A BRIEF GUIDE ABOUT INDEPENDENT AUDIT FIRMS

Definition

The purpose of an audit is to enhance the degree of confidence of intended users in the financial statements. This is achieved by the expression of an opinion by the auditor on whether the financial statements are prepared, in all material respects, in accordance with an applicable financial reporting framework. In the case of most general purpose frameworks, that opinion is on whether the financial statements are presented fairly, in all material respects, or give a true and fair view in accordance with the framework. An audit conducted in accordance with ISAs and relevant ethical requirements enables the auditor to form that opinion.

The main regulation concerning audit in capital markets is “Principles Regarding Independent Auditing Standards in the Capital Markets” (Serial:X, No:22)

Entities subject to independent audit and review of financial statements 

  • Entities which are determined by 397th paragraph of Corporate Law numbered 6102, Investment Funds, housing finance and asset finance funds are subject to annual independent audit,
  • Entities below are subject to interim reviews :
    • - Investment firms,
    • Collective investment schemes excluding investment funds,
    • Mortgage finance institutions,
    • Corporations the shares of which are traded on exchange.

Establishment Requirements  

The establishment requirements for the Audit Firms that will operate under the capital market regulations are as follows; 

  • It should be registered by the Public Oversight Accounting and Auditing Standards Authority (POA),
  • It must have adequate office, equipment and employees.
  • It should have a quality control committee which includes adequate number of auditors or experts under the supervision of a responsible partner,
  • It should have a professional liability insurance of min of 200.000 TL
Requirements for Managers and Auditors 

The partners and managers of the Audit Firm:
  • Should be registered with POA,
  • Should have working audit experience at a POA registered audit firms at least one audit engagement in a year which is out of the scope of capital markets law in 2 years or at a CMB registered audit firm experience for at least 2 years.
  • To be assigned as a responsible partner one should have a work experience as auditor, senior auditor in capital markets institutions or public issuers engagements at a CMB registered audit firm,
  • Must not be convicted of crimes for breach of the Capital Markets Law,
  • Should not be among responsible persons; for the termination of audit licenses of capital market institutions, or for the annulment of stock exchange membership of institutions.
  • Should not be barred from transactions in the stock exchange.
Audit Quality

The quality control reviews and oversight is done solely by CMB considering capital markets. According to CML, professional staff (CMB staff) shall be authorized for the application of the provisions of this Law and other laws concerning the capital market and the supervision of all kinds of capital market activities including audit services provided for capital markets and transactions. This authority shall be exercised by the professional staff assigned by the Chairman of the Board. The staff assigned with supervision is authorized to request from the related real persons and legal entities information and documents they may deem as relevant to the provisions of CML and other relevant legislation related to capital markets; to examine all the books and documents including the records kept for tax purposes, and all records including that kept electronically and miscellaneous means that contain information, and information systems; to request access to these systems and obtain the copies; to audit their accounts and transactions; to acquire written and verbal information from the relevant persons; to draw up the necessary minutes.

Besides, CMB carries out non-routine inspections/investigations by the notifications of CMBs corporate finance department and other related departments.