SOC 1/SSAE 16

Updates to the COSO Internal Control – Integrated Framework: Breakdown of What it Means for Management

By: Scott Price, Managing Partner of A-LIGN On May 14, 2013, COSO’s board issued an updated version of its “Internal Control – Integrated Framework,” originally published in 1992. The updated Framework incorporates input from various organizations, including the American Institute of Certified Public Accountants, the Institute of Internal Auditors, public accounting firms, and regulators. The revised Framework was provided as an effort for entities to reduce risk, improve compliance, and strengthen internal control.

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Why Payroll Companies are Subject to a SSAE 16 Examination

By: Scott Price, Managing Partner of A-LIGN Classification First, lets get down to the basics.  Payroll companies are classified as “classic” service organizations.  This is due to the fact that payroll companies typically use the same processes, procedures, controls, and systems to process payroll for a variety of companies.

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Ask A-LIGN: When receiving our first SSAE 16 audit, if the auditors find minor mistakes, will we have the opportunity to correct them?

By: Scott Price, Managing Partner of A-LIGN Answer: I hear this question often and, my answer is, “it depends.” I realize this is not the response most of you were hoping for, but I will elaborate. If your audit is a Type 1 SSAE 16, you can elect to have the review date of the report dated for when the service organization has remediated all deficiencies found in the controls. This is one of the main reasons why service organizations like to start with a Type 1 audit. However, in the same breath, the user community sees the limitations of a Type 1 since it only gives assurance at a specific point in time. It is a snapshot.

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Ask A-LIGN: What is the difference between a SOC logo and a SOC seal?

By: Scott Price, Managing Partner of A-LIGN  Answer: Misuse of Service Organization Control (SOC) terminology is a common mishap in the marketplace. When it comes to the use of the SOC logo or seal, many tend to assume the terms mean the same thing (six of one, half a dozen of the other), but in reality they are classified as entirely different entities. Let me explain…

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Ask A-LIGN: Is SSAE 16 a Certification?

Answer: No, SSAE 16 is not a certification. Here’s why: It is incorrect to say that you are SSAE 16 certified, because there is not a certification awarded to you after the engagement. The appropriate wording would be to state, “we have received an unqualified (Type 1 or Type 2) SSAE 16 report as a result of a service auditor performing an audit in accordance with SSAE 16 on the services within the scope of our review.” Once we have issued a final report to our clients, we will then issue the AICPA SOC Logo Guidelines form. The guidelines will explain exactly who can use the logo, how to use it appropriately, and when you must end the use or display of the logo.

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Ask A-LIGN: Why is the SAS 70 audit still asked for? I thought it no longer existed?

Answer: Correct. The SAS 70 audit has been out of existence since June 15, 2011. Many organizations are still being asked for SAS 70, frankly, due to the fact of its nearly 20-year existence and lack of education surrounding the change of the standard. Here’s Why: Since SAS 70 has been around nearly 20 years, its terminology seems stuck in the written agreements of many organizations that have long-term contractual obligations. Transitioning SAS 70 out of audit terminology is going to take an effort from the profession, as well as, publicity of the profession to make sure that these organizations understand SSAE 16, its replacement of SAS 70, and what it brings to the table to align it more with an assertion based report rather than a direct reporting on the controls.

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Ask A-LIGN: Is my Organization Required to Obtain a Type 2 SSAE 16 Examination Annually?

Answer: This is a question we are asked frequently by our clients and prospective clients, and the answer is: It Depends. Here’s why: The SSAE 16 guidance states that the period of review, or time frame that the report covers, should be at least six (6) months in the case of a Type 2 SSAE 16 examination.  While this standard sets a minimum period of review, it can be set to cover any period of time over 6 months – i.e., six months, nine months or one year.

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Integrated Audit of Financial Statements – Relevance of an SSAE 16 Report

  Over the many years, while I have been working with companies as their Independent Service Auditor to help issue their SAS 70s / SSAE 16 reports, I have also been on the other side of the fence wherein I was part of the team responsible for the Audit of the Financial Statements of a company that used the SAS 70 / SSAE 16 report.  I thought it may be useful to individuals reading this blog to get an understanding of how the SSAE 16 report links to an audit of financial statements more specifically under Sarbanes Oxley.  Since SAS 70 as a standard is no longer in existence, I will refer to only SSAE through the rest of this blog.

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Too many SSAE 16 audit detours?

  Does your Auditor offer: fixed fees? NO out-of-pocket expenses? a declining fee structure? over 250 SOC Audits of experience? the draft report within 10 days of completion? responds to your calls and emails on the same day?   If your current CPA firm is not meeting these standards,…

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Why do my clients ask me for a SOC 1/SSAE 16 Report?

Let’s spend a few minutes getting back to basics. Why do your clients ask for a SOC 1/SSAE 16 report to be provided?  Your clients ask because their auditors probably asked for it.  So why do your auditors ask for this report?  The roots for SSAE 16 can be traced back to SAS 70 and even further to SAS 55.  The understanding of internal controls is a fundamental component of performing a financial audit.  I spent time early in my career in the financial audit department which helps me explain to companies why a SOC 1/SSAE 16 report would be applicable or not to the company.  In performing a financial audit, the auditor makes inquires of the company regarding their internal controls. Having an understanding of the internal control over financial reporting is a required component for the auditor to perform.  If a service has been outsourced to another company, the auditor is required to understand the internal controls. This is so that they can understand the internal controls and assess control risk accordingly.

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