Ask a Turkish firm leader when they believe the Turkish Commercial Code (TCC) will be implemented and you are likely to receive a different response every time.
Uncertainty is rife over the most important piece of legislation for Turkey’s audit profession in a generation.
If implemented, the code could increase the audit marketplace from about 1,000 companies well into the 10,000s – with about 40 to 50 firms that have the capability and capacity to serve companies bound by the new commercial code requirements.
The TCC would also bring more coherence to Turkey’s fractured auditing and accounting requirements and align Turkish regulations with the EU.
The draft code, which took five years to develop, was released in 2008 but there has been little progress since.
In a 2009 survey of the Turkish accounting profession by the International Accounting Bulletin firm leaders were optimistic the code could find a passage through parliament in one or two years.
A year later, there has been virtually no progress due to political instability.
“I think no one in Turkey – not even the prime minister and the president – has any idea of when to implement the new code,” Baker Tilly Güreli senior manager Sinan Güreli said.
Grant Thornton Turkey, the largest audit firm outside of the Big Four, is well placed to take advantage of a flood of new business should the code come into force.
Chairman Aykut Halit said the delays have come about because the government is currently busy in court trying to change Turkey’s constitution, following a foiled coup attempt by disgruntled ex-military generals.
This has meant that certain legislation, such as the TCC, has fallen down the pecking order in terms of priority.
“There probably will be elections in 2011, so this will have to be discussed in Parliament,” Halit explained.
“So, you are looking at least another year until 2012, and once it is law they will probably put in another year’s notice period.”
Other mid-tier leaders are more optimistic but none believe the legislation can be pushed through before 2011.
The Turkish Commercial Code will be revolutionary for Turkey’s audit profession as it will require a larger number of companies to prepare financial statements in accordance with IFRS and have these audited by external firms.
Although a threshold for the new rules has not been set, industry sources have suggested the code could apply to companies with assets exceeding TRY6m ($3.9m), a turnover of TRY12m or a payroll of 50 employees or more.
Firm leaders estimate the new statutory audit rules could apply to anywhere between 20,000 to 50,000 companies.