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SAS 70 becomes SSAE 16

In recent years it’s become increasingly common for hosting providers to advertise their compliance with the SAS 70 Type II audit. Interest in that audit often comes from hosting customers’ need to meet Sarbanes-Oxley (aka Sarbox) or other legal requirements in their own businesses. But what is SAS 70?

It was not clear to me at first glance that SAS 70 is actually a financial accounting audit, not one that deals primarily with privacy, information technology security, or other areas.

SAS 70 was created by the American Institute of Certified Public Accountants (AICPA) and contains guidelines for assessing organizations’ service delivery processes and controls. The audit is performed by an independent Certified Public Accountant.

Practically speaking, what does passing a SAS 70 audit tell us about an organization? Most importantly that it is financially reliable, and thus hopefully a safe partner for providing critical Internet hosting and data storage services.

On June 15, 2011, the SAS 70 audit will be effectively replaced by the new SSAE 16 attestation standard (Statement on Standards for Attestation Engagements no. 16, Reporting on Controls at a Service Organization). Thus the focus appears to shift from an external auditor investigating an organization, to the organization making claims about itself under the guidance of an auditor.

SSAE 16 was created by the AICPA to make the United States service organization reporting standard compatible with the new international service organization reporting standard, ISAE 3402, which is freely available in PDF format. The SSAE 16 document is available only for a fee.

The AICPA’s FAQ on the SAS 70 to SSAE 16 transition makes an interesting point:

Q. — Will entities now become “SSAE 16 certified”?

A. — No! A popular misconception about SAS 70 is that a service organization becomes “certified” as SAS 70 compliant after undergoing a type 1 or type 2 service auditor’s engagement. There is no such thing as being SAS 70 certified and there will be no such thing as being SSAE 16 certified. An SSAE 16 report (as with a SAS 70 report) is primarily an auditor to auditor communication, the purpose of which is to provide user auditors with information about controls at a service organization that are relevant to the user entities’ financial statements.

This is interesting because many in the industry informally state that they are “SAS 70 Type II certified”. But practically speaking for those of us involved in Internet hosting, is “certification” very different from “passing an audit”? It serves primarily as a requirement checklist item about hosting providers in either case.

Many major hosting providers have completed a SAS 70 Type II audit, including Rackspace (and Rackspace Cloud), Amazon Web Services, SoftLayer (and The Planet, which SoftLayer recently acquired), Verio, Terremark, and ServePath, to mention a few that we have worked with. Presumably these will make an SSAE 16 attestation later this year.

Note that many VPS and cloud hosting providers do not report having been SAS 70 audited. If this is a requirement for your hosting, it's important to look for it early before settling on a provider.

More details about the SAS 70 to SSAE 16 transition are available on the AICPA Service Organization Controls Reporting website.

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