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3.6 Audit at the CBRT and Audit Reports
Audits Conducted by the Internal Organs of the CBRT
In accordance with Article No. 15 of the CBRT Law, the General Assembly examines and resolves whether to approve the Annual Report submitted 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 Article No. 24 of the CBRT Law, 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. With the authorization entrusted by the CBRT Law, the Auditing Committee submits its written opinions to the Board and also presents a copy thereof to the President.
According to Article No. 64 of the Main Regulation on Organization and Duties of the CBRT, the authority and responsibility for auditing the Bank’s transactions are entrusted with the Audit Department.
Article No. 64 of the Main Regulation on the Organization and Duties of the CBRT gives the authority and responsibility for auditing the Bank’s transactions to the Audit Department.
Within the scope of the authorities and duties granted by the CBRT Law No. 1211 as well as other legislation, 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.
According to Article No. 6 of the “Audit Regulation of CBRT”, audits carried out can be classified into four activities: internal audit, investigation, examination and consultancy, and external audit activities.
According to Article No. 37 of the “Audit Regulation of the CBRT”, one or several of the operational, financial, compliance and information systems audits are conducted simultaneously in all departments, branches and representative offices of the CBRT.
Within the scope of the external audit function, banks and financing institutions operating in Turkey are audited to ensure that the liabilities subject to reserve requirements are calculated, the maximum and the weighted average interest rates/profit-loss participation rates are reported, variable interest products and deposits are managed in compliance with regulations related to maturities and types of instruments; that the variable interest rate housing loan contracts are lawful; the incompliance with the credit card regulations and the controls regarding reporting of credit cards, the closure of export rediscount credit accounts, credit cards 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 are in conformity with Trial Balance; and International Bank Account Number (IBAN) applications comply with the relevant regulations, instructions and circulars. In 2019, the Audit Department conducted external audits in 21 banks and 6 financing institutions.
The Audit Department has a total of 65 staff and is composed of 12 chief inspectors, 5 chief auditors, 27 inspectors, 1 auditor, 1 information technologies auditor, 3 authorized assistant auditors, 2 assistant information technologies auditors, 7 assistant auditors and 7 assistant information technologies auditor.
The “Follow-up of Audit Results” activities, which are designed 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, were held in June and December 2019.
Audits Conducted by External Parties
In accordance with Article No. 42 of the CBRT Law, the Governor submits to the Council of Ministers a report on the operations of the Bank and the current and future monetary policy, in April and October each year. 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 Article 42 of the CBRT Law, the CBRT may assign external auditors to audit the balance sheet and the income statements of the Bank. Believing that independent external audit activities are one of the most effective instruments with respect to the transparency and accountability principles adopted by central banks operating in compliance with international standards, the CBRT first started to receive external audit services in 2000. The reports prepared at the end of the audit engagements each year are made public via the CBRT’s website.
In addition to these audits mentioned above, the Ministry of Treasury and Finance, the State Supervisory Council, the Turkish Court of Accounts, certain ministries and other authorized government agencies may conduct audits via their auditors at the CBRT on the issues related to their duties, if necessary.
CENTRAL BANK OF THE REPUBLIC OF TURKEY JOINT STOCK COMPANY
2019
AUDITING COMMITTEE REPORT FOR THE EIGHTY-EIGHTH ACCOUNTING YEAR
The Auditing Committee has audited the activities and resulting statements of the 2019 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. Gold holdings, and cash, foreign exchange banknotes, coins and securities in the service and reserve vaults of the Head Office and Branches, which were subject to audit and stock-taking during the accounting year, are in conformity with the accounting records as well as the inventory records, and these values are kept and administered in accordance with the regulations and instructions.
2. The conformity of books related to the Bank’s accounts with accounting records was examined and it was ascertained that: the records were kept in a timely and orderly manner, properly and per legislation, and that the Bank’s operations were in conformity with the Central Bank Law.
3. The balance sheet dated 31.12.2019 and the Income Statement for the period between 01.01.2019-31.12.2019 are in compliance with the Turkish Commercial Code and the Central Bank Law.
4. The financial statements compiled to present the financial position of the Central Bank of the Republic of Turkey on 31.12.2019 and the results of activities relating to the same accounting 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.
5. The trial for the legal liability lawsuit filed by the Bank continues.
6. The decisions, dissents and abstaining votes of the Board have been deliberated and no action was deemed necessary.
In conclusion, we hereby submit the “Balance Sheet” and the “Income Statement” dated 31.12.2019 for approval of the General Assembly.
Ankara, 28/02/2020
| Mehmet BABACAN Auditing Committee Member |
Mehmet KAYA Auditing Committee Memberi |
Mehmet Murat ÖZDİL Auditing Committee Member |
Auditing Committee Member |
Independent Auditors’ Report
To the Board of the Central Bank of the Republic of Turkey
Ankara
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 balance sheet as at 31 December 2019, the statements of profit or loss, changes in equity and 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 2019, and its financial performance and 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 Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We declare that we are independent of the Bank in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (“IESBA Code”) together with the ethical requirements that are relevant to our audit of the financial statements in Turkey. We have fulfilled our other ethical responsibilities in accordance with 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
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 the 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 General Assembly 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.
Auditors’ Responsibilities for the Audit of 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 auditors’ 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 judgment 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.
Additional paragraph for convenience translation to English:
The accounting principles summarized in (Note I. A. (2)), differ from the accounting principles generally accepted in countries in which the accompanying financial statements are to be distributed and International Financial Reporting Standards (“IFRS”). Accordingly, the accompanying financial statements are not intended to present the financial position and results of operations in accordance with accounting principles generally accepted in such countries of users of the financial statements and IFRS.
KPMG Bağımsız Denetim Ve Serbest Muhasebeci Mali Müşavirlik A.Ş.
A member firm of KPMG International Cooperative
Erdal Tıkmak, SMMM
Partner
Istanbul, 27 February 2020
* The full text of the Report is accessible at the Bank’s web site (www.tcmb.gov.tr), under About the Bank / Organization / Independent Audit Reports
Independent Auditors’ Report
To the Board of the Central Bank of the Republic of Turkey
Ankara
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 2019, the statements of profit or loss and other comprehensive income, changes in equity and 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 2019, and its financial performance and 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 Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We declare that we are independent of the Bank in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (“IESBA Code”). We have fulfilled our other ethical responsibilities in accordance with IESBA Code. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Other Matter
As mentioned in Note 3.a, US Dollar amounts presented in the accompanying financial statements are translated from TL at the official US Dollar bid rates announced by the Bank at 31 December 2019 and 2018 for the statement of financial position; and the average of daily official US Dollar bid rates announced by the Bank for the years ended 31 December 2019 and 2018 for the statement of profit or loss, and they do not form part of these financial statements.
Responsibilities of Management and Those Charged with Governance for the Financial Statements
The Bank 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 the financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the 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 General Assembly 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.
Auditors’ Responsibilities for the Audit of 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 auditors’ 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 judgment 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.
KPMG Bağımsız Denetim ve Serbest Muhasebeci Mali Müşavirlik Anonim Şirketi
A member firm of KPMG International Cooperative
Erdal Tıkmak
Partner
Istanbul, 27 February 2020
* The full text of the Report is accessible at the Bank’s web site (www.tcmb.gov.tr), under About the Bank / Organization / Independent Audit Reports
