Currently, companies are relying on service providers to streamline daily operationsendless functionality. This is evident via the introduction of data centers, cloud computing,SaaS (software as a service) organizations. Nevertheless, with the convenienceease of these outsourced tasks comes some form of inherent risks.
The primary differentiator between service providerstheir competitors is the capability to demonstrate the establishmenteffective implementation of internal controls in relation to what they offer. One simple way to offer this assurance for every stakeholder is to undergo a SOC audit report.
What are SOC Audit Reports?
SOC audit reports are statements given after a third-party auditor performs a thorough examination of a company to confirm they have an effective system of controls. The system of controls is related to security, processing integrity, availability, privacy,confidentiality. This report is issued by a CPA (Certified Public Accountant).
Types of SOC Audit Reports
Because of the diverse controls of different service organizationsthe kinds of services they provide, the extentnature of SOC audit reports vary. Here are the types of SOC audit reports.
SOC 1
SOC 1 emphasizes the business processinformation technology of a service organization that may impact the user entity’s financial statement. This is known as internal control over financial reporting. Controls include all systems that require complex passwordsare controlled by authorized users. Types of service organizations that can get SOC 1 reports include medical claims processing, loan servicing companies,payroll processing.
Structure of SOI Report
A complete SOC 1 report entails five key sections. They include:
The Open Letter
The auditor will highlight the scope of the report in the open letter based on the kind of audit conductedthe opinion issued.
Management’s Assertion
This section comprises management statements like an assertion that the system description reflects the system accurately.
System Description
This part covers the supporting procedures, policies, processes, operationalpersonal activities that comprise the service organization’s service. It may impact the user entity’s ICFR.
Description of Tests of ControlResultsTesting
This is where auditors outline the controls that were tested, the process implemented,the results
Other Information
While this section isn’t always included, it might be added to offer additional details that are not enclosed by the auditor’s opinion.
SOC 2
This report is focused on non-financial controls. They are essential for company oversight, vendor management programs, regulatory oversights,risk management procedures. The SOC 2 report is made up of non-financial controls that are based on 5 trust service categories. They include:
- Security
- Availability
- Processing integrity
- Confidentiality
- Privacy
SOC audit reports offer a completerepeatable reporting procedure to assist establish transparencytrust among service organizationsshareholders of user entities. Through proactively identifyinghandling various risks, organizations can ensure all contractual obligations are handled while lessening compliance expenses upfront.
