The response has to be "SET" only (if the ATC is effectively set, of course, which means: code set and on or auto mode)
PNF challenges: "ATC"
PF: checks mode and code, and if auto or on and code inserted, then responds "SET".
I think it is quite simple and sensible. Many add the code inserted, or even the equipment being used, 1 or 2. Same as adding the elevation when responding to the BARO REF challenge. The point is ascertaining that we were assigned a code, we inserted it and turned the Xpnder ON or AUTO.