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Service Organization Controls (SOC) audits and reports are used to ensure compliance and security within service providers. There are several SOC types, including SOC 1, which looks at the effectiveness of financial controls, and SOC 2, which evaluates
organizational controls surrounding security compliance and data.
SOC 2 has emerged to become more widely used as corporate reliance on digital transformation and data security has increased. SOC 2 provides a more comprehensive organizational security approach, making it a valuable requirement for many businesses before
signing on with new providers.
SOC 1 audits for compliance typically take six months to complete, while the SOC 2 process can be as lengthy as 12 months.
This piece details how achieving a SOC 2 standard has multiple long-term benefits that improve overall security maturity by embedding processes and controls throughout the organization.
SOC 2 is a compliance standard set by the American Institute of Certified Public Accountants (AICPA) to specify how customer data should be managed in line with the Trust Services Criteria, which covers security, availability, processing integrity, confidentiality
and privacy. It's a more holistic reporting standard than SOC 1, which focuses strictly on service organizations' financial reporting controls.
SOC 2 Type 1 captures organizational controls at one point in time to determine if they offer sufficient protection and meet the criteria. Reports are typically available within a few months, while SOC Type 2 takes longer, anywhere from 3-12 months, to
capture the controls' strengths and weaknesses over an extended period.
The SOC 2 audit process uses a baseline to evaluate data security and internal controls to generate a report. SOC reports offer confirmation that critical information is managed appropriately and well-protected in a time of increasing cybersecurity threats.
CPA firms use the following steps to complete SOC 2 reports on behalf of service organizations.
The detailed SOC 2 report will summarize the audit scope, system/control environment, and applicable tests after the audit. Most importantly, the report will state the auditor's formal opinion on control efficiency and compliance.
The formal conclusion to a SOC 2 audit is a full report detailing the organizational controls and their level of compliance with Trust Services Criteria: security, availability, processing integrity, confidentiality and privacy.
Ideally, the auditor's opinion on control performance will be unqualified, meaning the controls meet compliance requirements. Otherwise, a qualified opinion means the organizational controls are nearly compliant, but one or two areas fall short.
An adverse opinion flags serious compliance issues with non-negotiable requirements not being met. It's rare, but sometimes an auditor will assign a disclaimer of opinion, meaning they didn't obtain enough documentation to provide a formal opinion.
A SOC 2 audit gives service businesses a competitive advantage by demonstrating compliance with security controls, particularly data privacy and transaction processing. It focuses on
how organizational controls keep services and client data secure, rather than how they affect financial reporting.
Advantages of voluntary SOC 2 audits include:
Although reasonable efforts will be made to ensure the completeness and accuracy of the information contained in our blog posts, no liability can be accepted by IANS or our Faculty members for the results of any actions taken by individuals or firms in
connection with such information, opinions, or advice.
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