SAS 70 vs ISO 27001: Understanding Key Differences in Audit Standards

Introduction to SAS 70 vs ISO 27001

As businesses continue to face a growing array of cybersecurity threats, safeguarding sensitive information is no longer optional—it’s a necessity. This is where audit standards like SAS 70 & ISO 27001 come into play. While both standards focus on securing data & improving business operations, they differ in their approach, scope & application.

SAS 70, developed by the American Institute of Certified Public Accountants [AICPA], was an auditing standard primarily for service organizations. It evaluated internal controls & data security processes in service companies to ensure that customers’ data was being handled appropriately. However, it was phased out in 2011 & replaced by the System & Organization Controls 1 [SOC 1] framework.

On the other hand, ISO 27001 is a global standard for establishing, maintaining & improving an Information Security Management System [ISMS]. It offers a holistic, risk-based approach to managing information security across all aspects of an organization, not just for service providers. The ISO 27001 Certification is internationally recognized, making it highly relevant for organizations that operate in multiple regions or need to comply with data protection regulations.

The question remains, though: which one is right for your organization? SAS 70 vs ISO 27001—which standard should you choose? To answer that, we’ll first dive into the specifics of each framework before exploring their differences in detail.

What is SAS 70?

Historical Context & Evolution

SAS 70 was introduced in 1992 by the AICPA to provide a framework for auditing the internal controls of service organizations, particularly those that manage or process third-party data. This included IT service providers, cloud computing companies, data centers & other service providers that were responsible for securing clients’ sensitive data. At the time, SAS 70 was groundbreaking in its ability to help service organizations demonstrate to their customers that they had proper internal controls in place for safeguarding data.

However, the framework had its limitations. It was specifically focused on financial reporting controls & internal processes within service organizations, making it less suitable for companies that needed a broader, more comprehensive approach to information security. Additionally, SAS 70 lacked an emphasis on continuous improvement & proactive risk management, which became critical in later years as cyber threats grew more sophisticated.

In 2011, SAS 70 was replaced by SOC 1, which addresses the same concerns but with a more modern framework that includes better alignment with the International Standards for Assurance Engagements [ISAE]. Although SAS 70 is no longer in active use, it remains relevant as a historical reference for those working with legacy systems or frameworks.

Key Features & Purpose

The primary purpose of SAS 70 was to provide transparency & assurance to customers that their service providers were managing internal controls effectively. SAS 70 was particularly useful for companies outsourcing critical services, such as data hosting, cloud storage & IT infrastructure. By obtaining a SAS 70 audit report, service organizations could prove to their customers that their systems were secure & compliant with industry standards.

SAS 70 offered two types of reports:

• Type 1 Report: This report evaluated the design of an organization’s internal controls at a specific point in time.
• Type 2 Report: This more detailed report evaluated the operational effectiveness of those controls over a period (typically six (6) to twelve (12) months).

These reports were helpful to customers by providing assurance that a service provider’s internal controls were in place to prevent fraud, protect data & maintain overall security.

The SAS 70 Audit Process

The SAS 70 audit process involved an independent third-party auditor evaluating the internal controls & processes of a service organization. The auditor would conduct a detailed assessment of security protocols, system operations & financial controls to ensure that the service organization met the required standards for safeguarding customer data. After the evaluation, the auditor would produce a Report (either Type 1 or Type 2) for the organization’s clients to review.

While SAS 70 was useful for its time, its lack of a broader focus on holistic risk management meant that it became less relevant as the complexity of cybersecurity risks evolved.

What is ISO 27001?

Key Features & Purpose

ISO 27001 is part of the broader ISO 27000 family of standards, which was developed by the International Organization for Standardization [ISO]. ISO 27001 specifically outlines the requirements for establishing, implementing, maintaining & improving an Information Security Management System [ISMS].

ISO 27001 is designed to be applicable to any organization, regardless of its size or industry. It offers a risk-based approach to managing security, allowing organizations to assess potential vulnerabilities & address them with the appropriate controls. The standard also promotes continuous improvement through periodic risk assessments & ongoing monitoring of information security practices.

One of the most significant advantages of ISO 27001 is its global recognition. Companies that achieve ISO 27001 Certification demonstrate their commitment to information security & gain the trust of clients, stakeholders & regulators.

ISO 27001 Certification Process

The process for achieving ISO 27001 Certification generally follows these steps:

1. Gap Analysis: The organization performs an internal review to assess its current information security policies & practices against ISO 27001 requirements. This identifies areas that need improvement.
2. Implementation: Based on the gap analysis, the organization implements new controls, policies & processes to meet the requirements of ISO 27001.
3. Internal Audit: Once the new controls & processes are in place, the organization conducts an internal audit to ensure compliance with ISO 27001.
4. Certification Audit: A Third-Party Certification Body assesses the organization’s ISMS & confirms whether it meets ISO 27001 requirements.
5. Surveillance & Continuous Improvement: After receiving certification, the organization must conduct regular audits & reviews to ensure that its Information Security Management System continues to operate effectively.

Benefits of ISO 27001 Implementation

• Improved Risk Management: The risk-based approach in ISO 27001 helps organizations identify & mitigate security risks proactively, reducing the likelihood of data breaches or other security incidents.
• Regulatory Compliance: ISO 27001 helps organizations comply with various data protection regulations, such as GDPR, HIPAA & PCI-DSS, by ensuring that sensitive information is properly protected.
• Business Reputation: Achieving ISO 27001 Certification enhances an organization’s reputation as a responsible data steward, building trust with customers & partners.

SAS 70 vs ISO 27001: A Detailed Comparison

Now that we have a clear understanding of the individual features & objectives of SAS 70 & ISO 27001, let’s explore how they compare on key dimensions such as scope, audit versus certification, risk management & applicability.

Focus & Scope

• SAS 70: The scope of SAS 70 was narrow, primarily focused on evaluating the internal controls of service organizations. It did not provide a comprehensive approach to information security & was mainly concerned with financial reporting controls.
• ISO 27001: In contrast, ISO 27001 has a broad scope, addressing all aspects of an organization’s information security, including data protection, network security, access controls & incident management. It is not limited to service providers but applies to any organization that handles sensitive information.

Audit vs. Certification

• SAS 70: SAS 70 did not offer certification. Instead, it provided an Audit Report (Type 1 or Type 2), which was primarily a snapshot of an organization’s internal controls at a specific point in time (Type 1) or over a defined period (Type 2).
• ISO 27001: ISO 27001, on the other hand, results in formal certification once an organization meets the required standards. This certification is valid for three (3) years & requires annual Surveillance Audits to ensure continued compliance. ISO 27001 Certification is internationally recognized & provides greater assurance to stakeholders.

Risk Management & Controls

• SAS 70: SAS 70 focused on internal controls but did not emphasize a structured risk management approach. Its main goal was to ensure that service providers had the necessary controls in place to handle sensitive data securely.
• ISO 27001: ISO 27001 is built on a risk management framework & requires organizations to conduct comprehensive risk assessments. It emphasizes proactive risk mitigation strategies, with a focus on continuous monitoring & improvement of the ISMS.

Global Applicability

• SAS 70: SAS 70 was primarily used in North America & was industry-specific, particularly relevant to service organizations in industries like finance, IT & telecommunications.
• ISO 27001: ISO 27001 has a global reach & is recognized by organizations worldwide, regardless of industry. It is especially important for organizations that need to comply with international data protection regulations or manage global operations.

Conclusion

In conclusion, while both SAS 70 & ISO 27001 were developed with the goal of improving organizational security & internal controls, their differences are significant. SAS 70, now replaced by SOC 1, was a framework designed for auditing the internal controls of service organizations, particularly focused on financial reporting. It was eventually phased out due to its limited scope & failure to address evolving risks in cybersecurity.

On the other hand, ISO 27001 offers a more comprehensive & global approach to managing information security. Its risk-based framework, international recognition & emphasis on continuous improvement make it an excellent choice for organizations that are serious about safeguarding sensitive data & ensuring compliance with data protection laws.

Ultimately, the choice between SAS 70 vs ISO 27001 depends on the specific needs of your organization. If you are a service provider in the United States looking to demonstrate internal controls, SOC 1 (the successor to SAS 70) may be appropriate. If you need a robust, globally recognized Information Security Management System, ISO 27001 is the way to go.

Key Takeaways

• SAS 70 focused on auditing internal controls for service organizations, but has been replaced by SOC 1.
• ISO 27001 provides a comprehensive framework for managing information security across all types of organizations.
• SAS 70 provided an audit report, whereas ISO 27001 results in a formal certification.
• ISO 27001 is globally recognized & applicable to a wide range of organizations, while SAS 70 was largely North American & industry-specific.

Frequently Asked Questions [FAQ]