Discretionary Provisions as Accounting-Based Capital Buffers: Evidence from Modified Audit Opinions in the Turkish Banking Sector

This study investigates the structural characteristics, annual trends, and qualitative rationales underlying modified audit opinions issued within the independent audit reports of Turkish banks between 2022 and 2025. Utilizing a formal content analysis of 248 bank-year independent audit reports based on a complete census approach, the study evaluates the incidence and persistence of modifications under ISA 705 and IAS 37. The empirical findings reveal a recurring pattern of qualified opinions associated with unmandated discretionary provisioning, with all qualified opinions in the sample issued by Big Four audit firms and recurring across multiple reporting periods. Interpreted through institutional decoupling and signaling perspectives, the findings are consistent with the possibility that these qualifications may reflect interactions between accounting requirements, regulatory conditions, and provisioning practices rather than providing direct evidence of financial distress or managerial intent. The study contributes to the auditing and banking literature by examining the accounting bases and longitudinal patterns underlying modified audit opinions and by discussing their implications within an institutional framework relevant to emerging economies.