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3.6 Audit at the CBRT and Audit Reports
The activities of the CBRT, which operates as a joint stock company, are audited by both internal and external auditors in compliance with the regulations of the CBRT Law No. 1211.
Audits Conducted by the Internal Organs of the CBRT
In accordance with the Article No 15 of the CBRT Law No. 1211, the General Assembly examines and resolves whether to approve the annual report prepared by the Board of the Bank, the report of the Auditing Committee, the CBRT’s balance sheet and the income statements. In this way, the General Assembly completes the monitoring of the activities of the Bank every year by discharging the Board of the Bank and the Auditing Committee.
On the other hand, in accordance with the Article No 24 of the CBRT Law No. 1211, the Auditing Committee audits all the operations and accounts of the CBRT and submits to the General Assembly a report to be drawn up on operations and accounts of the Bank at the end of the year. Under the authority of the CBRT Law No. 1211, the Auditing Committee submits its written opinions to the Board and also presents a copy thereof to the Prime Ministry.
The authority and responsibility for auditing the Bank’s transactions are entrusted with the Audit Department according to the Articles No. 44 and 45 of the Main Regulation on Organization and Duties of the CBRT.
The Audit Department has the duty and authority to conduct audits, examinations and research and also to carry out investigations and consulting services when needed in the departments, branches and representative offices of the CBRT and also at institutions and organizations other than the Bank that fall within the scope of authorities and duties granted by the CBRT Law No. 1211 as well as other legislations.
According to the Article No. 6 of the “Audit Regulation of CBRT”, audits are carried out by 4 types of activities. Those are named as internal audit, investigation, examination and consultancy and external audit activities.
According to the Article No. 37 of the “Audit Regulation of the CBRT”, one or several of the operational, financial, compliance and information systems audits are conducted together in all departments, branches and representative offices of the CBRT.
Within the scope of the external audit function, banks operating in Turkey are audited to ensure that calculation of the liabilities subject to reserve requirements, reporting of the maximum and the weighted average interest rates/profit-loss participation rates, compliance of variable interest products and maturity and types of deposits with regulation, the legal compliance of variable interest rate housing loan contracts, the incompliance with the credit card regulations and the controls regarding reporting of credit cards, the closure of export rediscount credit accounts; the consistency of Trial Balance accounts with credit card and overdraft accounts, announced interest rates, actual maximum interest rates, KT (the weighted average interest rates and amounts for credits in TL) and MT (the weighted average interest rates and amounts for credits in TL) forms, and IBAN applications comply with the relevant regulations. In 2017, the Audit Department conducted external audits in 22 banks and 4 financing institutions.
The Audit Department is composed of 18 chief inspectors, 5 chief auditors, 17 inspectors, 1 auditor, 3 information technologies auditors, 10 authorized assistant auditors, 3 assistant auditors and 2 information technologies assistant auditors. Among those, 1 chief inspector and 1 IT auditor are assigned to assist the Executive Director in the conduct of his duties.
In line with the system of “Follow-up of Audit Results” in place, relevant meetings were held in June and December 2017 to monitor whether the necessary actions are taken regarding the issues in the audit reports, to inform and receive the opinions of the Board, the Auditing Committee and the Executive Committee.
On 23 May 2017, the Institute of Internal Auditing - Turkey bestowed its “Quality Assurance Corporate Awareness” award on the CBRT Audit Department for having successfully passed a quality assessment of its internal auditing procedures as well as its “Continuous Professional Development” award for its contributions to the creation of well-trained workforces and to professional development.
Audits Conducted by External Parties
Article 42 of the CBRT Law No. 1211 constitutes the legal basis of external auditing of the Bank. Accordingly, the Prime Minister may have the operations and accounts of the Bank audited.
In accordance with the Article No. 42 of the CBRT Law No. 1211, the Governor submits a report to the Council of Ministers on the operations of the Bank and the monetary policy followed and to be followed, each year in April and October. The CBRT furnishes information regarding its operations to the Committee on Plan and Budget of the Grand National Assembly of Turkey twice a year.
In accordance with the second paragraph of the same Article, the CBRT may assign external auditors to audit the balance sheet and the income statements of the Bank. An independent external review of the Bank’s accounts has been deemed as vital to the corporate governance of the Bank, and was first initiated in 2000. As part of the transparency and accountability principles adopted, the reports prepared following the audit engagements each year are made public via the CBRT’s website.
In addition to these audits mentioned above, the Undersecretariat of Treasury, the State Supervisory Commission, the Turkish Court of Accounts, certain ministries and other authorized government agencies, may conduct audits through their auditors in the CBRT on the subjects related to their duties, if needed.
CENTRAL BANK OF THE REPUBLIC OF TURKEY JOINT STOCK COMPANY
2017
AUDITING COMMITTEE REPORT FOR THE EIGHTY-SIXTH ACCOUNTING YEAR
The Auditing Committee has audited the activities and resulting statements of the 2017 Accounting Year of the Central Bank of the Republic of Turkey within the framework of the provisions of the related legislation, and concluded that:
1. Cash, gold holdings, foreign exchange banknotes and securities in the service and reserve vaults of the Head Office and Branches, which were subject to audit and stock-taking, are in conformity with the records as well as the legal books, and these values are kept and administered in accordance with the instructions,
2. The decisions, dissents and abstaining votes of the Board have been deliberated and no action was deemed necessary.
3. The books related to the Bank’s accounts were examined and it was ascertained that: the records were kept properly and per legislation, the Bank’s operations were in conformity with the Central Bank Law and the Articles of Association,
4. The balance sheet dated 31.12.2017 and the Income Statement for the period between 01.01.2017-31.12.2017 are in compliance with the Turkish Commercial Code and the Central Bank Law,
5. The financial statements compiled to present the financial position of the Central Bank of the Republic of Turkey by 31.12.2017, and the results of activities relating to the year that ended on the same date are presented in an accurate, correct and clear manner pursuant to the legislation in force in Turkey and the Central Bank Law,
6. The trial for the legal liability lawsuit filed by the Bank continues,
In conclusion, we hereby submit the “Balance Sheet” and the “Income Statement” dated 31.12.2017 for approval of the General Assembly.
Ankara, 5 March 2018
| Mehmet Ziya GÖKALP Auditing Committee Member |
Mehmet BABACAN Auditing Committee Member |
Mehmet KAYA Auditing Committee Member |
Zekeriya KAYA Auditing Committee Member |
To the Board of the Central Bank of the Republic of Turkey
Ankara
Report on the Audit of the Financial Statements
Opinion
We have audited the financial statements of the Central Bank of the Republic of Turkey (“the Bank”), which comprise the statement of financial position as at 31 December 2017, and the statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Bank as at 31 December 2017, and its financial performance and its cash flows for the year then ended in accordance with the Law of the Central Bank of the Republic of Turkey and related legislation (Note I.A.(2)).
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Bank in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Additional Paragraph for English Translation
The effect of the differences between the accounting principles summarized in Section I.A.(2) and the accounting principles generally accepted in countries in which the accompanying financial statements are to be distributed and International Financial Reporting Standards (“IFRS”) have not been quantified and reflected in the accompanying financial statements. The accounting principles used in the preparation of the accompanying financial statements differ materially from IFRS. Accordingly, the accompanying financial statements are not intended to present the Bank’s financial position and results of its operations in accordance with accounting principles generally accepted in such countries of users of the financial statements and IFRS.
Responsibilities of Management and Those Charged with Governance for the Financial Statement
The Bank Management is responsible for the preparation and fair presentation of the financial statements in accordance with the Law of the Central Bank of the Republic of Turkey and related legislation (Note I.A.(2)), and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Bank’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Bank or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Bank’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional skepticism throughout the audit. We also:
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
DRT BAĞIMSIZ DENETİM VE SERBEST MUHASEBECİ MALİ MÜŞAVİRLİK A.Ş.
Member of DELOITTE TOUCHE TOHMATSU LIMITED
Erdem Taş
Partner
Ankara, 5 March 2018
(3) The full report is available at the Bank’s web site (www.tcmb.gov.tr), under About the Bank/ Financial Statements and Reports/Independent Audit Reports.
To the Board of the Central Bank of the Republic of Turkey
Report on the Audit of the Financial Statements
Opinion
We have audited the financial statements of the Central Bank of the Republic of Turkey (the “Bank”), which comprise the statement of financial position as at 31 December 2017, and the statement of profit or loss, statement of other comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Bank as at 31 December 2017, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRSs).
Basis for Opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Bank in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with the IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Responsibilities of Management and Those Charged with Governance for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRSs, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Bank’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Bank or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Bank’s financial reporting process.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgement and maintain professional skepticism throughout the audit. We also:
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
DRT BAĞIMSIZ DENETİM VE SERBEST MUHASEBECİ MALİ MÜŞAVİRLİK A.Ş.
Member of DELOITTE TOUCHE TOHMATSU LIMITED
Ankara, 5 March 2018
