In short, don’t be surprised if you find information in a SAS 70 Type I or Type II audit relating to BCM. It may be in the form of a control objective that was tested or it may simply be “additional information” provided by the service organization that is actually going through the audit.

To learn more about SAS 70 audits, visit the official SAS 70 Resource Guide.

The Committee of Sponsoring Organizations of the Treadway Commission (COSO) framework essentially defines internal control as a process, effected by an entity’s board of directors, management and other personnel. This process is designed to provide reasonable assurance regarding the achievement of objectives in effectiveness and efficiency of operations, reliability of financial reporting, and compliance with applicable laws and regulations.

1. Internal control is a process. It is a means to an end, not an end in itself.
2. Internal control is not merely documented by policy manuals and forms. Rather, it is put in by people at every level of an organization.
3. Internal control can provide only reasonable assurance, not absolute assurance, to an entity’s management and board.
4. Internal control is geared to the achievement of objectives in one or more separate but overlapping categories.

What’s notable about the relationship with COSO and SAS 70 are COSO’s framework for internal control, which consists of the following five (5) broad based themes:

1. Control Environment
2. Control Activities
3. Risk Assessment
4. Information and Communication
5. Monitoring

Many SAS 70 Type I and Type II audit reports will discuss, in narrative form, these above five areas and how they relate to the organization undergoing the SAS 70 audit and what specific controls they have in place in relation to these five areas.

And let’s not forget the Statement on Auditing Standards (SAS pronouncements) that help bring these five internal control themes to light.

In 1988, the American Institute of Certified Public Accountants (AICPA) issued SAS 55, which describes internal control in terms of its three major components: control environment, accounting system, and control procedures. Shortly thereafter, the Committee of Sponsoring Organizations (COSO) released the following: Internal Control: Integrated Framework, in which internal control was characterized as five components: control environment, control activities, risk assessment, information and communication, and monitoring.

Thus, in 1995, the AICPA adopted COSO’s definition and it’s five components of internal control, issuing SAS No. 78 to supplement SAS No. 55.

So, you should be able to now clearly see the relationship with SAS 70 and COSO and the relationship with SAS 70 and other SAS pronouncements, specifically, SAS 55 and SAS 78.

If you want to learn more about SAS 70 audits, visit the official SAS 70 Resource Guide.

Let me distill some of these issues for you in better helping understand the auditing standard.

First and foremost, auditors who conduct SAS 70 audits use standards put forth by the AICPA and other approved governing bodies and “best of breed” corporate governance institutions (i.e. ISACA, IAA, etc.)

Additionally, what you need to know is that their is a commonly used “Roadmap” for SAS 70 compliance that consists of these sequential steps:

1. SAS 70 Readiness Assessment: Activities necessary for understanding your organization’s control environment, the scope of the audit and other essential areas.

2. Remediation: These are activities needed for becoming SAS 70 compliant. Generally, they include strengthening one’s control environment by utilizing any number of measures (additional security controls, policies and procedures, etc.)

3. Document Gathering: After steps 1 and 2 are completed, auditors need to gather documentation for the audit. This is a collaborative process that includes the auditor and the service organization undergoing the audit. This can take some time.

5. Fieldwork: Auditors will then arrive on-site to conduct fieldwork activities necessary for testing your internal controls in accordance with SAS 70 auditing standards.

6. Outcome of testing/drafting of report/discussion of findings: These are all activities that occur subsequent to fieldwork.

As one can see, being SAS 70 compliant requires the initiation of a number of steps for the audit process.

To learn more about SAS 70 audits, visit the official SAS 70 Resource Guide.

So, let’s distill fact from fiction in helping you learn the nuts and bolts about statement on auditing standards number 70.

First, you need to gaining a strong understanding of what SAS 70 is, what internal controls are, what control objective are, amongst other things. But how? There are a couple of ways: the AICPA publishes excellent, technical reference manuals on SAS 70. Though written more for the auditor in mind, they can still help you greatly understand SAS 70 compliance.

Second, visit the official SAS 70 resource guide, where an abundance of use information awaits you.

Some tips on saving money on SAS 70 compliance? Whoever conducts the audit, ask for a free readiness assessment and also ask for a Fixed fee for the audit. If you can get both of these, you are on your way.

So, then. What is SAS 70? Well, its an auditing standard put forth the American Institute of Certified Public Accountants (AICPA) in 1992, which is used to report on controls placed in operation and (if need be), tests of operating effectiveness. English please, right? Okay, in more simpler terms, its an audit that is used to test a number of controls (i.e., “checks and balances” you should have in place) throughout your organization.

To add to this, there are TWO types of SAS 70 audits; a Type I and a Type II. Most organizations having to comply with and go through a SAS 70 audit ultimately prepare for a SAS 70 Type II audit.

Okay, these are the basics, to learn more, visit the official SAS 70 Resource Guide, where you can learn all you need to know about SAS 70 audits to help answer that ever important question-What is SAS 70?