The Basics of SOC Reporting

 

 

 

SOC reporting is an important part of risk management, but only some industries require this kind of report. Organizations in low-regulated industries may not require a SOC report, but they may still benefit from one. High-regulated industries may require a SOC report to meet consumer protection requirements. In any case, if your organization needs to meet regulatory requirements, it's a good idea to obtain a SOC report. Listed below are some reasons why your organization should have one. Learn more about  soc 2 report , go here. 

 

SOC 2 and SOC 3 reports evaluate an organization's information systems and internal controls. They evaluate controls and processes that are likely to affect a user organization's financial statements. The new standard eliminates this unwarranted reliance on the older standard, but it still requires a thorough analysis. A SOC 2 report is used when a service organization's controls have little or no financial reporting impact, but a SOC 1 report is useful for organizations whose services are not regulated by financial authorities.

 

While SOC 2 is a useful tool for financial institutions, SOC 1 reports are more targeted to user entities, while SOC 3 reports are meant for regulators and business partners. Regardless of the type of SOC report you need, you should know the basics of SOC reporting and what it entails. It's easy to get confused if you're not familiar with these standards. Fortunately, there's help available to make it easier to understand the difference between Type 1 and SOC 2. Take a  look at this link https://en.wikipedia.org/wiki/System_and_Organization_Controls  for more information. 

 

SOC reports are valuable to investors and shareholders, and often accompany acquisitions. Because they communicate a company's risk management practices, they're highly relevant in different stages of the vendor's life cycle. In addition, SOC reports also communicate the company's checks and balances and demonstrate that the organization pays attention to its policies and procedures. In other words, SOC reports are an essential part of risk management. So, how can you make SOC reporting work for you?

 

The AICPA has set SOC 1 and SOC 2 criteria, but SOC 1 is less defined. The Type 2 report requires detailed testing of controls over a specific period of time, usually six months. The report includes an opinion and description of the controls over the entire reporting period. The service auditor meets with the service organization and determines which type of SOC is best suited for their needs. It also requires the service auditor to discuss policies and procedures in the organization and conduct observations.

 

Another benefit of SOC reporting is that it gives customers peace of mind. When customers know that the company they use has implemented adequate security and compliance measures, they're more likely to trust the service provider. As a result, SOC reporting helps to alleviate these concerns. If you're in the business of providing customer information or systems, SOC reports are an excellent way to ensure that everything is working properly. When you have a SOC report, you can rest assured that your customers will be able to trust you with their sensitive data.