Outsourcing has become a common way for organizations to save time, reduce costs, and focus on core business goals. But when companies outsource, they also hand over control of key processes to vendors and third parties. This shift creates new risks that need strong checks. That’s where outsourced risk management and GRC risk management (governance, risk, and compliance) come into play.

For years, SAS 70 reports were the standard tool for reviewing vendor controls. But over time, problems with SAS 70 became clear. These SAS 70 criticisms pushed regulators and businesses to look for better options. Today, companies rely more on SOC reports and updated compliance auditing standards. Let’s explore why SAS 70 faced backlash, what replaced it, and how organizations can manage risk in outsourced processes more effectively.

Understanding SAS 70 and Its Purpose

SAS 70 was introduced as an assurance standard for outsourcing. It was designed to help auditors evaluate internal controls in outsourcing arrangements. Companies that outsourced payroll, data hosting, or IT functions often used SAS 70 reports to assure clients that vendor systems were reliable.

At first, SAS 70 seemed helpful. It gave clients a way to trust vendors without checking everything themselves. But soon, businesses began to notice weak points. That’s when SAS 70 criticisms started to rise.

Common SAS 70 Criticisms

Many businesses questioned if SAS 70 actually protected them. Here are some of the major concerns:

Scope Confusion: SAS 70 was meant for auditing financial reporting controls. But vendors started using it for IT, security, and compliance claims, which it was never designed for.

No Standard Benchmarks: Each report looked different. Some were detailed; others were vague. This made it hard to compare vendors.

Misuse in Marketing: Vendors often promoted “SAS 70 certified,” even though SAS 70 was not a certification. Clients were misled into thinking it was a seal of approval.

Weak on Security: As cyber risks grew, SAS 70 didn’t keep up. It wasn’t strong enough to cover modern IT compliance frameworks or third-party risk management.

These SAS 70 criticisms showed that organizations needed something stronger and clearer.

SAS 70 Alternatives and Replacements

To fix these issues, the AICPA introduced SOC (Service Organization Control) reports. These became the main SAS 70 replacement and offered better clarity.

SOC 1 vs SAS 70: SOC 1 focuses only on financial reporting, similar to SAS 70, but with stricter rules.

SOC 2 vs SAS 70: SOC 2 was built for IT systems, covering security, availability, processing integrity, confidentiality, and privacy.

SOC 3 Reports: These are simplified public reports that can be shared widely without exposing details.

These SOC reports in GRC became the new standard for checking vendors. They solved many of the weaknesses of SAS 70 and gave businesses more confidence in outsourced risk management.

Key parts of vendor compliance and risk checks include:

  • Reviewing SOC reports for vendors
  • Conducting regular audits
  • Tracking regulatory compliance outsourcing requirements
  • Setting clear policies for risk and compliance outsourcing
  • Monitoring internal controls in outsourcing arrangements

When companies build these steps into their enterprise risk management program, they protect themselves and create trust with clients.

Best Practices for Risk and Compliance Outsourcing

If your organization is working with third parties, here are simple ways to make outsourcing safer:

  • Start with Clear Contracts – Include audit rights, compliance obligations, and data protection terms.
  • Request the Right Reports – Ask vendors for SOC 1 or SOC 2, depending on the service. Avoid vendors who only point to outdated SAS 70.
  • Use GRC Frameworks – Map vendor risks to your governance risk compliance program so you can monitor them continuously.
  • Check Vendor Compliance Often – Don’t just collect a report once. Follow up and test controls.
  • Build Assurance Standards for Outsourcing – Define minimum requirements vendors must meet before you work with them.

Moving Beyond SAS 70

The retirement of SAS 70 was necessary. Its flaws made it unreliable for modern business needs. SAS 70 alternatives like SOC 1 and SOC 2 fit better with today’s focus on cybersecurity, data privacy, and third-party risks.

Companies that still rely on outdated methods may face gaps in compliance. By shifting to updated IT compliance frameworks and adopting assurance standards for outsourcing, businesses can manage risk more effectively.

Conclusion

SAS 70 played a role in shaping outsourcing audits, but its time has passed. The SAS 70 criticisms showed that businesses needed stronger tools. Today, SAS 70 alternatives like SOC reports, combined with strong outsourced risk management, give organizations better protection.

When companies use GRC risk management, monitor third-party risk management, and align with GRC frameworks, they strengthen both compliance and trust. Outsourcing doesn’t remove responsibility—it shifts it. That’s why managing vendors with the right risk and compliance outsourcing practices is not optional. It’s a must for every organization that works with third parties.