Sustainability Audits to Begin

Recent Developments

The Public Oversight, Accounting and Auditing Standards Authority (the “POA“) has circulated the Draft Regulation on Sustainability Audit (the “Draft Regulation“), prepared with the aim of auditing mandatory sustainability reporting and determining the responsibilities and duties of audit firms, for consultation.

You can provide your comments on the Draft Regulation via the form, which you can access here.

What Does the Draft Regulation Offer?

The Draft Regulation stipulates the scope of the sustainability audit, sustainability audit report, audit firms that can conduct sustainability audit, restrictions and sanctions to be imposed on these audit firms.

You can access our legal alert dated January 15, 2024 on mandatory sustainability reporting and the scope of implementation here.

Scope of the Sustainability Audit

A sustainability audit involves collecting the necessary information and documents within the framework of the Turkish Auditing Standards (the “TAS“) and in accordance with the audit criteria, forming an opinion based on these documents and reporting the opinion via the audit firms authorized by the POA.

Sustainability Audit Report

The sustainability audit report prepared as a resul of the audit must include (i) the auditor’s opinion and (ii) other points to be emphasized, if any, in accordance with the TAS. Audit firms and auditors will be individually liable for any damages that may arise from sustainability audit reports that do not comply with the TAS or from information and opinions in such reports being inaccurate, incomplete or misleading.

Sustainability audit reports must be submitted to the management body of the audited company at least 20 days before the ordinary general assembly meeting for the financial period to which the independently audited financial statements belong, and in any case within three months after the end of each activity period.

Audit Firms that Can Conduct Sustainability Audit

Sustainability audits will be conducted by audit firms authorized by the POA.

To be authorized in the field of sustainability, an audit firm must be a registered and active, independent audit firm in the official registry of independent auditors, have at least two cap auditors who meet the requirements set out in the Draft Regulation, be of sufficient quality and size to form the supervisory teams specified in the Draft Regulation, and have established sustainability audit guidelines.

Restrictions

Audit firms will not be able to undertake sustainability audits of the companies whose independent audit cannot be undertaken in accordance with the relevant legislation, sustainability audits that may impair their independence, sustainability audits where the audit staff is insufficient in number, qualification or experience for the nature of the audited company and sustainability audits that contravene the POA’s regulations on contract acceptance procedures.

Conclusion

The Draft Regulation serves as a roadmap for the auditing process in sustainability reporting.