Let’s be real, navigating the world of service organization controls can feel pretty damn overwhelming. There are a ton of frameworks out there. Two major standards that often come up in this journey are SOC 2 and SAS 70. While both deal with evaluating controls at service organizations, they cater to different needs and come with their own set of guidelines.

In the past, the SAS 70 report was the go-to for evaluating internal controls over financial reporting. However, as technology and data management evolved, so did the need for more comprehensive standards. SAS 70 was actually replaced by SSAE 16 (Statement on Standards for Attestation Engagements No. 16) in 2010, which provided more detailed guidelines and requirements for service organization control reports before the widespread adoption of SOC 2.

This guide will break down the key differences between SOC 2 and SAS 70, explain why SOC 2 has become the preferred standard, and offer insights on how it impacts both service providers and their clients. If you’re trying to make sense of these standards and decide which is right for your business, read on for a straightforward comparison that cuts through the tech jargon and focuses on what really matters.

What is SOC 2?

SOC 2, or Service Organization Control 2, is a type of report developed by the American Institute of Certified Public Accountants (AICPA). It’s designed to give assurance about the controls at a service organization related to five key areas: security, availability, processing integrity, confidentiality, and privacy. SOC 2 is particularly important for service providers in sectors like cloud computing, managed security services, and IT outsourcing.

Key Components of SOC 2 Reports

• Trust Services Criteria: SOC 2 reports are based on five Trust Services Criteria:
  • Security: Measures to protect systems against unauthorized access.
  • Availability: Ensures systems are accessible as agreed upon.
  • Processing integrity: Guarantees that processing is accurate, timely, and complete.
  • Confidentiality: Protects confidential information from unauthorized access.
  • Privacy: Manages personal data according to privacy laws.
• Types of SOC 2 Reports:
  • Type 1: Evaluates the design of controls at a specific point in time.
  • Type 2: Assesses both the design and the effectiveness of controls over a period, typically between six and twelve months.

These reports cater to different needs. While a SOC Type 1 report provides a snapshot of controls at a single point in time, SOC Type 2 offers a more comprehensive look by assessing how well those controls operate over a defined period. Understanding the distinction between SOC reports Type 1 and 2 is critical for businesses looking to determine the right level of assurance they need.

• Audit Process: To get SOC 2 certified, an independent auditor assesses your organization’s controls. They review how well these controls are designed and how effectively they operate over time.

Why SOC 2 Matters to You

For end-users, SOC 2 reports offer several benefits:

• Enhanced security: Provides assurance that the service provider has effective security measures in place.
• Compliance: Demonstrates that the service provider meets relevant regulatory requirements like HIPAA or GDPR.
• Risk Management: Offers insight into how outsourcing services may impact your business and how these risks are managed.

What Was SAS 70?

Before SOC 2 became the standard, there was SAS 70 (Statement on Auditing Standards No. 70), introduced in 1992. SAS 70 was focused on assessing internal controls related to financial reporting at service organizations. However, it had some limitations that SOC 2 has addressed.

In 2010, SAS 70 was replaced by SSAE 16, which provided more detailed guidelines and led to the development of SOC 1 reports. SOC 1 is designed to address internal controls over financial reporting, similar to SAS 70 but with more stringent requirements. SOC 1 reports are still used today for financial reporting purposes.

Key Points About SAS 70

• Focus: SAS 70 primarily dealt with internal controls over financial reporting. It was used by auditors to assess the impact of third-party services on financial statements, but it didn’t cover non-financial aspects like security or privacy.
• Audit process: A SAS 70 audit involved evaluating and testing the design and effectiveness of controls, but it didn’t set specific standards for data centers or offer a way to compare different service providers.
• Misconceptions: Some people mistakenly thought that passing a SAS 70 audit meant being “SAS 70 certified,” but there was no official certification. Providers often created their own logos to indicate compliance, which wasn’t an official certification.

SOC 2 vs. SAS 70: What’s the Difference?

Here’s how SOC 2 improves upon SAS 70:

Scope and Focus

• SAS 70: Focused mainly on financial controls, assessing how third-party services impacted financial statements.
• SOC 2: Covers a broader range of controls beyond financial aspects, including security, availability, and privacy, making it more relevant for data-focused service providers.

Management Assertion

• SAS 70: Didn’t require a written assertion from management about the controls.
• SOC 2: Requires management to provide a written description of their system and controls, with the auditor verifying its accuracy.

Relevance to End-Users

• SAS 70: Primarily for auditor communication and didn’t address concerns about security and privacy in a way that was useful to end-users.
• SOC 2: Directly addresses end-users’ concerns by providing assurance about the effectiveness of controls, making it more relevant for those relying on the service provider.

Scope of Controls

• SAS 70: Limited to financial controls and didn’t offer a comprehensive framework for evaluating non-financial controls.
• SOC 2: Directly evaluates controls based on the five Trust Services Criteria, ensuring a thorough assessment of security, availability, and other critical aspects.

Audit Guidelines:

• SAS 70: Didn’t require assessing the control environment of significant vendors used by the service provider.
• SOC 2: Requires auditors to understand and assess significant vendors whose services affect the service provider’s system.

Comparing the Audit Processes

SAS 70 Audit Process:

• Planning: The auditor plans the audit, including defining the scope and objectives.
• Control evaluation: Evaluates the design and implementation of controls related to financial reporting.
• Testing controls: Tests the operating effectiveness of these controls over a period.
• Report preparation: Prepares a report detailing findings and issues.

SOC 2 Audit Process:

• Planning: Includes defining scope and objectives, and determining relevant Trust Services Criteria.
• System description: Management provides a detailed description of their system and controls.
• Control evaluation: Evaluates the design and implementation of controls based on the Trust Services Criteria.
• Testing controls: Tests the effectiveness of these controls over a specified period.
• Report preparation: Provides a detailed report including an opinion on control effectiveness and any identified issues.

SOC Type 2 vs. SAS 70: Key Differences

When comparing SOC Type 2 vs. SAS 70, it’s clear that SOC Type 2 offers a more comprehensive evaluation, especially for organizations focused on data security and operational integrity. SOC Type 2 not only looks at the design of controls but also their effectiveness over time, making it more reliable for long-term assurance. SAS 70, on the other hand, was limited to financial controls, and while it served its purpose, it lacked the depth needed to address today’s complex business environments.

Regulatory Compliance and Future Trends

• Compliance:
  • HIPAA: SOC 2 reports help healthcare organizations show that their service providers meet HIPAA’s security requirements for protecting health information.
  • GDPR: For organizations dealing with EU residents’ data, SOC 2 reports can demonstrate compliance with GDPR’s data protection standards.
• Looking Ahead:
  • Cloud Computing: The rise of cloud services has made SOC 2 increasingly important. Businesses need assurance about the controls in place at cloud service providers.
  • Emerging Tech: Technologies like AI, blockchain, and IoT will shape future auditing standards. Auditors will need to adapt to new risks and control requirements associated with these technologies.

Best Practices for Implementing SOC 2

• Prepare early: Start preparing for the audit well in advance. This involves documenting controls, implementing policies, and training your team.
• Choose the right auditor: Select an experienced auditor who understands SOC 2 and the relevant Trust Services Criteria.
• Continuous monitoring: Regularly test and review your controls to ensure they remain effective.
• Engage management: Have management actively involved in the audit process and provide a detailed written assertion.

SOC 2: The Go-To Standard for Today’s World

The move from SAS 70 to SSAE 16, and eventually to SOC 2, marks a deeper understanding of the risks and controls that are crucial for modern businesses. SOC 2 isn’t just about financial controls—it’s about security, availability, confidentiality, processing integrity, and privacy too.

Whether you’re deciding which type of SOC audit fits your service organization or trying to wrap your head around SOC reports Type 1 and 2, one thing’s for sure: SOC 2 isn’t going anywhere. Its wide-ranging focus on controls and criteria has made it the go-to standard for evaluating the security and reliability of service providers.

While SAS 70 served its purpose, the shift to SOC 2 means we’re better prepared to tackle today’s fast-changing business landscape. And as we push ahead, SOC 2 will keep evolving to meet new tech and emerging risks, ensuring that organizations stay secure and compliant no matter what comes next.

Conclusion

SOC 2 has stepped in as the go-to standard, leaving SAS 70 in the past when it comes to assessing service organization controls. With its broader scope, focus on more than just financial aspects, and detailed evaluation criteria, SOC 2 offers a more all-encompassing framework for service providers and their clients alike. Whether you’re a service provider aiming to prove your commitment to security and operational excellence, or a client needing reassurance about the controls at your providers, SOC 2 is the gold standard that truly delivers in today’s environment.

The post SOC 2 vs. SAS 70: A Comprehensive Comparison appeared first on Scytale.

*** This is a Security Bloggers Network syndicated blog from Blog | Scytale authored by Kyle Morris, Senior Compliance Success Manager, Scytale. Read the original post at: https://scytale.ai/resources/soc-2-vs-sas-70-a-comprehensive-comparison/