Why You Need a CSAE 3416 Canadian SOC Report
Service organizations in Canada or organizations with Canadian clients/users need to provide control comfort to their clients and regulators. The CSAE 3416 Service Organization Report is intended for just that purpose. Similar to the results of the U.S. SSAE 16, the CSAE 3416 report can help meet client expectations and contractual commitments while mitigating risks that typically arise from outsourcing services. Completing the report process can often provide a competitive advantage by proactively addressing the importance of the controls in place. Completing the process can lower overall business risks by identifying and addressing potential weaknesses or gaps in the control environment that process financial transactions for customers, as well as for those service businesses that have technology controls that may be relevant to their customers’ security and financial statements.
What are the differences in SSAE 16 and CSAE 3416?
The staff of the Auditing and Assurance Standards Board (AASB) issued a "Basis for Conclusion" about the subject. The full document is available at http://www.aasbcanada.ca/basis-for-conclusions/item40880.pdf), but the AASB’s objectives in developing CSAE 3416 were specifically identified to develop a Canadian standard on assurance engagements equivalent to SSAE 16, with minimal amendments to the wording in SSAE. The reasoning for the limited changes was to:
- avoid inconsistency with other Canadian standards, and
- address circumstances particular to the Canadian environment where amendments are required to serve the public interest and maintain the quality of auditing and reporting in Canada.
Since the SSAE 16 was originally developed to align with ISAE 3402 but also respond to U.S. requirements, the aligning of the new Canadian standard with the U.S. standard will inherently also align it with the international standard.
The Basis for Conclusions document identifies three areas where SSAE 16 amendments were made to finalize the Canadian standard. For example, with respect to cross-references of auditing standards, the document concluded that CSAE 3416 is aligned with the U.S. standard in all material respects.
SSAE 16 and CSAE 3416 also include parallel sections such as those listed below.
- The scope of the attestation engagements under CSAE 3416 continues to be focused on controls likely to be relevant to customers’ internal controls over financial reporting.
- Two types of reports may be issued: a Type 1 report attesting to the fair presentation and design of the service provider’s controls and a Type 2 report attesting to the fair presentation, design, and operating effectiveness of the controls.
- Use of the report is limited to management of the service provider, existing customers, and their auditors. The CSAE 3416 report is not intended to be used by service providers in marketing their services to potential customers.
- Management of the service provider is required to provide a written assertion about the service provider’s controls. In the case of a Type 1 report, management is required to state that the controls are fairly presented and suitably designed; in the case of a Type 2 report, management is required to state that the controls are fairly presented, suitably designed, and operating effectively to achieve the identified control objectives.
- The report discloses the reliance on the work of the service provider’s internal audit in the engagement.
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