SOC 2 or ISAE 3402: which standard suits your organization?

In a digital world in which organizations increasingly rely on external service providers, it is essential to ensure control and reliability. You can do this with an Assurance report such as SOC 2 or ISAE 3402. Both standards provide certainty about the internal control of processes, but their implementation differs considerably. We discuss the differences between SOC 2 and ISAE 3402. We help you determine which standard is most suitable for your organization. 

What is SOC 2?

Let’s first take a closer look at SOC 2. SOC 2 (System and Organization Controls 2) is a standard developed by the American Institute of Certified Public Accountants (AICPA). This report focuses on the internal control of information security and privacy at service organizations. SOC 2 is particularly relevant for:

• IT and cloud service providers
• Software-as-a-Service (SaaS) companies
• Hosting and data centers
• Organizations that process customer data

Trust Service Criteria

A SOC 2 report is based on five Trust Service Criteria:

1. Security – Protection against unauthorized access;
2. Availability – Ensuring that systems are available, and that information is accessible to the user;
3. Processing integrity – Ensuring that data processing is complete, valid, accurate, timely and authorized;
4. Confidentiality – Protection of information that is defined as confidential within the system;
5. Privacy – Management of personal data in accordance with regulations such as the GDPR.

In consultation with your auditor, you select the criteria that best suit your business operations and the associated risks, so that the audit is optimally aligned to your specific situation. Types of SOC reports In addition to the SOC 2 report, there are two other types of reports. Below we explain the three variants:

• SOC 1 – Focuses on the assessment of the design of internal controls at a specific moment;
• SOC 2 – Assesses how effectively these controls function over a longer period, usually between 6 and 12 months;
• SOC 3 – A publicly available report that largely corresponds to SOC 2 but does not contain a detailed description of the controls used.

Please note: although SOC 1 and SOC 2 are sometimes referred to in practice as SOC 2 Type I and Type II, this is formally incorrect.

What is ISAE 3402?

Let us now take a closer look at ISAE 3402. ISAE 3402 (International Standard on Assurance Engagements 3402) is an international standard that is specifically aimed at service organizations that have an impact on the financial reporting of their customers. This report is often used by accountants and financial institutions to demonstrate that a service organization has implemented effective internal controls.

ISAE 3402 is particularly relevant for:

• Payroll and payroll administration companies
• Financial service providers
• Outsourcing partners of financial processes
• Trust offices and investment institutions

As with SOC 2, ISAE 3402 has two types of reports:

• ISAE 3402 Type I: Assessment of the design and the design of controls;
• ISAE 3402 Type II: Assessment of the operation and effectiveness of controls over a longer period.

SOC 2 or ISAE 3402: the key differences

Combining ISAE 3402 and SOC 2?

Some organizations need both an ISAE 3402 and a SOC 2 report. This is especially true for service providers that manage both IT processes and financial processes. In such cases, both reports can be combined into a single audit trail, provided that the control criteria are properly aligned.

SOC 2 versus ISAE 3402: Choose the right standard for your organization

The choice between SOC 2 or ISAE 3402 depends on the nature of your service and the expectations of your customers. While SOC 2 focuses on information security and privacy, ISAE 3402 is crucial for companies that manage financial processes. Both standards provide valuable assurance, but it is important to make the right choice based on your business model and the requirements of your stakeholders.

• Choose SOC 2 if your customers want certainty about information security and privacy measures. This is especially relevant for IT, SaaS and cloud companies;
• Choose ISAE 3402 if your services have a direct impact on the financial reporting of customers, such as in the financial sector;
• Are you considering a combination? Then an integrated audit solution can help you obtain both an ISAE 3402 and SOC 2 report.

Do you want to know more about ISAE 3402 and SOC 2 or start an audit process? Please contact us.

• Your question:
• Your name
• Your email address
• CAPTCHA
• Comments
  This field is for validation purposes and should be left unchanged.

Δ