ISAE 3402 vs SOC 2: which audit do you need?

Both ISAE 3402 and SOC 2 are audit standards that provide assurance about the controls at service organizations. But they serve different purposes and audiences. Choosing the right standard depends on your clients, your market and the type of assurance they require.

ISAE 3402 is an international standard issued by the International Auditing and Assurance Standards Board (IAASB). It is primarily used in Europe and is aimed at service organizations whose controls are relevant to the financial reporting of their clients. Think of payroll providers, hosting companies that process financial data, or pension administrators. The report is intended for the auditors of your clients, who use it to assess whether they can rely on your controls.

SOC 2 is an American standard from the AICPA. It focuses on the five Trust Service Criteria: Security, Availability, Processing Integrity, Confidentiality and Privacy. SOC 2 is broader than ISAE 3402 in the sense that it is not limited to financial reporting. It covers the entire operational security posture of your organization. SOC 2 reports are primarily requested by US-based clients or international organizations following American standards.

When do you choose ISAE 3402? When your clients are mainly European, when their auditors need a report for financial statement audits, or when you process data that directly impacts financial reporting. Banks, insurers and financial institutions typically request ISAE 3402 Type II reports.

When do you choose SOC 2? When you serve an international or US market, when clients want broad assurance about your security posture, or when the focus extends beyond financial reporting to general data security and privacy. SaaS companies, cloud providers and technology firms typically need SOC 2.

Can you have both? Yes. Many organizations that serve both European and American clients opt for a combined audit. This is more efficient than running two separate audits and provides comprehensive coverage for all stakeholders.

Not sure which standard fits your situation? We can help assess your client requirements and recommend the most appropriate audit approach. Get in touch for a free consultation.