When Does a U.S. Service Organization Need An ISAE 3402 Report?
The International Auditing and Assurance Standards Board’s (IAASB) International Standard on Assurance Engagements (ISAE) 3402, Assurance Reports on Controls at a Service Organization, became effective in 2011. The standard allows accounting firms to issue attestation reports on user entities’ internal control over financial reporting for service organizations that have international operations..
A U.S. certified public accounting firm cannot issue a standalone ISAE 3402 report. Rather, U.S. certified public accounting firms can issue a combined report on Statement on Standards for Attestation Engagements (SSAE) No. 16, based on standards set by the American Institute of Certified Public Accountants (AICPA), and the ISAE 3402. The AICPA utilized standards from the IAASB for the SSAE No. 16 standard, and so the standards for SSAE No. 16 reports include the standards required for an ISAE 3402 report.
It is not required for a U.S. service organization with international operations or clients to complete an ISAE 3402 report as long as their SSAE No. 16 report includes all required standards. The service organization has the option of disclosing that their report is a combination SSAE No. 16 and ISAE 3402 report, if they meet all the standards.
To learn more about the similarities and differences between SSAE No. 16 and ISAE 3402 reports, refer to this SOC FAQ document
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