April 12, 2017

Understanding the New SSAE 18 – What You Need to Know

Understanding the New SSAE 18 – What You Need to Know Risk Advisory Services

Fundamental changes are coming again to SOC reports. In 2011, SAS 70 was superseded by the SSAE 16, and as of May 1, 2017, SSAE 18 will become effective and bring along with it a handful of significant updates which strengthen the overall quality of the SOC 1 report.

This blog will detail everything you need to know to help ensure you are prepared for the shift, highlighting important information about the new control and reporting requirements and providing context to help interpret these changes as they relate to your business.


For several years, SOC 1 and SSAE 16 were synonymous. On May 1, 2017, this association ends. As a result, a SOC 1 report will only be referred to as a SOC 1, and the SSAE 18 guidance formalizes this. The most significant changes in SSAE 18 may slightly impact Service Organizations with the addition of new controls and report enhancements, but, it will have the benefit of providing additional assurance to User Organizations.

SSAE 18 builds upon and superscedes the SSAE 16, therefore, if you are a Service Organization future reports should be issued as a SOC 1 Report under the SSAE 18 guidance, while, if you are a User Organization and currently request an SSAE 16/SOC 1 Report from your vendors, after May 1, you should simply request the company’s latest SOC 1 Report.

What is SSAE 18?

The SSAE 18 guidance primarily clarifies existing auditing standards. It is also intended to reduce instances of duplication within similar standards that cover Examinations, Reviews and Agreed Upon Procedure engagements. As of May 1, these engagements – specifically, SSAE nos. 10-17 – will fall under the SSAE 18.

Additionally, the SSAE 18 requires the inclusion of defined Complementary Subservice Organization Controls when applicable (see below for a definition of Complementary Subservice Organization Controls). This is intended to provide clarity with regard to how Service Organizations address their own third-party vendor management obligations (which are considered fourth-party relationships to User Organizations). These fourth-party relationships and control responsibilities were not always clearly defined in prior SOC reports, leaving a potential gap in understanding the complete risk profile of an organization.

When will the SSAE 18 appear?

As stated above, the official effective date by which the SSAE 16 can no longer be issued is May 1, 2017. Experts expect many vendors to begin providing SSAE 18s sometime between the middle to late part of 2017.

What are notable updates to SOC 1 reports?

There are two updates in particular worth mentioning:

  • Requirement of Risk Assessments. The SOC 2 already suggests the inclusion of a Risk Assessment. This guidance will formalize the need across the board to help ensure that an organization’s controls are regularly reviewed, adequately address its risks, and are adjusted as needed.
  • Creation of the Complementary Subservice Organization Controls section. These clarify whether a Service Organization uses a third-party vendor or internal business unit that is critical to the delivery of products or services that fall outside the scope of the audit. In other words, if you utilize a third-party for a particular service, their responsibilities as they relate to the outsourced control activities would need to be defined in the report. This provides a clear delineation of responsibility. These were typically part of a SOC 2 report, now, their inclusion are being formalized as a requirement under both SOC 1 and SOC 2.

How does the AICPA define Complementary Subservice Organization Controls?

The AICPA definition is as follows: “Controls that management of the service organization assumes, in the design of the service organization’s system, will be implemented by the subservice organizations and are necessary to achieve the control objectives stated in management’s description of the service organization’s system.”

Are the implications of all this good or bad?

This latest update, while it does add some additional work and control requirements, will provide service organizations and user organizations greater insight, coverage, and peace-of-mind over their third-party vendor risks and corresponding responsibilities.

Do you have questions about SOC 1 Reports, the changes surrounding SSAE 18, or other risk advisory matters? Please contact us at [email protected] #AskMarumTechnology

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