Independent audit arrives quietly. A startup that closed a large round, an e-commerce company whose revenue doubled, a group whose subsidiaries are counted together: one spring the accountant mentions that the company crossed the thresholds two years running and needs an auditor before the general assembly. Missing that moment has a hard consequence under Article 397(2) of the Turkish Commercial Code No. 6102 (TCC): financial statements and the board’s annual report that should have been audited and were not are deemed never to have been prepared, which unsettles the general assembly’s approval, dividend decisions and the board’s discharge. This article sets out who is subject to audit under the Presidential Decision No. 6434 as amended in March 2026, how the two-of-three test and the two-consecutive-years rule work, how thresholds are measured with subsidiaries, which companies are audited regardless of size, how the auditor is elected and replaced under Article 399, what the audit covers and what an adverse opinion does, and which reporting framework an audited company must use. It follows our articles on the shareholder’s information right and special audit and director liability.
Who decides: Article 397(4) and the Presidential Decision
The Code does not itself list the companies subject to audit. Article 397(4) provides that the companies whose audit is governed by Article 398 are determined by the President, and Article 397(1) requires their financial statements, and those of a group, to be audited by an auditor under the Turkish Auditing Standards published by the Public Oversight, Accounting and Auditing Standards Authority (KGK), together with a check that the financial information in the board’s annual report is consistent with the audited statements. The current instrument is the Decision on the Determination of Companies Subject to Independent Audit, put into effect by Presidential Decision No. 6434 of 29 November 2022 (Official Gazette 30 November 2022, No. 32029), in force from 1 January 2023, and amended by Presidential Decisions No. 8313 (Official Gazette 6 April 2024), No. 9774 (Official Gazette 1 May 2025) and, most recently, No. 11066 of 16 March 2026 (Official Gazette 17 March 2026, No. 33199). Article 2 of the Decision defines “company” as the capital companies regulated by the Code, so limited companies are within it as much as joint-stock companies, even though the Code’s audit chapter is written for the joint-stock company; Article 635 applies the joint-stock provisions on auditors to limited companies.
The thresholds after the March 2026 amendment
Article 3(1)(b) of the Decision makes a company subject to audit if it exceeds the threshold values of at least two of three criteria in two consecutive accounting periods. The criteria are total assets, annual net sales revenue and number of employees, and the values depend on the company’s category. For companies in the general category, that is, companies not on the annexed lists (I) or (II) and not deemed publicly held, Article 3(1)(b)(3) as amended by Decision No. 11066 sets the thresholds at total assets of 500 million Turkish lira, annual net sales revenue of 1 billion Turkish lira and 150 employees. Under the effective-date table annexed to the Decision, the new values apply in determining whether a company is subject to audit for accounting periods beginning on or after 1 January 2026. For the companies on list (II), broadly those regulated by the Information and Communication Technologies Authority (excluding call-centre companies), companies taken over by the Savings Deposit Insurance Fund and companies at least half owned by municipalities, Article 3(1)(b)(2) as amended by Decision No. 9774 sets 120 million lira of assets, 150 million lira of revenue and 100 employees. For companies deemed publicly held under the Capital Markets Law No. 6362 whose instruments are not traded on an exchange, Article 3(1)(b)(1) keeps the lowest values: 30 million lira of assets, 40 million lira of revenue and 50 employees. A software company with 160 employees, 600 million lira of assets and 700 million lira of revenue in both 2026 and 2027 therefore meets two criteria (assets and employees) in two consecutive periods and becomes subject to audit from 2028.
How the test is applied: two years in, two years out, groups
Article 5 of the Decision contains the mechanics. Under Article 5(1) a company that exceeds at least two thresholds in two consecutive accounting periods becomes subject to audit from the following accounting period. Under Article 5(2) a company that became subject to audit leaves the regime from the following period if it falls below at least two thresholds in two consecutive periods, or falls at least twenty per cent below at least two thresholds in a single period. Under Article 5(3) total assets and revenue are taken from the financial statements of the last two years prepared under the legislation the company is subject to, and the employee criterion uses the average number of employees over the last two years. Article 5(4) is the provision that catches groups: a company is assessed together with its subsidiaries and participations; for assets and revenue the items in the parent’s and subsidiaries’ statements are added (intra-group transactions eliminated where present) and the average employee numbers are summed, while a participation’s items count in proportion to the company’s shareholding. A holding company with three operating subsidiaries may therefore be subject to audit although none of the four companies would be on its own. Article 5(5) leaves interim limited-review obligations to KGK where no other legislation provides for them, and Article 5(6) authorises KGK to resolve doubts about the Decision’s application.
Audited regardless of size: list (I) and exclusions
Article 3(1)(a) subjects the companies in list (I) to audit without any threshold. The list covers, among others, capital-market institutions regulated by the Capital Markets Board (investment firms, collective investment undertakings, portfolio management companies, and joint-stock companies whose capital-market instruments are traded or have an approved prospectus or issuance document, including companies that have issued debt instruments without a public offering), banks and other institutions regulated by the Banking Regulation and Supervision Agency (financial leasing, factoring, financing, asset management and savings-finance companies), insurance, reinsurance and pension companies, precious-metals intermediaries authorised on Borsa İstanbul, licensed warehouses, certain media service providers, energy-market licence holders whose regulations require an audit, payment and electronic money institutions regulated by the Central Bank, and state economic enterprises and their subsidiaries (added in 2024 and reworded by the 2026 amendment) together with certain natural-gas companies majority owned by them. A payment or electronic money institution is therefore audited from day one, whatever its revenue, whereas a crowdfunding platform is not on list (I) and is assessed against the thresholds unless it falls within one of the listed categories; readers of our CASP licence guide should note that crypto-asset service providers are audited under the Capital Markets Law and the Board’s communiqués in any event. Article 4 excludes certain companies subject to the privatisation law, companies at least half owned directly or indirectly by the state and other public bodies (with exceptions), and savings-finance companies in liquidation under the Fund’s administration.
Electing the auditor: Article 399
Under Article 399(1) the auditor is elected by the general assembly (the group auditor by the parent’s general assembly) for each accounting period and in any event before the end of the period it will audit; the board then registers the appointment with the trade registry without delay and announces it in the Trade Registry Gazette and on the company’s website. Under Article 400(2) an auditor who has been elected for a total of seven years within ten years for the same company may not be re-elected until three years have passed. The election can be undone only through the court: under Article 399(4) the commercial court at the company’s seat may, on the application of the board or of shareholders representing ten per cent of the capital (five per cent in public companies), appoint a different auditor where a just cause relating to the elected auditor’s person, in particular a suspicion of partiality, requires it; the action must be brought within three weeks of the announcement of the election, and a minority claimant must have voted against the election, had its dissent recorded and held its shares for at least three months before the meeting (Article 399(5)). Where no auditor has been elected by the fourth month of the accounting period, or the elected auditor declines, terminates or cannot act, Article 399(6) lets the board, any board member or any shareholder ask the court to appoint one, with a final decision. The auditor itself may terminate the engagement only for just cause or where a removal action has been brought against it (Article 399(8)); differences of opinion about the content of the opinion, or the company’s restriction of the audit, are not just cause for the auditor to walk away.
What the audit covers and what the opinion does
Article 398 defines the audit as the audit of the company’s and the group’s financial statements and of the board’s annual report, extending to the inventory, the accounting, the internal audit to the extent the auditing standards require, the early-risk-detection reports under Article 378, and compliance with the Turkish Accounting Standards, the law and the articles’ provisions on financial statements; the auditor also reports separately on whether the board has set up the risk-detection system and committee that Article 378 requires. Article 403 sets out the opinions: unqualified, qualified where the statements contain irregularities that the company’s organs can correct and whose effect is not comprehensive, adverse, and a disclaimer where uncertainties or company-imposed restrictions prevent the audit from being completed, which has the effect of an adverse opinion (Article 403(4)). An adverse opinion has a corporate consequence: under Article 403(5) the board must call the general assembly within four business days of receiving the opinion, and the general assembly elects a new board (the former members may be re-elected unless the articles provide otherwise), which must have compliant financial statements prepared within six months. Together with Article 397(2), under which unaudited statements of an audited company are deemed not to exist, these rules make the audit a governance event rather than a compliance formality, which is why investors’ information rights usually include the audited accounts.
Which framework: TFRS or BOBİ FRS
Being subject to audit changes the accounting framework as well. Under KGK’s Communiqué on the Financial Reporting Standard for Large and Medium-Sized Enterprises (BOBİ FRS), published in the Official Gazette of 29 July 2017 (No. 30138, repeated issue) and applicable from accounting periods beginning on or after 1 January 2018, companies subject to independent audit that do not apply the Turkish Financial Reporting Standards (TFRS) prepare their financial statements under BOBİ FRS; TFRS, which mirror IFRS, remain mandatory for public-interest entities such as listed companies, banks and insurers under KGK’s separate decision on the scope of TFRS. In practice a newly audited startup must therefore restate its tax-basis Uniform Chart of Accounts figures under BOBİ FRS, usually with comparatives for the prior year, and Article 88 of the Code requires the statements to comply with the Turkish Accounting Standards published by KGK. Becoming subject to audit is also an independent ground for the e-Ledger obligation under the Revenue Administration’s General Communiqué on Electronic Ledgers (Serial No. 1), although since the 2024 amendment every company keeping books on the balance-sheet basis has been in e-Ledger from 1 January 2025 in any event.
We crossed two thresholds in 2026 only. Are we audited in 2027?
No. Article 5(1) requires two consecutive accounting periods above at least two thresholds; the obligation begins in the period following the second one. If 2027 is also above, the 2028 statements are the first to be audited, and the auditor must be elected at the 2028 general assembly, in any event before the end of 2028.
Our parent is abroad and we are its only Turkish company. Does the group rule matter?
Article 5(4) adds the Turkish company’s own subsidiaries and participations to its figures; a foreign parent’s figures are not added to a Turkish subsidiary’s. A Turkish holding with several operating companies, on the other hand, aggregates them and may be audited although each is small.
What if we simply do not elect an auditor?
Any shareholder or board member can ask the court to appoint one under Article 399(6) after the fourth month, and unaudited statements are deemed not prepared under Article 397(2), so the general assembly cannot validly approve them or resolve on dividends based on them; the e-Ledger obligation and the tax-law consequences of missing it run separately.
Related: IFRS S1/S2 · book value · special audit · minority rights.
Sources. Turkish Commercial Code No. 6102 (Articles 88, 378, 397–403, 635); Presidential Decision No. 6434 on the Determination of Companies Subject to Independent Audit (consolidated, Articles 2–5 and lists (I)–(II)); Presidential Decision No. 11066 (Official Gazette 17 March 2026, No. 33199); KGK Communiqué on BOBİ FRS (Official Gazette 29 July 2017, No. 30138 repeated); Revenue Administration General Communiqué on Electronic Ledgers (Serial No. 1). Statute links open the official Turkish texts on mevzuat.gov.tr.
This article is provided for general information only and does not constitute legal advice. Please seek legal support for an assessment of any specific matter.
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