SOC Reporting Services

If your organization provides outsourced services to other businesses, chances are you’ll be requested to demonstrate that you maintain a sound environment of internal control over the transactional data you manage or systems you host on their behalf. The American Institute of Certified Public Accountants (AICPA) has created multiple reporting options to enable you to demonstrate transparency to your customers and prospects.

A System and Organization Control (SOC) audit is an examination performed by an independent public accounting firm. The primary objective of an SOC audit is to provide transparency related to a service organization’s internal control structure, and to provide assurance regarding the design and operating effectiveness of the controls that are in place.

An SOC audit is not a certification. There is no pass-fail rating that comes with an SOC audit. Rather, the output is a published audit report that includes any control exceptions or failures.

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Our SOC Reporting Services include:

SOC 1 Reports

An SOC 1 examination is focused on services that are relevant to customers’ internal controls over financial reporting. This information can be crucial for your customers who have to comply with laws and regulations such as the Sarbanes-Oxley Act of 2002. Organizations that provide services that directly impact financial reporting such as payroll processing, revenue reporting, debt collections or loan servicing, provide an SOC 1 report to their customers. Technology companies, such as accounting software providers or data centers, who provide infrastructure for financially relevant systems, may also consider an SOC 1 report.

SOC 1, Type 1

A Type 1 report focuses on the design of controls as of a point in time. With this audit, management is responsible for demonstrating that they have designed controls appropriately to mitigate the risks related to their services as it pertains to their users, and that those controls have been implemented as of a specific date.

What to expect in your Type 1 audit report:

  1. The service auditor’s opinion
  2. Management’s assertion
  3. Management’s description of their internal control processes
  4. Identification of controls that were designed and implemented as of the examination date

SOC 1, Type 2

A Type 2 report focuses on controls operating effectively over a period of time. Similar to a type 1 audit, management is responsible for demonstrating that they have designed controls appropriately to mitigate the risks related to their services, as it pertains to their users, and that those controls have been implemented as of a specific date. In addition, management would need to demonstrate that those controls were operating effectively throughout a period of time, typically between six and 12 months.

What to expect in your Type 2 audit report:

  1. The service auditor’s opinion
  2. Management’s assertion
  3. Management’s description of their internal control processes
  4. A summary matrix that includes the service auditor’s test procedures for each key control activity, the results of those procedures, as well as any identified exceptions
SOC 2 Reports

An SOC 2 examination evaluates an organization’s information systems relevant to one or more Trust Services Principles (TSPs). These reports are typically best suited for companies that provide services that are operational in nature. The security, availability, processing integrity, confidentiality and privacy TSPs are designed to work together to represent different aspects of system reliability. Criteria relevant to all five principles are called “common criteria” and the security principle encompasses all of these criteria. The four remaining TSPs — availability, processing integrity, confidentiality and privacy — have individual criteria that must be evaluated in addition to the common criteria.

The baseline of any SOC 2 is the common criteria, which are organized as follows:

  • Organization and management
  • Communications
  • Risk management and design and implementation of controls
  • Monitoring of controls
  • Logical and physical access controls
  • System operations
  • Change management

SOC 2, Type 1

A Type 1 report focuses on the design of controls as of a point in time. With this audit, management is responsible for demonstrating that they have designed controls appropriately to mitigate the risks related to their services as it pertains to their users, and that those controls have been implemented as of a specific date.

What to expect in your Type 1 audit report:

  1. The service auditor’s opinion
  2. Management’s assertion
  3. Management’s description of their internal control processes
  4. Identification of controls that were designed and implemented as of the examination date

SOC 2, Type 2

A Type 2 report focuses on control operating effectively over a period of time. Similar to a type 1 audit, management is responsible for demonstrating that they have designed controls appropriately to mitigate the risks related to their services, as it pertains to their users, and that those controls have been implemented as of a specific date. In addition, management must demonstrate that those controls were operating effectively throughout a period of time, typically between six and 12months.

What to expect in your Type 2 audit report:

  1. The service auditor’s opinion
  2. Management’s assertion
  3. Management’s description of their internal control processes
  4. A summary matrix that includes the service auditor’s test procedures for each key control activity, the results of those procedures, as well as any identified exceptions
SOC 3 Reports

An SOC 3 examination is intended for general public consumption and may be posted on your company’s website or other public channel. Common uses for SOC 3 reports include marketing and vendor due diligence. Similar to an SOC 2 audit, an SOC 3 audit evaluates an organization’s information systems relevant to one or more Trust Services Principles (TSPs). These reports are typically best suited for companies that provide services that are operational in nature. The security, availability, processing integrity, confidentiality and privacy TSPs are designed to work together to represent different aspects of system reliability. Criteria relevant to all five principles are called “common criteria” and the security principle encompasses all of these criteria. The four remaining TSPs — availability, processing integrity, confidentiality and privacy — have individual criteria that must be evaluated in addition to the common criteria.

The baseline of any SOC 3 is the common criteria, which are organized as follows:

  • Organization and management
  • Communications
  • Risk management and design and implementation of controls
  • Monitoring of controls
  • Logical and physical access controls
  • System operations
  • Change management

An SOC 3 examination must be performed over a period of time. An SOC 3 audit is often performed as an add-on service to an SOC 2, Type 2 engagement. Unlike the other SOC options, an SOC 3 report is very brief and only contains high-level information that is appropriate for a board audience.

What to expect in your SOC 3 audit report:

  1. An abbreviated service auditor’s opinion
  2. An abbreviated management’s assertion
  3. A summary of management’s description of their internal control processes
From May 1, 2011 to April 30, 2017, service auditors performed SOC 1 services based on the Statement of Standards for Attestation Examinations No. 16 (SSAE 16). For reports issued beginning May 1, 2017, service auditors will use the Statement of Standards for Attestation Examinations No. 18 (SSAE 18), which supersedes SSAE 16. Learn more about SSAE 18.
Neha Patel

Neha Patel

Partner, IT Advisory Services

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Neha Patel, CPA, CISA, has nearly 14 years of experience in public accounting and internal audits, with an emphasis on governance…

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