Guide to ISAE 3402 and SOC 2

Beginner’s Guide to ISAE 3402 and SOC 2 — what they are, how they’re used, who needs them, and how to prepare for them.

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🔐 What is ISAE 3402 and SOC 2? — Basic Definitions

1. ISAE 3402 (International Standard on Assurance Engagements 3402)

• Issued by: International Auditing and Assurance Standards Board (IAASB)
• Purpose: To provide assurance on internal controls over financial reporting of outsourced service providers (e.g., data centers, payroll processors, cloud providers).
• Audience: Usually requested by external auditors of client companies to support their financial statement audits.

Key Points:

• Focus is on controls relevant to financial reporting
• Used internationally
• Produces a Service Organization Control (SOC 1) report (Type I or Type II)

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2. SOC 2 (System and Organization Controls 2)

• Issued by: American Institute of Certified Public Accountants (AICPA)
• Purpose: To evaluate a service organization’s controls related to security, availability, processing integrity, confidentiality, and privacy.
• Audience: Customers and partners of service organizations, especially tech companies, SaaS providers, cloud services, etc.

Key Points:

• Focus is on data protection and security controls
• Based on Trust Services Criteria (TSC)
• Produces SOC 2 Report (Type I or Type II)
• Popular in the U.S. tech sector

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🧠 The Difference Between ISAE 3402 and SOC 2

Feature	ISAE 3402 (SOC 1)	SOC 2
Focus	Financial reporting controls	IT & security controls
Audience	Auditors, regulators	Customers, partners
Standard	International	U.S.-centric
Framework	ISAE 3402	AICPA Trust Services Criteria
Report Types	Type I and II	Type I and II

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🛠️ Use Cases / Why You Might Need It

Scenario	ISAE 3402 (SOC 1)	SOC 2
You run a payroll or payment processing service used by clients in audits	✅	❌
You’re a SaaS company storing sensitive customer data	❌	✅
Your client’s external auditor asks for audit support	✅	❌
Your customer (especially in the U.S.) wants to see your security practices	❌	✅

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📄 Type I vs Type II Reports

Type	Description
Type I	A point-in-time snapshot of controls: “Do controls exist and are they designed properly?”
Type II	A detailed review over time (e.g., 6–12 months): “Are controls operating effectively over time?”

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🧱 Step-by-Step: How a Company Gets SOC 2 or ISAE 3402 Certification

🔎 Question before we proceed:
Do you want this guide to focus on SOC 2, ISAE 3402, or both? The steps differ slightly depending on your use case.

Assuming both for now:

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Step 1: Determine Applicability

• Are you providing financial services or dealing with financial reporting data for others?
  • ✅ → ISAE 3402 (SOC 1)
• Are you handling customer data, building SaaS platforms, or managing cloud environments?
  • ✅ → SOC 2

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Step 2: Define the Scope

• Choose what systems and processes are to be evaluated.
• For SOC 2:
  • Decide which Trust Service Criteria apply:
    • Security (mandatory)
    • Availability
    • Processing Integrity
    • Confidentiality
    • Privacy
• For ISAE 3402:
  • Focus on controls that relate to clients’ financial reporting

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Step 3: Gap Assessment (Pre-Audit Readiness)

• Internal review (or hire a consultant) to:
  • Identify missing controls
  • Fix weak documentation
  • Set up logging, monitoring, access controls
• SOC 2 will usually include:
  • Incident response plans
  • User access controls
  • Encryption policies
  • Monitoring and alerting

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Step 4: Implement Controls

Examples:

Area	Typical Control
Access Control	Role-based access; MFA
Data Protection	Encryption at rest/in transit
Availability	Backup & DR procedures
Logging	Centralized logging with review
Risk Management	Regular risk assessments
Change Management	Documented deployment & rollback

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Step 5: Documentation & Evidence Collection

• Create and organize evidence:
  • Policy documents
  • System screenshots
  • Training records
  • Audit logs
• Use tools like:
  • Drata, Vanta, Tugboat Logic (for SOC 2 readiness automation)

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Step 6: Engage an Auditor

• Must be a licensed CPA firm for both ISAE 3402 and SOC 2
• Type I: Takes weeks
• Type II: Takes months (e.g., 6–12 months evidence review)

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Step 7: Get the Report

• Once complete:
  • Type I report validates control design
  • Type II validates design + effectiveness
• Share this with clients, partners, auditors

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Step 8: Annual Re-Certification

• SOC 2 and ISAE 3402 require yearly audits
• You must demonstrate ongoing control compliance

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📈 Tools & Frameworks Often Used

Tool/Service	Purpose
Vanta, Drata	Automate SOC 2 prep
AWS Artifact	SOC 2-ready AWS documentation
JIRA, Confluence	Track policies and issues
Slack, Email	Record of communications
SIEM Tools	Logs and monitoring evidence

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🧩 Real Examples

Company	Standard Used	Why
ADP	ISAE 3402	Payroll processing (finance-linked)
Zoom	SOC 2	Data privacy & availability
Shopify	Both	Multiple services with financial and SaaS components

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📘 Summary Table

Topic	ISAE 3402	SOC 2
Industry	Finance, BPO, hosting	SaaS, Cloud, Security
Control Type	Financial Reporting	Information Security
Use Cases	Audit support	Customer trust
Region	Global	U.S. dominant
Report Duration	Point-in-time or over 6–12 months
Audit Firms	CPA Firms	CPA Firms

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✅ Checklist for Readiness

• Decide if you need ISAE 3402 or SOC 2
• Map your systems, processes, and data flows
• Select a Trust Services Criteria set (for SOC 2)
• Conduct a gap assessment
• Implement missing controls
• Collect evidence
• Hire an auditor
• Get certified and share report with clients

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