Is SSAE 18 the Same as a SOC 2 Report?

Organizations increasingly rely on third parties for services like cloud hosting and payment processing. This reliance makes it crucial to ensure the security and reliability of external systems and the data they handle. Demonstrating robust internal controls is paramount for service organizations to build and maintain trust with clients and partners. This need for assurance has led to standardized reporting mechanisms that provide transparency into a service provider’s control environment. These reports help user entities assess outsourcing risks and make informed business decisions.

Understanding SSAE 18

The American Institute of Certified Public Accountants (AICPA) issues the Statement on Standards for Attestation Engagements No. 18, known as SSAE 18. This professional standard provides a framework for auditors performing attestation engagements. An attestation engagement involves an independent auditor reporting on subject matter or an assertion about subject matter, which is the responsibility of another party. This can include evaluating an entity’s compliance, assessing internal controls over financial reporting, or reporting on controls at a service organization.

SSAE 18 ensures consistency and reliability in how assertions are evaluated and reported by independent auditors. Its objective is to provide principles for engagements where a practitioner expresses a conclusion about the reliability of written assertions. This standard establishes requirements for planning, performing, and reporting on these engagements, covering practitioner qualifications, evidence gathering, and reporting formats. It governs various types of audit reports, including those focused on service organization controls, ensuring uniform professional standards and credible assurance.

Understanding SOC 2 Reports

A System and Organization Controls (SOC) 2 report provides detailed information and assurance about a service organization’s controls. It addresses controls relevant to the security, availability, processing integrity, confidentiality, and/or privacy of the data it processes for its users. These areas are defined by the AICPA’s Trust Services Criteria (TSC):
Security: Protects information against unauthorized access, disclosure, or damage.
Availability: Ensures systems are accessible for operation and use.
Processing Integrity: Addresses whether system processing is complete, accurate, timely, and authorized.
Confidentiality: Pertains to the protection of information designated as confidential.
Privacy: Covers the collection, use, retention, and disclosure of personal information.

A SOC 2 report can cover one or more of these criteria, depending on the services provided and user entity needs, allowing for a tailored risk assessment. These reports are designed for users like clients, business partners, and regulatory bodies who need to understand internal controls over information systems. This assurance helps user organizations manage vendor risk, maintain regulatory compliance, and build trust in service providers’ ability to protect sensitive data and maintain system integrity.

Distinguishing SSAE 18 from SOC 2

SSAE 18 and a SOC 2 report are not interchangeable. SSAE 18 is the overarching professional standard that dictates how an independent auditor conducts an attestation engagement. It provides authoritative guidance for auditors on planning, evidence gathering, and reporting.

In contrast, a SOC 2 report is a specific type of report prepared following SSAE 18 guidelines. It is one of several attestation reports an auditor can issue under the SSAE 18 framework. Every SOC 2 report is performed under SSAE 18’s guidance, ensuring a consistent and rigorous auditing process. While a SOC 2 report provides specific assurance about controls related to the Trust Services Criteria, the methodology is governed by SSAE 18.

SSAE 18 also encompasses other attestation engagements beyond SOC 2, such as SOC 1 reports, which focus on controls relevant to user entities’ internal control over financial reporting. Custom attestation reports on specific compliance matters can also be issued under this standard. Therefore, a SOC 2 report results from an engagement performed under SSAE 18, but SSAE 18 is a broader standard for a wide array of attestation services.

What to Expect in a SOC 2 Report

A SOC 2 report is structured to provide comprehensive insights into a service organization’s control environment, offering transparency to user entities. Typically, it begins with Management’s Assertion, where the service organization formally states its claims regarding the effectiveness and suitability of its controls relevant to the Trust Services Criteria. This assertion outlines what management believes about their system and controls.

The Independent Service Auditor’s Report then presents the auditor’s opinion on the fairness of management’s assertion and the operating effectiveness of controls over a specific period. This opinion letter provides the independent auditor’s professional conclusion, offering credibility. The report also provides a detailed Description of the Service Organization’s System, outlining services, system components, and controls established to meet the chosen Trust Services Criteria. This narrative helps users understand the audit context.

This section identifies the Applicable Trust Services Criteria within the engagement’s scope, stating which of the five criteria (Security, Availability, Processing Integrity, Confidentiality, Privacy) were evaluated. Finally, the report details the Control Activities and Tests of Controls. This section describes the specific controls implemented to address selected criteria and outlines audit procedures performed to test their design and operational effectiveness, along with findings, including any identified exceptions or control weaknesses.

Leveraging SOC 2 Reports for Assurance

User entities and business partners leverage SOC 2 reports to gain assurance about the security and reliability of their service providers’ systems. These reports are instrumental in vendor risk management, helping user organizations assess whether a service provider’s controls meet their security, compliance, and operational requirements. Two types of SOC 2 reports offer different levels of assurance based on user entity needs.

A Type 1 SOC 2 report focuses on the description of controls and their suitability of design at a specific point in time, providing a snapshot of the control environment. In contrast, a Type 2 SOC 2 report evaluates the description of controls, their suitability of design, and operational effectiveness over a period, typically three to twelve months. This report provides stronger assurance by testing controls over an extended period, demonstrating consistent operation.

Understanding the auditor’s opinion is important for assessing risk and making informed decisions. An unqualified opinion indicates controls were designed effectively and operated as intended, providing high assurance. A qualified opinion suggests controls were generally effective, with certain exceptions. An adverse opinion signifies controls were not effective, indicating significant deficiencies. A disclaimer of opinion means the auditor could not form an opinion due to severe scope limitations. By examining the report type, auditor’s opinion, and detailed findings, user entities can manage associated risks and determine reliance on a service provider.