Does Term SAS 70 Type 1 or Type 2 Employee Mean Anything?

[Guest Edward McElroy]

I need to determine whether the term SAS 70 Type 1 or Type 2 Employee means anything. Please let me know your thoughts. Thanks Ed

[BeckyMiller]

SAS 70 Type I and Type II relate to a report on internal controls that is done by a CPA firm for a service provider. This may be a TPA, an investment manager, a bank, etc. A Type I report is a report on internal controls that are in operation. A Type II report goes beyond this and actually reports on the effectiveness of such internal controls.

Where a service provider has a Type II report, the plan auditor may be able to rely on the internal controls of the service provider and reduce the procedures that the auditor must perform on the plan's operations covered by such controls.

As such, a service provider may be in a competitive advantage in bidding for business if it has a clean Type II report.

See chapter 6 of the AICPA's Audit Guide on Employee Benefit Plans for more discussion on this matter. The AICPA also has a publication "Implementing SAS 70." The AICPA's web site is www.aicpa.org.

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