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Service Organization Controls (SOC) reporting provides benefits to both service providers and their clients by providing assurance over established standards. SOC reporting provides transparency and trust in the outsourcing of significant processes and in working with third parties that handle sensitive data.
As companies continue to outsource critical functions, there is a growing need to address the lack of insight and trust in service providers' processes and controls. SOC reports are essential for demonstrating that key risks are addressed, and controls are operating effectively for relevant business processes and information technology (IT). By obtaining an independent audit and opinion, service providers build trust with various stakeholders and help clients meet financial reporting and regulatory requirements.
In summary, independent assurance through SOC reports help to:
SOC 1 and SOC 2 reports are among the most common types of attestation reports due to their broad applicability across various industries and their focus on critical aspects of services provided by third parties.
There are two options for each report, a Type 1 and a Type 2, depending on the time period covered and extent of testing performed:
Reports on whether processes and controls are designed and implemented at a specific point in time
Reports on whether processes and controls are designed and tested for operating effectiveness over a period of time
To provide information to a user entity’s auditor regarding the controls at a service organization that may be relevant to a user entity’s ICFR (financial statement audit and SOX).
The objective is to give clients and their auditors confidence that the service organization has adequate controls in place to handle transactions and other activities that could affect financial reporting.
User entity financial statement auditor, management, and internal audit.
Organizations that handle client financial or non-financial information that impacts the financial statements or internal control over financial reporting.
Examples often include IT infrastructure, payroll processors, plan recordkeepers, investment advisors, custodians, and loan servicers.
To provide users with information about controls at the service organization relevant to security, availability, processing integrity, confidentiality, or privacy in support of a user entity’s evaluation of its own systems of internal control.
A SOC 2 focuses on the required common criteria (security), incorporates one or more of the AICPA trust services principles and can integrate other industry-specific regulations and requirements. It is used primarily for vendor management programs, internal risk management processes and regulatory oversight.
Management of the service organization and specified parties with sufficient knowledge and understanding of the service organization and internal controls (e.g., current and prospective customers, business partners, and regulators).
Companies that obtain SOC 2 certification often handle sensitive customer data and operate in environments where data security and privacy are paramount.
Example organizations include data centers, cloud service providers, Software as a Service (SaaS) providers, health care providers, financial services, and background verification companies.
To provide interested parties with information about controls at the service organization that may affect the user entity’s security, availability, processing integrity, confidentiality, or privacy.
A SOC 3 is a simplified version of the SOC 2 report providing a summary of the information in a SOC 2 report but does not include detailed descriptions of the service organization’s system and controls. It is used primarily for vendor due diligence.
General use for anyone with a need to understand a service organization’s controls.
To provide intended users with useful information about an entity’s cybersecurity risk management program for making informed decisions.
Management, directors, analysts, investors, and others whose decisions might be impacted by the effectiveness of the entity’s cybersecurity risk management program.
To provide specified parties with information about the controls arising from business relationships with suppliers and distribution networks.
Management and specified parties who have sufficient knowledge and understanding of the entity and its supply chain management program.
Our experience has shown that SOC 1 and SOC 2 pre-assessment reviews followed by SOC attestation examinations are the most effective approach as they allow for early identification and remediation of control concerns to eliminate surprises during the reporting phase and to minimize disruptions to your team.
Our professionals have experience with various technologies, across multiple industries, and in testing controls to successfully execute a proven approach to SOC reporting.
Diverse teams bring different perspective, skills and abilities. Collaboration leads to more creative and effective ways to address client needs.
We are a trusted partner that integrates with client teams to foster a collaborative environment.
We understand the AICPA SOC attestation standards and have experience guiding companies through the examination process.
Performed under the AICPA Consulting Standards, a SOC pre-assessment based on the relevant attestation framework, helps an organization prepare for the attestation. A pre-assessment offers recommendations for improvement and identifies control gaps prior to a SOC examination.
A SOC examination and related report, which is provided to customers and auditors, communicates the design and operating effectiveness of a service organization’s controls environment or is customized to meet specific industry or regulatory requirements.
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