Understanding SSAE 18 and SOC Reports

SSAE SOC Type 1, 2, & 3

SSAE (Statement on Standards for Attestation Engagements)

SSAE is a set of standards established by the American Institute of Certified Public Accountants (AICPA) for auditing service organizations. The current standard is SSAE 18, which focuses on the accuracy and reliability of financial reporting and internal controls.

SOC (System and Organization Controls)

SOC reports are designed to help service organizations demonstrate the effectiveness of their controls. There are three main types of SOC reports:

SOC 1: Focuses on controls relevant to financial reporting. It's often used by organizations that handle financial transactions for their clients.

SOC 2: Concentrates on controls related to security, availability, processing integrity, confidentiality, and privacy. This is particularly important for technology and cloud service providers.

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SOC 2 Type 1

• Focus: Evaluate the design of controls at a specific point in time.
• Purpose: Assesses whether the controls are suitably designed to meet the relevant trust services criteria (security, availability, processing integrity, confidentiality, and privacy) as of a particular date.
• Outcome: This provides a snapshot of the control environment but does not assess the operational effectiveness of those controls over time.

 SOC 2 Type 2

• Focus: This evaluation evaluates the design and operating effectiveness of controls over a specified period (usually 6-12 months).
• Purpose: Assesses whether the controls are not only suitably designed but also operating effectively to meet the trust services criteria throughout the audit period.
• Outcome: This provides a more comprehensive view of the control environment and demonstrates that the controls are functioning as intended over time.

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In summary, SOC 2 Type 1 reports are about the design of controls at a specific time, while SOC 2 Type 2 reports provide assurance on the effectiveness of those controls over a period.

SOC 3: This is similar to SOC 2 but intended for a general audience. It provides a high-level overview without the detailed information in SOC 2 reports.

These reports help organizations build trust with their clients by ensuring their systems and processes are secure and reliable.