Today’s businesses are increasingly relying on the expertise of at least one service organization to streamline their operations. It is crucial that each service organization ensures that their security controls aligns with those of their client, for the sake of data security.
The System and Organization Controls (SOC) report has become the standard metric for reviewing and articulating the services and internal control processes of a service organization for the benefit of the client, or user organization. These reports are invaluable to ensuring that user entities and service organizations stay on the same page in their shared goal in protecting the user organization’s data assets.
To truly be valuable for your organization, you must be able to understand the most important information within the SOC 1, SOC 2, SOC 3 or SOC for Cybersecurity report, but you may need some clarification as to just what the report conveys and how you can best interpret it.
This AICPA requires that all SOC reports be issued by an independent CPA firm. With each submitted report, check that their CPA license is up to date and that the firm has the appropriate information technology or information security certifications. This provides assurance that the firm undergoes peer review every three years to ensure that the firm is up to speed on its accounting and auditing practices at the time of your audit.
There are four SOC reports your organization may need to perform, and the first step toward a better understanding of the results is to determine exactly which report you are preparing to review and interpret:
The SOC 1 audit involves the user auditor's review of the user entity's financial statements to evaluate the effect of the controls at the service organization, according to the AICPA. Under SOC 1, there are two types of audits a CPA may perform: SOC 1 Type 1 and SOC 1 Type 2.
The SOC 2 report focuses the controls at a service organization, relating to security, availability and processing integrity for the systems that the service organization uses to manage and process user's data. The report serves to ensure the confidentiality and privacy of the information processed by these systems, according to the AICPA.
Additional information to look for in your SOC 2 report includes oversight of the service organization, vendor management programs, regulatory oversight, risk management processes, and internal regulatory oversight.
Similar to SOC 1, SOC 2 features two types of reports.