SAS-70 Audit of Service Organizations

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Statement on accounting standard no.70, is defined as a set of standards which an auditor uses for auditing and evaluating a service organization and internal controls as per contract. These standards were developed during 1988 and then maintained by AICPA i.e. American Institute Of Certified Public Accountants.

Auditor after every audit done by him releases a report which is called “Service Auditors Report.” SAS-70 audit is performed on service organizations which are typically business organizations or entities offering services to their customers. There are various service organizations that do it. Some of them are like contracting enterprises, clearing houses, hosted data centers and insurance claim processors etc.

SAS-70 is a methodical and meticulous auditing standard. It serves the purpose of a respected guidance and is not just a checklist of basic auditing standard. It is considered a very useful and popular auditing tool which significantly illustrates the transparency to businesses with which service organizations deal. Moreover, by following this standard it also reveals the fact that the service organization has been assessed comprehensively to its clients. Therefore after going through all the essentials of this standard ensures that the organization has sufficient controls and safeguards either to host crucial information or to deal with information like the data relevant to the service organization’s customers. It is a thorough audit used for authoritative guidance. It expresses lucidity in the business working with service organization.

It came into effect after the SOX i.e. Sarbox. Sarbanes-Oxley Act became very popular which added the importance of implantation of organizations with SAS-70. It is vital because of the fact that it is considered as an essential resource depicting the efficiency and effectiveness of all the information security safeguards and controls within the organization.

SAS reports have two types which are TYPE 1 and TYPE 2:

• Type 1 reports include thoughts and opinions given by the service auditor. Reports of this type depict the degree by which any service organization’s services are complied with the controls being executed in activities and operations for achieving the objectives and long term goals of the organization.

• Type 2 reports are very much similar to the reports of type 1. The difference is only in relation to a section which is in addition to reports of type 1. In this section opinions given by the service auditor are for a definite period, say 6 months, on the execution and compliance of safety guards and internal controls. Moreover, they are less thorough as compared to type 1.

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