SOC Reports

What is a SOC Report?

System and Organization Controls (SOC) reports enable companies to feel confident that service providers, or potential service providers, are operating in an ethical and compliant manner. SOC reports establish credibility and trustworthiness for a service provider — a competitive advantage that’s worth both the time and monetary investment.

SOC reports utilize independent, third-party auditors to examine various aspects of a company, such as:

  • Security
  • Availability
  • Processing Integrity
  • Confidentiality
  • Privacy
  • Controls related to financial reporting (SOC 1)
  • Controls related to Cybersecurity (SOC for Cybersecurity)

SOC Report Types

The objective of a SOC 1 Readiness assessment is to conduct a preliminary assessment and provide guidance that will empower the service organization to successfully prepare for, and hopefully achieve, an unqualified opinion on a SOC 1 Type 1 or Type 2 examination (see below). This is accomplished by identifying specific controls and control gaps related to the achievement of control objectives for the services being audited, then by providing specific, actionable guidance for management to make decisions about improving and maintaining the system of controls.

The objective of a SOC 1 Type 1 examination conducted by 360 Advanced is the expression of an opinion about whether internal controls related to user entities’ financial reporting have been effectively designed to meet certain control objectives related to the services provided by a service organization to its clients (user entities). This report demonstrates to your clients and their auditors that you accurately represented the description of your system of controls, and confirms that said controls are suitably designed and placed into operation.

The objective of a SOC 1 Type 2 examination conducted by 360 Advanced encompasses the objectives of a SOC 1 Type 1 examination, and additionally includes an expression of an opinion about whether controls were operating effectively to meet the specified control objectives during a specific period of time. This report incorporates an additional step that 360 Advanced tested the controls and shares the results of those tests. This type of engagement inspires management to place an emphasis on the service organization’s continuous process improvement.

SOC 1 Report

 

A SOC 1 examination is a highly specialized engagement that requires a unique understanding of third-party internal controls, specialized audit skillsets, and extensive experience with many unique service providers and user entities with varying interests and expectations. A SOC 1 report, as defined by the American Institute of Certified Public Accountants (AICPA), is a “Report on Controls at a Service Organization Relevant to User Entities’ Internal Control Over Financial Reporting.”

SOC 2 Readiness Assessment

A SOC 2 Readiness Assessment engagement is similar in objective and process to a SOC 1 Readiness Assessment engagement. (see above) The assessment empowers the service organization to successfully prepare for, and hopefully achieve, an unqualified opinion on a SOC 2 Type 1 or Type 2 examination.

This is accomplished by identifying specific controls and control gaps related to meeting criteria for the system being audited, then by providing specific, actionable guidance for management to make decisions about improving and maintaining the system of controls. The key deliverable from this engagement is a listing of controls and gaps that detail the elements required to obtain a clean opinion.

The objective of a SOC 2 Type 1 examination conducted by 360 Advanced is the expression of an opinion about whether the controls have been effectively designed to meet the requirements defined in the criteria under each category. The engagement is conducted in a manner that establishes the design of the system of controls as of a point in time, and to assist management of the service organization to focus on improving the capability maturity of its core processes (and ultimately to be prepared to “pass” a SOC 2 Type 2 examination). The deliverables from the engagement include an Internal Project Monitoring document and a SOC 2 Type 1 report.

The objective of a SOC 2 Type 2 examination conducted by 360 Advanced encompasses the objectives of a SOC 2 Type 1 examination, and additionally includes an expression of an opinion about whether controls were operating effectively to meet the requirements defined in the criteria under each category. The engagement is conducted in a manner that promotes management to focus on continuous process improvement, and adaptation to changing circumstances in regards to the industry and user organization expectations.

SOC 2 Report

 

A SOC 2 report is an attestation report issued by an independent Certified Public Accounting (CPA) firm, which opines on the design and often also the operating effectiveness of a service organization’s controls and whether the criteria of one or more of the following five (5) categories have been achieved: security, availability, processing integrity, confidentiality and/or privacy.

SOC 3 Report

 

A SOC 3 report, formerly known as a SysTrust or WebTrust, is the result of a highly specialized audit engagement that reports on whether the controls within the system were effective to provide reasonable assurance that the service organization’s service commitments and system requirements were achieved based on the applicable trust services criteria under the five (5) categories which include: security, availability, processing integrity, confidentiality, and/or privacy.

While the report is based on a SOC 2 Type 2, the content of the report is limited which allows it to be a general use report without the same distribution restrictions as a SOC 2. This report is often used in conjunction with marketing and sales efforts.

SOC for Cybersecurity

 

As a result of the growing concern of managing cybersecurity threats, the AICPA developed a cybersecurity risk management reporting framework to address the constant need of detecting and mitigating breaches. It permits flexibility by not constraining management to a particular security management framework. The AICPA cybersecurity risk management reporting framework helps organizations communicate about the effectiveness of their cybersecurity risk management programs. Similar to the SOC 3 report, the SOC for Cybersecurity report is designed for general-use and is a valuable tool to provide to the board of directors, business partners and prospective business partners.

SOC reports come in several forms depending on the needs and circumstances of the service organization. 360 Advanced conducts all types of SOC engagements including Readiness Assessments, Type 1 and Type 2 examinations.

How to Achieve SOC Compliance

The first step in the audit process to achieve SOC compliance is determining which type of SOC report will best benefit your organization. Then, if needed, the official process begins with a SOC Readiness Assessment. This overview is designed to help the service organization prepare for the examination by identifying deficiencies, gaps, and other potential red flags, along with coaching on options to repair them.

From there, you’ll develop descriptions of your system elements and prepare for the audit. Working with an auditing firm that specializes in SOC reporting can go a long way in making the process less painful for everyone.

Read the Blog: 3 Questions to Ask Before Your SOC Assessment

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