With the publication of the Regulation on Sustainability Auditing ("Regulation"), in the Official Gazette dated January 17, 2025, and numbered 32785, one more legislative effort has been added on sustainability, which have gained momentum over the past five years. With the increasing prevalence of sustainability policies and initiatives, it has become mandatory to establish an auditing framework to ensure compliance with national and international standards for these activities.
The sustainability audit, as defined and aimed by the Regulation, involves verifying and aligning a company's sustainability report—which includes its environmental, social, and governance disclosures—with the Turkish Sustainability Reporting Standards ("TSRS"). This process also ensures that the necessary auditing techniques are applied, and the findings are evaluated and formalized in a report.
The Regulation establishes the principles and procedures concerning independent audit firms and independent auditors operating in the field of sustainability. Additionally, it regulates the principles and procedures for sustainability audits conducted within the framework of the Turkish Commercial Code ("Code") and the Decree Law on the Organization and Duties of the Public Oversight, Accounting, and Auditing Standards Authority ("Authority") ("Decree Law").
The Regulation encompasses both mandatory and voluntary sustainability audits as defined under the legislation. It includes provisions for the authorization, registration, obligations, responsibilities, audits, and administrative sanctions applicable to independent audit firms and auditors.
Several definitions related to sustainability auditing are provided in Article 4 of the Regulation. For terms not defined in the Regulation, the definitions in Article 4 of the Independent Auditing Regulation shall apply.
The Regulation aims to establish a sustainability audit that ensures compliance with the Turkish Sustainability Reporting Standards and assurance under the Turkish Auditing Standards ("TAS"). The audit scope will be determined based on the criteria outlined in the TSRS and other relevant legislative provisions. In sustainability-related audits, TSRS will form the criteria, while in other audits, the criteria will be based on other legislative provisions. Audit criteria will be determined by the Authority for mandatory audits unless explicitly stated in the legislation, and by the requester for voluntary audits.
According to the Regulation, audit evidence consists of information and documents used to determine whether there are any non-conformities in the audited subject. Based on this evidence, a sustainability audit report compliant with TAS will be prepared. If no specific provision exists in the legislation, the report must be submitted to the company's management body at least 20 days before the ordinary general assembly meeting for the period to which the financial statements pertain, and no later than the maximum period stipulated by the Code for general assembly meetings.
Audit firms authorized to conduct sustainability audits must meet the following conditions:
- Be registered and active in the Official Registry of Independent Audit Firms,
- Have at least two responsible auditors,
- Demonstrate the adequacy of their audit staff,
- Possess sustainability audit guidelines.
Applications will be submitted by the relevant audit firms. After the applications are reviewed and deemed appropriate by the Authority, the firms will be registered and granted a "Certificate of Authorization as an Independent Audit Firm in the Field of Sustainability."
To become authorized as a sustainability auditor, individuals must be registered and active in the Official Registry of Independent Auditors, successfully pass sustainability-related examinations, complete practical professional training in the field. Auditors meeting these requirements will be certified as "Sustainability Auditors" by the Authority.
Audit firms and auditors are required to conduct sustainability audits in compliance with professional ethical rules. Audit teams must be formed in accordance with the criteria set by the Authority. It is stipulated that the responsible auditor signing the sustainability report must have conducted sustainability audits for at least three years.
The Authority will examine the audits of businesses subject to sustainability reporting at least once every six years from the date of the initial contract. The timeframe for subsequent examinations will begin in the year following the decision of the Public Oversight, Accounting, and Auditing Standards Board regarding the previous review. Additionally, the Authority may conduct reviews and audits based on complaints, notifications, or as deemed necessary, apart from those scheduled.
Sustainability audits conducted under the Regulation will be subject to the Authority's annual public report on inspections and audits. As a result of such inspections, the Authority may impose sanctions, including warnings, restrictions on activities, suspension of authorization, or revocation of authorization for audit firms and auditors. In cases of non-compliance with the Decree Law and Authority decisions, administrative fines may also be imposed in addition to other sanctions.
Individuals and entities involved in sustainability auditing are held accountable for complying with the legislation. In case of errors or violations, both individual and institutional sanctions are stipulated under the Regulation. Independent audit firms and auditors will be held separately liable for damages arising from sustainability audit reports that fail to comply with TAS, or that contain false, incomplete, or misleading information or opinions.
The Regulation also introduces Corporate Sustainability Training, organized by the Authority, to promote the adoption and effective use of TSRS. Successful candidates in the Corporate Sustainability Reporting Expertise Examination conducted by the Authority will be granted a Corporate Sustainability Reporting Expert license.
Another notable aspect introduced by the Regulation is the inclusion of exemptions regarding the transition period. The Regulation, which will be enforced by the Public Oversight, Accounting, and Auditing Standards Authority, entered into force on its publication date, January 17, 2025.
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.
