What are SOC Reports and Why are they so Important?
System and Organization Controls reports—or SOC reports, for short—are a very specialized need. Squire’s team of experts, from SOC reporting specialists to Information Technology personnel, stand ready to assist business entities in reaching their SOC compliance goals. If you need a SOC report, you know just how important they are to courting potential clients or meeting the vendor risk compliance needs of your existing clients.
Essentially, SOC reports assure companies that their business partners have strong internal controls, ethical business practices, and security measures in place to protect customer data and personally identifiable information (PII) from unauthorized access.
A successful SOC examination, performed by a CPA firm like Squire, can give an organization confidence in engaging with a business partner.
SOC reports come in a few different forms, all of which can be provided by Squire’s team of certified public accountants and Information Technology specialists:
SOC 1®
A SOC 1 is a report that focuses on a service organization’s internal controls that are relevant to a user entity’s financial reporting. A great example of a service organization that impacts a user entity’s financial reporting is a payroll processing company. This SOC report is intended to help businesses and their auditors assess and evaluate how the service organization’s controls impact the user entity’s financial statements.
SOC 2®
The second form of a SOC report is primarily a risk management tool. A SOC 2 report assesses the operational risks of outsourcing to a third party. Rather than focusing on financial reporting, a SOC 2 report breaks down its findings based on the Trust Services Criteria (TSC), based on COSO principles, established by the American Institute of Certified Public Accountants (AICPA.) The TSC includes the following categories: security (common to all), availability, processing integrity, confidentiality, and privacy. A SOC 2 report is intended to be a restricted-use report, meaning that its distribution is limited to business partners or others who understand or interact with the service organization’s system.
SOC 3®
A SOC 3 report is like a SOC 2 report but is far more general and a bit easier to digest quickly. This report is used primarily as a marketing tool for companies looking to share their trustworthiness with a wider audience.
SOC ® for Cybersecurity
In response to the increasing nature of cyberattacks, especially in the business world, the AICPA has published its practice guide for cybersecurity as the Cybersecurity Risk Management Reporting Framework. Using these industry-standard guidelines, an organization can evaluate its cybersecurity risk management program. This report is intended for internal use only, typically for distribution to a company’s Board of Directors, or those charged with governance.
In an era where trust and compliance shape business success, SOC reports provide transparency and peace of mind. Whether you require SOC 1, SOC 2, SOC 3, or SOC for Cybersecurity examination, rely on the expertise of Squire’s renowned CPAs and Information Technology specialists. Please feel free to contact us—we are ready to listen and provide feedback on the type of report that will best fit your organization’s needs.