Turkey: The State Audit Over Corporations


The authority of the Ministry of Industry and Trade to audit corporations (limited to joint stock companies) was stipulated for the first time in Article 274 of the former Turkish Commercial Code no. 6762 ("Old TCC"). The scope of auditing practice has been extended with art. 210 of the new Turkish Commercial Code no. 6102 ("New TCC") which entered into force on 1 July 2012 and the audit has become an obligation for all commercial corporations.

Before the New TCC entered into force, a number of amendments were made to both the TCC and the Act on the Implementation and Entry into Force of the Turkish Commercial Code ("Act of Implementation") by the Act on Amendment of the Turkish Commercial Code and Act on Implementation and Entry into Force of Turkish Commercial Code ("Act no. 6335"). Act no. 6335 introduced a number of amendments to provisions that were criticized by business organizations and scholars. More detailed information can be found in our article published in July 2012.

Article 210 of the New TCC has been amended by Act no. 6335, which introduced the following wording; "principles and procedures of auditing and the transactions subject to audit shall be regulated by a regulation to be prepared by the Ministry."

In accordance with the New TCC, the Regulation Pertaining to the Audit of Corporations by the Ministry of Customs and Commerce ("Regulation") was published in the Official Gazette dated 28 August 2012.

The Regulation regulates the scope and procedures of the auditing of companies and it is composed of five sections.

The Scope of Audit

The purpose of this Regulation is to determine the principles of auditing, how it will be conducted and the transactions subject to audit. Within this scope, the Regulation provides certain definitions.

Pursuant to the Regulation, the Ministry of Customs and Trade (the "Ministry") is the public institution authorized to conduct the audit. Even before the amendments of Act no. 6335 were enacted, it was already accepted that all references in Article 210 of the New TCC to the Ministry of Industry and Commerce were, in fact, made to Ministry of Customs and Trade. The Regulation embraced the amendment of terminology introduced by the Act no. 6335.

Article 210 of the New TCC states that not only joint stock companies but all corporations shall be evaluated within the scope of audit, contrary to the Old TCC. Accordingly, the section of the Regulation regarding definitions refers to all corporations. Moreover, Article 13 of the Regulation also states that the Ministry may audit any corporations who no longer are legal entities.

Transactions Subject to Audit

Transactions subject to audit are enumerated in Article 5 of the Regulation. These are incorporation actions, transactions which are necessary for the existence of the commercial enterprise (those relative to the registration with the trade registry and announcements, with respect to the trade name and enterprise name, and those concerning the commercial ledgers), as well as mergers and acquisitions, de-merger, type conversion transactions and actions regarding group companies. Moreover, the transactions regarding the general assembly and administration of the company, acts regarding the appointment of the auditor and those concerning the amendment of the articles of association are also within the scope of auditing. Transactions concerning shares and the obligation of subscription of capital, stock exchange transactions, and transactions related to alteration of capital, financial statements, annual activity reports and reserve funds, and also transactions about profit, dividend and liquidation shares are among the long list of transactions subject to auditing. Transactions related to electronic and knowledge-based society services are also within the scope of the audit provisions pursuant to the understanding of electronic transparency in the New TCC. The transactions concerning the termination of a company and lastly regulatory transactions based on the New TCC are audited by the Ministry.

It is understood that the audit includes all activities from the moment a company is established. With this broad auditing competence, the New TCC aims to ensure accountability and transparency in commercial transactions.

The Purpose of Auditing

The aim of auditing is expressed in art. 4 of the Regulation. Auditing targets to ensure all commercial companies realize their transactions in accordance with the law. In that way, the Regulation stipulates that the compliance of "all transactions realized from the establishment until the termination of commercial companies with the Code and the regulatory transactions pursuant to the Code" shall be audited "by the Ministry". Firstly, remedial aspect of auditing is put forward. Therefore, it is stipulated that the Ministry shall provide guidance to remove any improprieties in practice. Secondly, auditing has another aspect, which is providing sanctions. Following completion of an audit, it is regulated that persons, whose criminal liability is detected, shall be directed to the competent authorities. Persons whose legal responsibility arises, the relevant persons are identified to the board of directors and included in the agenda of the general assembly. Lastly, the preventative role of auditing is emphasized. The Regulation stipulates that precautions will be taken in order to prevent inconveniences arising in practice.

Principles in Auditing

Auditing is based on the principles of impartiality, equality, honesty, confidentiality, and professional diligence. These principles are valid in all phases of auditing, in other words, from collecting evidence to evaluating the consequences of the results. Moreover, the principle of confidentiality prevails until the result of auditing becomes definite.

Procedure of Auditing

The third part of the regulation defines how the audit will take place. The decision to undertake an audit is at the discretion of the Ministry and it is performed at the registered office of the company, at the commercial enterprise, and if necessary at a branch office by the audit personnel of the Ministry. If the technological infrastructure of the company is significant and the auditing personnel does not deem an audit at the registered office necessary, the investigation may be conducted only on files after obtaining the approval of the Ministry. The Ministry may take the auditing decision ex officio or upon request, notice, or complaint by shareholders or third parties. However, separate approval of the Ministry is required for expansion of the audit of the audit personnel so as to include subsidiaries and affiliated companies.

An auditor shall conduct the audit compliant to a certain procedure. On the other hand, the audited entities are also imposed certain obligations. One of these obligations is to facilitate the works auditors. The second obligation is to make available in a timely manner to the auditors all kinds of written or electronic documents, even if they are confidential, upon requests during audit. The audited entities failing to fulfill this requirement will be warned. If the requested documents do not arrive on time or are incomplete, the Regulation refers to Article 562 (4) of the New TCC and concludes that such act will result in criminal liability. The sanction in this case is a judicial fine not less than three hundred days provided the act does not constitute another crime requiring a higher sanction. Along with the audited entity, state institutions and organizations, professional institutions in the form of public entities, associations concerning public welfare, notaries, banks, insurance companies and other real persons or legal entities shall provide any and all documents requested for audit.

Techniques of Auditing

Techniques of auditing are not listed exhaustively in the Regulation. Auditors decide on the utilization of advised techniques by themselves, but this authority does not provide an unlimited right of selection. It is essential to gather adequate evidence following the utilized techniques. Within this scope, the Regulation suggests techniques such as observation and affirmation.

Preparation of the Audit Reports

The reports indicated by the Regulation are prepared at the end of the audit. Article 9 stipulates the content of these reports. The inspection report includes the conformity of the corporation's acts with the law. The investigation report is prepared only if there is a crime resulting in criminal liability. Finally, the survey report regulates all other issues, which are not addressed in the other reports.

As specified under New TCC Article 210(3), the Ministry may file a suit for the termination "of the companies engaging in acts which are contrary to the public order or its field of operation or preparatory acts or engaging in acts and activities which constitute a simulation" within one year of being informed of the relevant activity. In order to file suit for annulment, an investigation report shall be prepared. Moreover, the investigation report shall state that situations giving raise to the legal responsibility of persons should be included in discussion on the general assembly agenda and the shareholders shall be informed about such situations, and the report shall include other issues regarding the application of administrative monetary fines, and other determination and opinions of matters which fall within the scope of the authorization of other ministries, institutions and organizations which require taking of certain measures.


The Regulation sets out the auditing criteria in a detailed way for all commercial companies. The establishment, operations, and termination of a commercial company are subject to audit pursuant to certain procedures. Such detailed auditing will increase transparency and keeping of records and will be a factor while fighting against the off-the-record economy. Still, the Ministry needs qualified and experienced personnel both in the provinces and in the cities in order for the active auditing of commercial companies which are increasing day by day and whose accounts become more complex. Without these personnel it would be naïve to anticipate an efficient auditing.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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