The American Institute of Certified Public Accountants (AICPA) has responded to the increase in cybersecurity attacks by publishing the Cybersecurity Risk Management Reporting Framework, also known as the System and Organization Controls (SOC) for Cybersecurity. In a SOC for Cybersecurity report, a CPA reports on an organization’s enterprise-wide cybersecurity risk management program.

Why Are SOC Reports Important for a Company’s Cybersecurity?

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. No one likes to hear the word audit, but SOC reports establish credibility and trustworthiness for a service provider — a competitive advantage that’s worth both the time and monetary investment.

What are the different types of SOC Reporting?

SOC reports are governed by the American Institute of Certified Public Accountants (AICPA) and focus on offering assurance that the controls service organizations put in place to protect their clients’ assets (data in most cases) are effective. There are four main types: SOC 1, SOC 2, SOC 3, and SOC for Cybersecurity, with subsets of each.

SOC 1 Report

The biggest difference between a SOC 1 report vs. SOC 2 report is the focus of examination. A SOC 1 report focuses on outsourced services performed by service organizations which are relevant to a company’s (user entity) financial reporting.

SOC 2 Report

A SOC 2 report is also an attestation report issued by an independent Certified Public Accounting (CPA) firm. Its focus addresses operational risks of outsourcing to third-parties outside financial reporting. These reports are based on the Trust Services Criteria which include up to five categories: security, availability, processing integrity, confidentiality, and/or privacy.

SOC 3 Report

A SOC 3 report — formerly known as a SysTrust or WebTrust —covers similar reporting areas as the SOC 2, but isn’t as comprehensive. It excludes certain details of the description and all of the detailed controls/results of testing. Whereas a SOC 2 report restricts users, the benefit of a SOC 3 is that it is a general-use report making it a great tool for marketing purposes.

How Does a SOC Report Work?

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

Security

A comprehensive review of an organization’s information security systems including access controls and authentication, network and infrastructure, data encryption and protection, incident response and disaster recovery, and vendor management and exposure to third-party risks

Availability

This examines an organization’s availability by assessing the effectiveness of controls related to the availability of systems and data. These reports are part of the Trust Services Criteria, which include security, availability, processing integrity, confidentiality, and privacy.

Processing Integrity

Analyzing an organization’s data processing integrity by evaluating controls and procedures related to processing accuracy, completeness, and timeliness.

Confidentiality

Assesses an organization’s controls related to confidentiality as one of the Trust Services Criteria including:

• Data Classification: How the organization categorizes and labels confidential information
• Access Controls: Measures in place to restrict access to confidential data only to authorized individuals
• Encryption: Use of encryption for data at rest and in transit to protect confidentiality
• Data Retention and Disposal: Policies and procedures for securely retaining and destroying confidential information

Privacy

SOC reports conduct a thorough assessment of an organization’s data privacy practices. An auditor evaluates if a business’s practices truly align with their policies and commitments by reviewing how data is collected and what it is used for, their data retention and disposal practices, and examining their controls and safeguards for personal information.

Controls Related to Financial Reporting

SOC 1 reports specifically evaluate an organization’s internal controls relevant to financial reporting. These reports assess the design and operating effectiveness of controls that impact the accuracy and reliability of financial data and reporting processes.

Controls Related to Cybersecurity

The suite of SOC reports analyze an organization’s cybersecurity by examining their approach to identifying and managing cybersecurity risks, assessment of control effectiveness, alignment with Trust Services Criteria, a detailed description review of systems and processes, identification of security gaps and exceptions, an evaluation of communication and monitoring, incident response assessment, and third-party risk management.

Download Our Guide to SOC Reports

What Organization Would Benefit from SOC Reports?

SOC for Cybersecurity is ideal for businesses, non-profits, and virtually any other type of organization that wants to take a proactive approach to risk management.

The type of assessment a business chooses will depend on its services and business model.

For example, financial services companies and professionals such as trust departments, RIAs, benefits professionals, payroll processing firms, and loan servicers. Tech companies like SaaS and cloud service providers as well as healthcare operations such as hospitals, medical claims processors, and software providers for the health vertical.

The common thread with these organizational examples is they handle sensitive customer data, impact financial reporting, or provide critical business services. SOC reports are crucial to establish trust with clients and stakeholders while protecting the organization.

Which SOC Report is Right for my Company?

SOC 1 – These reports are often driven by requirements of the businesses clients or auditors such as  financial services companies, tech organizations, and business services related to financial processes

SOC 2 – just about any organization that collects, stores, and processes sensitive customer data

SOC 3 – useful for organizations that want to publicly share their security practices without revealing confidential details. An organization that would use this security peace-of-mind as marketing tool to instill trust from their customers such as a hosting or other cloud service provider or ecommerce platform.

What can I expect during the SOC examination?

The first step in the SOC assessment process is determining which type of SOC report will best benefit your organization. Then, 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 so management can understand their options to repair them.

Working with an auditing firm that specializes in SOC reporting can go a long way in making the process less painful for everyone.

SOC Reporting is Essential

360 Advanced cybersecurity and compliance client, Xfernet is an enterprise cloud solutions company that serves a wide range of clients including media, finance, legal, and commerce companies that require elite data protection. With this much business on the line, SOC reporting is not a nice-to-have, but an essential component of their compliance program. All kinds of personal data is housed and exchanged on Xferent  servers. SOC compliance not only works to protect this information, but serves as a symbol of trust for Xfernet clients.

Trust us to deliver the assurance your clients need.

In this increasingly global and digital business landscape, companies enter partnerships with service providers who can implement and manage areas such as IT or accounting. Before a company hands over the keys to its infrastructure or accounts, it must gain comfort that its partner is trustworthy, secure, and operating according to industry requirements. A SOC report is the “trusted handshake” between service providers and their clients.

Our experienced team can guide you step-by-step through the entire process, from the SOC Readiness Assessment to delivery of the final report. Contact us today to schedule a consultation.