By Debbie Zaller, CPA, CISSP, PCI QSA, Principal, Schellman & Co., LLC
The CSA recently announced that the STAR Program will now allow a one-time, first-year only, Type 1 STAR Attestation report. What is a Type 1 versus Type 2 examination and what are the benefits for starting with a Type 1 examination?
Type 1 versus Type 2
There are two types of System and Organization Control (SOC) 2 reports, Type 1 and Type 2. Both types of reports examine a service organization’s internal controls relating to one or more of the American Institute of CPAs’ (AICPA) Trust Services Principles and Criteria, as well as the Cloud Security Alliance’s (CSA) Cloud Controls Matrix (CCM). Both reports include an examination on the service organization’s description of its system.
A Type 1 report examines the suitability of the design of the service organization’s controls at a point in time, also referred to as the Review Date. A Type 2 report examines not only the suitability of the design of controls that meet the criteria but also the operating effectiveness of controls over a specific period of time, also referred to as the Review Period.
In Type 2 examination, the auditor is required to perform more detailed testing, request more documentation from the organization, and spend more time performing a Type 2 examination than with a Type 1 examination. The additional documentation and testing requirements can put a greater strain on an organization and require more resources to complete the audit.
A service organization that has not been audited against the criteria in the past may find it easier to complete a Type 1 examination during the first audit as it requires less documentation, less preparation, and the organization can respond quicker to gaps noted during the examination.
The cost for a Type 1 examination is less than for a Type 2 examination because the examination testing efforts are less than what is needed for a Type 2. Additionally, fewer organization resources will be utilized for a Type 1, resulting in additional cost savings.
If the service organization, or specific service line or business unit of the organization, was recently implemented, the organization would have to not only ensure that controls were put in place to meet the criteria, but also ensure the controls have been operating for a certain period of time prior to completing a Type 2 examination. In this situation, there would not be enough history or length of time for a service auditor to perform a Type 2 examination. A Type 1 examination would allow for a quicker report rather than waiting for the review period in a Type 2 examination.
Benefits of a Type 1
There are several benefits to starting with a Type 1 report that include:
- Quicker report turn-around time and STAR Registry
- Shorter testing period
- Cost efficiencies
- Easier to apply to new environment or new service line
An organization might be trying to win a certain contract or respond to a client’s request for a STAR Attestation in a short period of time. A Type 1 examination does not require controls to be operating for a period of time prior to the examination. Therefore, the examination and resulting report can be provided sooner to the service organization.
Starting with a Type 1 report has many benefits for a first-year STAR Attestation. The organization will find this useful when moving to a Type 2 examination in the following year.
It is important to note, though, that Type 1 shall be considered just as an intermediate and preparatory step prior to achieving a Type 2 STAR Attestation.