While a position for Turkey in the
European Union is perhaps still some years distant, the nation’s
business community is working hard to bring itself in line with
both EU and international standards.

One chapter in the ongoing negotiations
between Turkey and the EU is company and commercial law.

An important milestone was reached last
year with the release of the Draft Turkish Commercial Code (TCC) on
financial reporting and the statutory audit profession.

The TCC took five years to develop, but still
appears far from finalised.

The aim of the code is to align Turkish
regulations with the EU and enable Turkey to function as part of
the international community.

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Korkut Özkorkut, deputy director of the
Research Institute for Banking and Commercial Law at the Faculty of
Political Sciences at Ankara University, tells The
the new statutory audit regulation in the draft TCC
will have a significant effect on financial reporting.

One of the most notable changes in the draft
TCC relates to the statutory audit system of joint stock companies.
Related articles of the draft TCC that are in harmony with the
provisions of the EC 8th Directive would replace the entire
statutory audit system in the current TCC, which calls for no
qualification, licensing, education requirements or specialist
knowledge, Özkorkut explained.

The draft code also brings more coherence to
Turkey’s fractured auditing and accounting requirements.

The current TCC and Tax Procedures Code
empower several regulatory authorities to set and enforce auditing
and accounting requirements for various entities that fall under
their jurisdictions.

These authorities include the Capital Market
Board, the Banking Regulation and Supervisory Agency, the General
Directorate of Insurance and the Energy Market Regulatory

However, under article 88 of the draft TCC,
the Turkish Accounting Standards Board would become the single
authority for setting financial reporting standards in Turkey.

Özkorkut said the draft code would also
strengthen audit standard-setting and regulation.

The Union of Certified Public Accountants and
Sworn-in Certified Public Accountants of Turkey (TURMOB) would set
the auditing standards only until a new Turkish Auditing Standards
Board is founded.

The authority of oversight of auditors and
audit firms would go to the Ministry of Industry and Commerce until
a new public oversight board is established.

However, Özkorkut said these interim
regulations may not be sufficient to keep pace with the demands of
complex public oversight.

“I have not a general, but a concrete fear
about an independent auditing system and its oversight authority,”
Özkorkut said.

He added that Turkey needs to establish a sole
supreme authority working together with the TURMOB to determine
auditing standards and ethics, authorise independent auditors and
audit firms under a public oversight system and monitor their
activities within the framework of quality assurance.

Political delays

The draft TCC is on the agenda of
the Turkish Grand National Assembly (GNA) but Özkorkut said that
just 76 of 1535 articles have been passed so far.

None have been accepted yet this
year as the government’s focus has been drawn to local

“Last autumn, Turkey promised that the draft
TCC would be accepted in 2009 in its Third National Program, which
was prepared for adaptation of the EU law,” Özkorkut said.

“Despite that it is not clear yet when the
draft would be accepted.”

Results from the nation’s national elections
in March mean the opposition is likely to draw the process out.

“If it happens as an optimistic view, at
least, it would take much more time than we have expected before.
Because the deputies of the opposition parties would probably use
their right to make speech for every article of the draft in the
GNA,” Özkorkut said.

Özkorkut hopes the new TCC is enacted as soon
as possible before it can be amended.

“The draft has not been damaged yet. The
attitudes of both parts, the Government and the opposition parties,
are still uncertain,” he said.