What is GDS 3402?
GDS 3402, also known as “Assurance Services: Reporting on Controls Related to Outsourcing”, which refers to auditing standards specifically related to outsourcing. This standard is generally relevant for information technology (IT) service providers and other business process outsourcing organisations.
The main objective of this standard is to assess how reliable outsourcing is for customers and to examine the internal control systems of the companies providing these services. This includes assessing the impact of outsourcing on the client organisation’s financial statements, business processes and overall control environment.
The first version was published in the Official Gazette No. 29239 on 17/1/2015 and started to be implemented. The updated versions of this standard entered into force on 1/1/2018 and 1/1/2021.
GDS 3402 Report Types
GDS 3402 reports are available in two types, Type 1 and Type 2:
Type 1 Report:
- Scope: Assesses the design and appropriateness of the service provider’s controls as of a given date.
- Focus: Assesses the moment when controls are designed and implemented.
- Objective: To determine whether the service provider’s controls are appropriately designed.
Type 2 Report:
- Scope: Assesses the design, suitability and effectiveness of the service provider’s controls over a specified time period (usually 6-12 months).
- Focus: Tests and verifies that controls are operating effectively for a specified period of time.
- Objective: To determine whether the service provider’s controls are operating effectively on an ongoing basis.
GDS 3402 Audit Process
- Audit Process: An independent audit firm or internal audit department initiates an audit process to assess compliance with GDS 3402.
- Determining the Audit Scope: Within the audit process, business processes, systems and controls that must comply with GDS 3402 standards are determined.
- Determination and Implementation of Internal Controls: The Company determines and implements the necessary internal control measures to ensure compliance with GDS 3402 standards.
- Documentation: Internal control measures, procedures and related documents are organised and kept. These documents are kept ready to be shown during the audit process.
- Preparation of the Audit Report: After the audit process is completed, the audit firm prepares an audit report. This report evaluates whether compliance with GDS 3402 standards has been achieved.
- Compliance Certificate and Report: The company provides the compliance certificate and audit report to clients or relevant stakeholders to document the successfully completed audit process and compliance with GDS 3402 standards.
Potential organisations that need to comply with GDS 3402 standards are as follows;
- Information Technology (IT) Service Providers: Companies that offer IT services such as data storage, cloud computing, and software development.
- Companies Outsourcing Business Processes: Companies that outsource business processes such as customer service, financial transactions, and human resources management.
- Outsourcing Service Providers: Companies that provide outsourcing services in general may have to comply with GDS 3402 standards when providing these services.
- Financial Service Providers: Financial institutions that outsource services that affect financial reporting.
GDS 3402 standards stand out as a symbol of trust and control in the modern business world. It is applied in various ways, from the sensitivity of information technology service providers in data storage and cloud computing to the meticulousness of financial service providers in reporting processes. Companies that outsource their business processes and general outsourcing service providers gain a competitive advantage and increase customer confidence by complying with these standards. GDS 3402 is a process designed to provide greater assurance to customers by assessing the reliability and effectiveness of outsourcing. Compliance with these standards helps companies to gain a solid place in the business world while reinforcing their credibility. For more information and detailed guidance on GDS 3402, please contact us at info@cfecert.co.uk.
