WHAT IS AN INDEPENDENT AUDIT?
Independent audit is the examination of the financial records, business transaction and financial statements prepared in accordance with applicable accounting and reporting standards to provide different levels of assurance on the financial statements and notes to the financial statements whether they comply with these applicable auditing standards for a given date and period.
An audit involves performing procedures which comply with the applicable auditing standards, to obtain audit evidence about the amounts and disclosures in the financial statements. The full set of financial statements consist of statements of financial position, statements of income, statements of comprehensive income, statements of changes in equity, statements of cash flows and notes to financial statements.
Independent auditors issue Independent Auditors? Report to express an opinion after their audit of the financial statements, summary of significant accounting policies and other explanatory notes. This opinion does not serve for a decision about whether the enterprise is proper for investment or use of credit. These decisions are in the discretion of the reader of the financial statements.
Audit opinion serves information about whether the accompanying financial statements give a true and fair view of the financial position of the Companies as at a given date, and of its financial performance and its cash flows for the given period in accordance with the applicable financial reporting standards.
The audit work includes several processes for issuing audit opinion regarding the financial statements of a company. It has been done upon providing information whether company?s financial position and financial performance are presented fairly in accordance with the applicable financial reporting framework.
Independent auditor?s opinion raises the degree of financial statements? reliability. However this opinion should not be evaluated as a view about the future level of the business and as the entity?s management is effectively and efficiently manages the activities.
IMPORTANCE AND BENEFITS
Independent audit and transparency are new issues for some companies in Turkey. On the other hand, many companies have early adopted reporting system inline with international financial reporting standards (?IFRS?) and they implemented audit concept to their business environment. These companies now sight the benefits of independent audit to their firm.
?Since 2011 many countries -more than a hundred- are required or allowed for the preparation of financial statements in accordance with IFRS.? Effects of globalization have been perceived in the developed and developing economies as increasing business partnerships and foreign direct investments. Together with the increase in foreign direct investment, investors started to demand a common language for the comparability. Capital markets board and the regulators made a decision about financial reporting standards and applications which are getting more complex as to deal them under a corporate structure and not to be subject to personal comment differences.
Since 2005, European Union countries ceased applying different local generally accepted accounting principles for using a unique financial reporting standard and they required publicly listed companies to prepare their financial statements in line with IFRS. Other non-member countries are affected from the unique accounting practices and financial reporting purposes.
Unique financial reporting and accounting standards deliver comprehensive and comparative information to the reader of the financial statements. But to catch the depth and the stability in the capital markets, transparency and assurance are needed. At the end of 90s, globalization in financial markets, deficient risk management systems, increase in the complexity of financial instruments, deficient regulations on financial markets resulted with a high debt burden.
In today’s business environment there is more inspection and skepticism of a company’s financial statements than ever before. Corporate management, boards and audit committees, internal and external auditors, analysts and other investment professionals all have important roles to play in rebuilding investor trust by executing their respective responsibilities, keeping in mind both legal obligations and the heightened expectations of investors. The needs about increasing the transparency of the financial position, measuring the financial data empirically and using the unique finance language with many other enterprises in today?s globalized capital market, will be satisfied by independent audit.
In Turkey, independent audit of the financial statements pursuant to the relevant audit standard, prepared in accordance with IFRS, generally accepted accounting principles issued by the Turkish Capital Markets Board (?CMB?), and accounting principles issued by relevant market regulators for different industries is mandatory for the companies that are regulated by these oversight authorities. These authorities include;
Banking Regulation and Supervision Agency (BRSA) for banks and all financial institutions except for insurance companies
Turkish Treasury for insurance companies
CMB for listed companies
Energy Market Regulatory Authority (EPDK) for energy companies
With the new Turkish Commercial Code effective from 1 January 2013, independent audit will be mandatory for the companies that will be determined by the Council of Ministers. Financial statements of these companies subject to independent audit will be prepared in accordance with Turkish accounting and reporting standards (?TFRS? which is direct translation of IFRS) issued by the Public Oversight, Accounting and Auditing Standards Authority (Kamu G?zetimi, Muhasebe ve Denetim Kurumu, ?KGK?). These financial statements prepared in accordance with TFRS shall be audited by an independent auditor according to the Turkish Auditing Standards that will be issued by KGK and compliant with International Auditing Standards.