Data breaches now cost businesses an average of $4.88 million per incident—the highest total ever recorded and a 10% increase from 2023, according to IBM's 2024 Cost of a Data Breach Report. One in three breaches now involve shadow data, making information increasingly difficult to track and safeguard. Behind these staggering numbers lies a fundamental truth: proper controls and security protocols aren't optional luxuries—they're essential safeguards for organizational survival.
The compliance landscape has evolved considerably over the years, with standards progressing from SAS 70 to the current SSAE 18 framework. Understanding what these standards mean for business operations, how they differ from one another, and the importance of implementing appropriate compliance measures directly impacts long-term success and client trust.
Understanding Compliance Standards in Business Technology
Organizations that outsource critical functions face heightened risks from third-party vulnerabilities. When client data moves beyond immediate control, ensuring proper security measures becomes both more challenging and more crucial.
JD Young Technologies has helped Oklahoma businesses navigate compliance requirements for over 75 years. This experience shows that maintaining proper controls isn't just about checking regulatory boxes—it directly impacts operational resilience and customer trust.
The Evolution of Compliance Standards
Compliance standards have transformed significantly over the years, responding to the changing landscape of business operations and technology integration.
SAS 70: Where It All Began
Statement on Auditing Standards No. 70 (SAS 70) was introduced in 1992 when outsourcing was still in its infancy. Most organizations maintained internal control of their data processing and IT functions. Despite limited outsourcing at that time, concerns were already emerging about third-party standards and practices.
SAS 70 helped external auditors organize assessments of their clients' financial statements when third-party agencies were used for financial transaction reporting and processing. This standard clarified auditing requirements and enabled external auditors to review and test controls within these third-party organizations more efficiently and thoroughly.
As outsourcing became more common and businesses increasingly relied on third parties for essential processes like manufacturing, payroll, and order fulfillment—alongside the rise of SaaS and cloud services—SAS 70 was constantly adapted for purposes beyond its original intent.
The need for a more robust framework and better governance standards became apparent. This led to the development of NIST 800 series and ISO 27000 to address growing security and assurance needs within service organizations.
SSAE 16: The Next Generation
In June 2011, Statement on Standards for Attestation Engagements No. 16 (SSAE 16) replaced SAS 70 as the authoritative standard for service organization audits. Developed by the Auditing Standards Board (ASB) of the American Institute of Certified Public Accountants (AICPA), SSAE 16 redefined reporting requirements for service organizations regarding their compliance controls.
Several key factors drove this transition:
- Steep increase in the number of service providers
- Growing complexity of outsourced services
- Widespread adoption of cloud computing
- Demand for clearer understanding of service provider controls
- Need for better compliance demonstration and risk mitigation assurance
A fundamental difference between SSAE 16 and SAS 70 was the requirement for service company management to provide documented assertions to auditors that their system descriptions accurately represented their organizational systems. These descriptions needed to outline services provided, operational activities affecting customers, control objectives, and evaluation timeframes.
SSAE 18: The Current Standard
In 2017, the AICPA replaced SSAE 16 with SSAE 18 to address concerns around other AICPA standards and provide greater clarity. This latest evolution determines requirements and provides application direction to auditing personnel for undertaking and reporting on inspection, review, and procedural engagements.
It's important to note that SSAE 18 is not a certification path—organizations cannot become "SSAE 18 certified." Rather, it's the standard utilized by auditors to conduct various attestation reports.
Understanding SOC Reports
When the American Institute of Certified Public Accountants introduced their new reporting framework for practitioners, they created Service Organization Controls (SOC) reports. This framework enables practitioners to deliver alternative reporting types based on stakeholder and organizational requirements.
SOC 1: Financial Reporting Focus
A SOC 1 report is essentially similar to the former SAS 70 report with minor differences. It provides controls internally over financial reporting and is restricted to User Entities and Auditor Entities.
SOC 1 reports come in two types:
Type 1 outlines management's system description, specific design, and ability to adhere to control measures at a specific point in time.
Type 2 covers management's system description, specific design, and ability to adhere to control measures over a defined period.
SOC 2: Enhanced Security Framework
SOC 2 reports are considered superior for service providers compared to SOC 1. They report on relevant controls aligned with trust principles and criteria. The framework is based on various criteria categories and trust principles:
Criteria Categories:
- Communications
- Monitoring
- Policies and Procedures
Trust Principles:
- Confidentiality
- Availability
- Security
- Privacy
- Processing Integrity
For an organization to become SOC 2 certified, they must undergo rigorous auditing by an independent body. This certification is essential for companies handling PHI or data governed by laws like HIPAA, proving they meet specific compliance requirements.
SOC 3: General Use Certification
SOC 3 reports provide certification-level assurance for data centers and are intended for general use. They offer assurance to users regarding high availability, facility security, and data processing integrity.
While SOC 2 reports include service auditor testing and results, SOC 3 reports only provide system descriptions and auditor opinions.
Key Differences Between Standards
Understanding the distinctions between these standards helps organizations determine which compliance framework best suits their needs.
SSAE 16 vs. SAS 70
The transition from SAS 70 to SSAE 16 introduced several important changes:
SSAE 16 requires written management assertions about control design and operational effectiveness, whereas SAS 70 simply verified adherence to existing processes without setting standards.
SAS 70 was never designed for organizations offering cloud hosting, colocation, or managed dedicated servers. It was intended to provide auditors with information about data center processes as they related to financial reporting only.
After an SSAE 16 audit, a Service Organization Control (SOC) 1 report is produced, offering a more comprehensive evaluation of controls.
SSAE 18 vs. SSAE 16
While many mistakenly refer to SSAE 16 as SOC 1 reports, SSAE 18 encompasses even more reports under the same heading. Key differences include:
- SSAE 16 relates specifically to SOC 1 reports dealing with service organizations' controls affecting client financial reporting
- SSAE 18 deals with multiple attestation reports, not solely SOC 1
SSAE 18 introduces important changes regarding how service organizations manage their subservice entities:
- Organizations must detail any subservice organizations used in service provision
- They must outline subservice organizational controls they depend on (Complementary Subservice Organizational Controls)
- Service organizations must provide documented risk assessments outlining internal risks
- Organizations must implement controls that monitor the effectiveness of subservice organization controls
Why Compliance Matters for Your Business
Organizations handling sensitive data face increasing scrutiny from clients, partners, and regulators alike. Demonstrating proper controls and security measures isn't just good practice—it's essential for business continuity and client trust. Whether you're processing financial data, storing customer information, or providing cloud-based services, the right compliance framework helps:
- Build client confidence in your operations
- Reduce risk of data breaches and security incidents
- Meet regulatory requirements in various industries
- Create standardized processes that improve overall efficiency
- Provide competitive advantage when bidding for contracts
At JD Young Technologies, we understand the complex landscape of compliance and security. Our document management solutions, including our partnership with Square 9 Softworks, help organizations streamline processes while maintaining robust security controls that support compliance requirements.
Ensuring Your Business Stays Compliant
Navigating compliance standards doesn't have to be overwhelming. The business technology experts at JD Young can help your organization implement solutions that align with current standards while improving operational efficiency.
Our document management specialists work with you to understand your specific needs and compliance requirements, creating customized solutions that protect your sensitive information while streamlining business processes.
For over 75 years, JD Young Technologies has helped Oklahoma businesses thrive by staying ahead of industry changes and technological advances. Our forward-thinking approach ensures you're not just meeting today's standards but prepared for tomorrow's challenges.
Ready to take the next step in securing your business information while improving operational efficiency? Contact the document management specialists at JD Young Technologies today to learn how our solutions can help your organization maintain compliance while driving growth.