The SSAE 18, or Statement on Standards for Attestation Engagements No. 18, auditing standards require that service organizations confirm and re-confirm third-party vendor certifications and controls on an ongoing basis.

Overseen by the American Institute of Certified Public Accountants (AICPA), SSAE 18 governs how companies report on their internal controls. According to the AICPA, attest engagements are when an accountant in public practice is “engaged in issuing or does issue an examination, a review, or an agreed-upon procedures report on the subject matter, or an assertion about the subject matter (hereafter referred to as the assertion), that is the responsibility of another party.”

These audits usually result in System and Organization Controls (SOC) reports that offer information necessary to accurately evaluate the risks associated with outsourced vendors. Service auditors are required to follow these rules when they conduct SSAE 18 engagements. 

What is the SSAE 18 auditing standard?

SSAE 18 was issued in 2017 to replace the SSAE 16 standards, which replaced the Statement on Auditing Standards No. 70, or SAS 70. SSAE 18 scrutinizes how service organizations evaluate and report on their third-party vendors. The SSAE 18 report is іntеndеd to be used by a service organization’s сuѕtоmеrѕ and its аudіtоrѕ.

As such, SSAE 18 requires service organizations to apply the same risk assessment standards to vendors they work with directly and indirectly. The reason for that is when a service organization contracts with a third-party vendor to provide a service, that third-party vendor likely subcontracts some of its services out to another provider.

Under SSAE 18, these providers are classified as “sub-service organizations.” That means they must undergo the same risk assessments to evaluate their organizational controls before the original service organization can receive a SOC attesting that it has the proper systems to manage risk.

SSAE 18 aims to avoid situations where customers might unwittingly expose their companies to risk because their service organizations partnered with sub-service organizations that didn’t have the necessary risk management policies and procedures.

What is the difference between an SSAE 18 and SOC 1 audit?

The SSAE 18 audit primarily focuses on how service organizations report on their controls, aligning with auditing standards and organization controls. 

Conversely, SOC 1 delves specifically into internal controls associated with financial reporting and the safeguarding of customer data. 

This distinction emphasizes the critical role of internal control over financial statements in the context of SSAE 18 and SOC 1 auditing standards board compliance.

Is SSAE 18 the same as SOC 2?

While SSAE 18 and SOC 2 conform to auditing standards, they diverge in scope. SSAE 18 zeroes in on scrutinizing vendor management and controls over service provider relationships within service organizations. 

On the other hand, SOC 2 compliance revolves around assessing and ensuring robust cybersecurity measures involving data availability, confidentiality, privacy, and processing integrity within internal systems and data centers.

Who needs an SSAE 18 audit?

Organizations engaging extensively with third-party service providers benefit significantly from SSAE 18 audits. These audits comprehensively evaluate risk management practices across vendor networks, from financial institutions handling sensitive customer data to tech companies outsourcing cloud services. 

Particularly in industries such as healthcare, financial reporting, and data security, where outsourced services significantly impact financial statements and regulatory compliance, the need for an SSAE 18 (SOC 1) audit becomes pronounced.

This audit is vital if the outsourced services intersect with significant aspects of an entity’s information system impacting financial reporting processes, including payroll processing, loan servicing, data centers, software as a service (SaaS), and medical claims processors. The SSAE 18 compliance becomes pivotal, mainly if the user organizations are publicly traded, demanding a robust SOC 1 Type II Report.

What are the benefits of SSAE 18 auditing?

The advantages of SSAE compliance are multi-layered and pivotal for service organizations. Beyond instilling customer confidence by showcasing a steadfast commitment to robust controls, these SOC 1 and SOC 2 Type 2 audit reports catalyze identifying and rectifying potential risks.

Through thorough SSAE 18 engagements and subsequent attestation reports, service organizations gain invaluable insights into their internal controls and operational processes, enabling them to fortify their operations and safeguard their reputation.

These audits frequently unearth critical areas for enhancement, reducing risk exposure, irregularities, and potential fraud instances. Though SSAE 18 engagements aren’t legally mandated, opting for these reports sets an industry benchmark for responsible trust services principles and criteria.

Furthermore, these reports double as powerful marketing tools, distinguishing one service organization from its peers by showcasing its commitment to sound internal controls and adherence to stringent attestation standards set by the AICPA.

SSAE 18 compliance elevates a service organization’s credibility and marketability by offering transparency into their robust service organization controls and adherence to stringent standards.

By undergoing SSAE 18 audits, service organizations can provide clients with independent verification of adequate internal controls over critical operations like financial reporting, data processing, and cybersecurity.

How to prepare for SSAE 18

Preparing for SSAE 18 involves meticulous planning and adherence to a comprehensive checklist: 

  • Determine the Service and Organization Controls report necessary for the organization, as each SOC report requires different information.
  • Find a CPA firm that aligns with its needs.
  • Define the sub-service organizations and complementary user entity controls that must be reviewed for the audit. 
  • Set internal control objectives, including defining the internal controls that require review.
  • Have constant communication with third-party vendors.
  • Visit these third-party vendors regularly to ensure everything is operating efficiently.
  • Perform internal control audits for its third-party vendors.

Navigate the world of SSAE 18 audits with ZenGRC

ZenGRC offers a robust platform that streamlines the complexities of SSAE 18 compliance. From managing internal controls to facilitating communication with vendors, it is a vital tool for organizations navigating the rigorous landscape of regulatory audits.

Schedule a demo today to witness how ZenGRC can empower your organization to navigate regulatory audits effortlessly while fortifying your compliance posture.