firms.
3. Prepare the board's proposal and add it to the general assembly agenda.
4. Obtain the general assembly resolution and sign the audit engagement letter.
5. Register the appointment with the trade registry and announce it.
6. Hold a kick-off meeting with the auditor and agree the year-end timetable together.

This article is for general information. For your company's specific situation, consult your legal and audit advisers.