Fee pressure is threatening the benefits of a sudden influx of audit-seeking clients into the Turkish market, the International Accounting Bulletin’s Turkey survey has found.
Following the 2012 reworking of the Turkish commercial code, last year the country’s public oversight board, the Kamu Gözetimi Kurumu (KGK), lowered the threshold determining which businesses require a mandatory audit.
"Three years ago the limit was such that only 2,000 companies were audited by law. Now 6,500 companies are being audited by law," Baker Tilly Turkey managing partner Sinan Gureli explained. "They are not publicly traded; they are just local Turkish companies and they have to be audited by law."
This progressive lowering of the bar for audit is set to continue, according to the industry leaders interviewed by IAB, and has already had a positive impact on firms’ revenues.
Commenting on the 9% growth rate secured by the firm in the previous financial year, Grant Thornton Turkey managing partner Nazim Hikmet said: "The main reason for the increase in revenues is due to the decrease in the regulatory thresholds for audit."
However, the opportunities offered by an expanding audit market remain under threat by widespread fee pressure.
Hikmet described it as the most important issue in the financial services sector for the last few years. While Gureli explained: "The market size is widening, but at the same time unless we have a legitimate pricing policy, which is regulated by government authorities, these numbers will keep dropping."
He cautioned: "This will affect the quality, it will affect the people we employ, and it will affect the credibility of the service."
Read the IAB Turkey survey in full here.