a) Election, dismissal and termination of the contract
- The auditor is elected by the company's general assembly. The auditor of the group of companies is elected by the parent company's general assembly.
- The auditor must be elected for every financial period and in any case before the end of the period in which the auditor will perform the engagement. Subsequent to election, the auditor must be registered at the trade registry by the board of directors and be announced in the Turkish Trade Registry Gazette and on its website by the board of directors.
- The auditor who is elected to audit the financial statements of the parent company may also be considered as the auditor of the group of companies financial statements unless another auditor is elected.
- The auditor may be dismissed from the duty to audit only in the manner set forth in paragraph four and provided that another auditor has been appointed.
- Based on the claim of (a) the board of directors and (b) the shareholders representing five percent of the capital in the public companies and ten percent of the capital in the private companies, the commercial court of the first instance may appoint another auditor by hearing the related parties and elect an auditor in cases where there is a fair reason of the claim and there is a suspicion that the auditor conducted his/her duty subjectively.
- The action regarding dismissal and appointment of a new auditor must be filed within three weeks from the date on which the auditor election is announced in the Turkish Trade Registry Gazette. In order for the minority shareholders to file this action, it is required that:
- They have voted against the election of the auditor at the general assembly,
- Their opposing votes have been recorded in the minutes, and
- They have been in the position of the company's shareholders for at least three months prior to the date of the general assembly at which the election was made.
- If an auditor is elected within the first four months of the financial period, an auditor must be appointed by the court based on the request of any shareholder, of each member of the board and of the board of directors. The same rule may be applied in other cases such as if the elected auditor rejects the position or terminates the contract. The order of the court is final.
- The auditor can only terminate the audit contract in the case of the existence of a just cause or only if an action for the dismissal is filed. A disagreement with respect to audit is not considered as just cause.
- In cases where the auditor gives an appropriate notice of termination, the board of directors must elect a temporary auditor with immediate effect and must inform the general assembly of the termination notice and request the approval of the general assembly for the elected auditor.
b)
Persons who may be auditors
An auditor can be:
- A sworn financial advisor or certified public accountant licensed in accordance with Law No. 3568 on the Professions of Certified Public Accountants and Sworn Financial Advisors, and
- Persons and partnership firms in which the partners are composed of these persons appointed by the Public Oversight, Accounting and Auditing Standards Board.
The new TCC introduces the concept of independence implying that the auditor has no connection with the company. The rule is explained in the new TCC in detail indicating who cannot be an auditor in a joint stock company.
c)
Auditor's rotation rule
If the auditor has been appointed by a company for seven of the last ten years, that auditor must be replaced for at least three years. The Public Oversight, Accounting and Auditing Standards Board has authority to shorten these periods. If the auditor was appointed before the effective date of this provision, these prior years will be taken into consideration in the calculation of the periods.
d)
Services impairing independence
of auditors
In accordance with the new TCC the auditor is not allowed to provide any services, excluding tax consultancy and tax audit, to the audited company. Such prohibited services cannot be provided to the audit clients through one of the audit firm's affiliated firms or persons.
