As vendor management [BC1]scrutiny intensifies, the pressure is on to demonstrate that your internal controls protect your customers’ sensitive data. Increasingly, organizations that outsource critical functions are asking for System and Organization Control (SOC) reports to better understand the service provider’s information systems and processes. However, confusion about the purpose of each assurance reporting option have led many organizations to demand the wrong type of report.
Aprio’s mission is to help clients improve their risk management programs, providing higher quality reports with less business disruption. We can clarify your SOC reporting options and help select the structure that best supports your risk management reporting needs.
SOC 1 reporting relates specifically to financial reporting controls. The primary reason to execute a SOC 1 report is to prove to an external auditor that your organization’s financial reporting controls satisfy the internal control over financial report (ICFR) requirements for the entities using your service. This report demonstrates that your organization’s controls provide the appropriate financial protection to reduce or eliminate the need for those financial auditors to perform their own tests on those controls. This report and its associated financial reporting standards are only appropriate for organizations that provide services that directly affect their customers’ financial controls — such as medical billing, claims processing, inventory management or order fulfillment.
SOC 2 reporting provides the unique opportunity for organizations to improve their information risk management programs, increase transparency into information controls, address your customers’ vendor reporting requirements that enable stronger customer relationships and improve the integrity of the business.
Whereas SOC 1 was designed specifically to address risks that pertain to financial reporting, SOC 2 was designed to attest to a service organization’s controls as they relate to security, availability, processing integrity, confidentiality and privacy – the five categories that make up AICPA’s Trust Services Criteria.
Under SOC 2, service organizations and their auditors select the Trust Services categories and associated criteria that are appropriate to the services they perform. That framework can be expanded to include criteria from other compliance reporting standards, such as HIPAA, PCI DSS, ISO 27001, EI3PA or the New York State Department of Financial Services Cybersecurity Requirements. As a result, a SOC 2 is one of the most highly flexible risk management reporting protocols and can be tailored to address myriad specific non-financial reporting requirements in areas such as government, healthcare, title agents and financial services.
Similar in nature to SOC 2, SOC 3 reporting focuses on one or more of the same Trust Services Criteria related to a service organization’s internal controls.
SOC 3 reporting is intended for a general audience, that may not have the technical knowledge or require the level of detail of a SOC 2 report. SOC 3 reports do not include descriptions of tests and results or opinions on the description of the system. The report is more concise and can be shared openly on a company’s website for marketing purposes. For example, a cloud service provider or data center could make a SOC 3 report available to re-sellers of their services to address the security and privacy concerns of prospective customers.
Can you demonstrate to your board, investors and other stakeholders that you are managing cyberthreats and have an effective cybersecurity risk management program in place to prevent, detect and respond to security breaches? The AICPA has introduced SOC for Cybersecurity to provide objective measurement of an organization’s entire risk management framework.
Although there is some overlap, there are key differences between SOC 2 and SOC for Cybersecurity. SOC 2 applies to service organizations such as cloud service providers and business process outsourcers, whereas SOC for Cybersecurity can be applied to any company. Another key difference lies in their scope. SOC 2 relates to a defined system that a service provider uses to process user data, while SOC for Cybersecurity is an enterprise-wide cyber security assessment.
Let Aprio’s information assurance professionals help your organization select the SOC reporting that is right for your business. We also make SOC reporting easier to achieve. Clients with multiple vendor and compliance reporting requirements appreciate our pragmatic approach that unifies the collection and cataloging of control evidence to simplify the reporting process and avoid audit fatigue. We help you prevent disruptive predeadline “compliance spikes,” by pacing the work so that your team has adequate time to remediate issues.
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