Lesson: Criteria for a Vendor To Be Considered a Subservice Organization

In this lesson, Nick Palazzolo, CPA, delves into the essential criteria that determine whether a vendor qualifies as a subservice organization within the framework of SOC engagements. He explains that a vendor's role must be integral to the service organization's operational activities to be considered a subservice organization, such as services that impact the service organization's control environment or involve handling sensitive data. Nick uses relatable examples from real-life scenarios involving companies like Optum Financial and Amazon Web Services to illustrate situations where a vendor's services are crucial to the operational and control objectives of the primary service organization. He also discusses factors like the degree of interaction, data access, and the nature of contractual relationships, which can influence this determination, ensuring a comprehensive understanding of how these relationships are defined and the implications they hold in SOC engagements.