According to Turkish law, co-operatives are regulated as a partnership for the purpose of protecting certain economic interests of their members, particularly the needs of their profession or livelihood. To achieve this purpose, cooperatives are expected to utilise the tools of cooperation, solidarity, and suretyship. Despite a long history, the development in cooperative law is still ongoing in Turkiye. The lack or insufficiency of audit plays an important role in the underdevelopment of co-operatives. Co-operative auditing is the examination of the structure and activities of a co-operative by authorised persons and/or bodies to determine whether there are any errors or omissions in the law, the statute, and the decisions of the general assembly. In comparative law, examples are important in this process. In this study, the United Kingdom has been included in the comparison because it is regarded as the country where co-operative practices originated in the historical development process and because it has a history of successful co-operative practices. Consequently, this study examines co-operatives and the supervision of co-operative in terms of Turkish and UK law. Therefore, the concept of co-operative and their historical development are discussed firstly, and after, the supervision of co-operatives is examined in terms of Turkish and UK law.
Under Turkish law, co-operatives, which are established for the purpose of developing the economy and protecting and securing the interests of their members, are a partnership model based on the principles of mutual aid and solidarity. Accordingly, the regulations on co-operatives are set out in the Co-operatives Law No. 1163. In addition, the Turkish Commercial Code also contains provisions applicable to co-operatives.
Audit in co-operatives is divided into three categories: internal audit, external audit and supreme union audit. These audits aim to effectively examine co-operative operations and eliminate deficiencies. However, in practice, it is observed that co-operatives are not audited effectively, and as a result, public confidence in co-operatives is undermined. To increase this trust, effective auditing must be carried out by experts with professional knowledge and competence.
In the UK, the country of its modern birth, the foundation of co-operatives dates back to the 19th century. As a matter of fact, the decline in the need for labour force in the society due to the Industrial Revolution led people to be in solidarity, and for this purpose, many structures that formed the basis of co-operatives were established in UK. Subsequently, many laws on co-operatives have emerged in UK law, and the provisions of the law have changed and developed in proportion to the requirements of the age. In this context, the audit of co-operatives has also been subject to various rules in UK law, and detailed regulations have been implemented on issues such as the access of auditors to all kinds of information and documents, and their legal and criminal responsibilities.
In Turkish law, concerns regarding the audit of co-operatives can be addressed by appointing persons with expert knowledge to audit co-operatives, amending the legislation in line with the developments and regulations in other jurisdictions, and introducing a new audit model that ensures the protection of shareholders’ rights. In this context, an examination of Article 7 of the “Regulation on Procedures and Principles Regarding the Training of Auditors in the Supreme Organisations of Co-operatives”, which was adopted and entered into force on 22.08.2022, will show that it is intended to provide the necessary legal infrastructure for the operation of the effective audit mechanism, which is felt to be lacking in terms of Turkish law. The Ministry of Trade, which has the authority to ensure the enforcement of the Regulation, will play an important role in eliminating the existing concerns and problems regarding auditing, if the Ministry of Trade pays utmost attention to the proper implementation of the Regulation and the effective auditing of cooperative activities.
In terms of training, it should be noted that the knowledge and experience of co-operative members and auditors, as well as the knowledge and experience of the persons accompanying the judicial process, is extremely important and that efforts should be made to identify and overcome the deficiencies in this regard. However, as in other areas, the success of cooperatives is closely related to the motivation of those who are subject to the legislation to comply with it. This study aims to contribute to the solution of the problems by evaluating this issue, which also opens the door to a sociological evaluation, in the context of commercial law.
The legal regulations on co-operatives in UK law have evolved depending on their needs and problems that have emerged over time. It is known that most of the regulations on co-operatives have been introduced to solve the problems of commercial companies, rather than the principles of co-operatives or practices related to co-operatives.
It is seen that the development of independent (external) audit in UK law has undergone many changes, and amendments have been made to the law on auditing of companies starting from 1789. With these amendments, transparency and accountability are aimed as well as an effective auditing. The amendments stipulate that persons who deliberately or negligently prevent auditors from accessing the information and documents they need will face criminal and legal sanctions.
Like the audit of other companies, the audit of co-operatives is made possible by the auditors’ access to information and documents that will enable them to obtain information about the activities of the co-operative, thus controlling both the operations of the management and administration and the expenditures made.
In order to ensure the effectiveness of the audit, studies have suggested that internal auditing should be carried out by a group selected from among the members and that the number, term of office, qualifications, powers, duties, salaries and legal and criminal responsibilities of the auditors should be determined by the general assembly, while external auditing should be carried out by a high-level co-operative organisation or by auditors who have a contractual relationship with the co-operative.
Co-operative Audit Auditor Turkish Law UK Law
