What Does SSAE Stand For in Accounting and Auditing?
Understand SSAE: the essential framework for professional assurance engagements in accounting and auditing, crucial for business confidence.
Understand SSAE: the essential framework for professional assurance engagements in accounting and auditing, crucial for business confidence.
Statements on Standards for Attestation Engagements (SSAE) are professional standards used by auditors and accountants for attestation engagements, issued by the American Institute of Certified Public Accountants (AICPA).
An attestation engagement involves a practitioner issuing a report on a subject matter, or an assertion about that subject matter, which is the responsibility of another party. The Auditing Standards Board (ASB) of the AICPA develops and maintains these standards, codified under AT-C sections in the AICPA Professional Standards.
These standards provide a consistent approach for evaluating controls, policies, and procedures of service organizations, ensuring reliability and security in their reports. SSAE 18, for instance, focuses on reporting on the quality of financial reporting and internal controls, including those over information systems.
The most common applications of SSAE are found in Service Organization Control (SOC) reports, primarily governed by SSAE 18. These reports provide an independent assessment of controls at a service organization.
SOC 1 reports focus on a service organization’s controls that may affect a user entity’s internal control over financial reporting (ICFR), including areas like payroll processing or payment systems.
SOC 2 reports, in contrast, address controls related to security, availability, processing integrity, confidentiality, and privacy—collectively known as the Trust Services Criteria (TSC). Security is a mandatory criterion for all SOC 2 reports, while others are included based on the service organization’s needs.
SOC 3 reports are a summarized version of SOC 2 reports, designed for general public use and marketing purposes, offering a high-level overview without detailed technical information.
For both SOC 1 and SOC 2, there are two types of reports: Type 1 and Type 2. A Type 1 report describes the service organization’s controls at a specific point in time and assesses whether they are suitably designed. A Type 2 report evaluates the operating effectiveness of these controls over a specified period, typically six to twelve months.
SSAE reports are utilized by various stakeholders, including user entities (clients of the service organization), their auditors, and regulators.
These reports offer assurance regarding the effectiveness of controls within a service organization. For user entities, they provide insight into the security practices and internal controls of service providers, helping them understand how these controls impact their own financial reporting or operational objectives.
The reports also assist organizations in demonstrating compliance with various regulatory requirements. For example, SOC 1 reports are relevant for Sarbanes-Oxley (SOX) compliance, as they address controls affecting financial reporting.
SOC 2 reports help with compliance for regulations such as HIPAA (Health Information Portability and Accountability Act) and GDPR (General Data Protection Regulation), particularly concerning data security and privacy. An independent assessment builds trust between organizations and their clients, fostering transparency and accountability.