The benefits of a SOC exam for service organizations
By Jacqueline Cooper – a Wipfli resource
Businesses are increasingly looking for independent assurances from their service organization vendors that their data is being handled responsibly. You may have received requests for a SOC report from clients, leading you to wonder what the value of a SOC examination may be — or even what it might entail.
SOC, or System and Organization Controls, is an audit performed by an independent third party that assesses a service organization’s system-level controls. SOC exams come in four major categories:
- SOC 1: Addresses internal controls that deal with your clients’ financial statements.
- SOC 2: Deals with the controls of your service organization that are relevant to your operations and compliance, as outlined by the AICPA’s Trust Services Criteria (TSC).
- SOC 2+: Combines the assessment of SOC 2 with reporting on other frameworks, such as HIPAA, CSA or HITRUST. A SOC 2+ exam doesn’t certify organizations on those additional frameworks but does provide an opinion on whether the overall criteria are met through audit steps.
- SOC 3: Similar to SOC 2 in that it is based on the TSC, but the resulting report can be freely distributed. This is different from SOC 1 or SOC 2 reports, which have limited use and are only intended for the organizations that rely on the services of the service organization.
How do organizations benefit from SOC audits?
In addition to potential business demands, there are numerous advantages to conducting a third-party SOC assessment, specifically one that focuses on digital security. This may also be necessary to maintain business relationships with certain customers.
Ensuring customer satisfaction: A SOC report gives valuable understanding of the risk and security environment, vendor management, internal control governance and adherence to regulations of your industry. This gives clients the confidence that their data is secure and in good hands. Moreover, it satisfies clients third-party vendor management requirements as they can be confident that their systems and network are well-protected.
Reduce the use of questionnaires: Most likely, your company has had to complete various vendor management or security questionnaires for your clients, which can be a tedious task and an additional responsibility for your employees. However, by conducting a SOC audit, you can offer your clients the SOC report instead of having them fill out their own questionnaires.
Minimize inquiries from financial statement auditors: Utilizing a SOC report can effectively decrease the amount of time spent addressing inquiries from your clients’ auditors regarding your controls, procedures and activities. In the past, you may have received inquiries from financial statement auditors; however, a SOC report can provide the necessary answers and showcase your dedication to maintaining cybersecurity compliance.
Uncover and address deficiencies in your procedures: The inquiries posed by your auditor during a SOC examination assist in pinpointing weaknesses in your system and procedures. These can be rectified or enhanced by implementing industry best practices, thus reducing your risk. For instance, you may come to realize that due to the high frequency of changes in your organization, conducting a security assessment every six months instead of every 12 would be more beneficial.
Enhance the strength of your policies and procedures: As a part of the SOC examination, the assessment includes the evaluation of the existing policies and procedures of your company. The auditor may identify any missing policies or procedures or suggest adjustments to be made. Following their advice will facilitate improvements and minimize potential risks.
Keep informed about standards and regulations: After the completion of the SOC exam, your auditors will have gained a comprehensive understanding of your company and its adherence to security standards and regulations, such as frameworks like ISO 27001 and the NIST Cybersecurity Framework. You can utilize your auditors as a valuable resource in the future for receiving and implementing recommendations, as well as ensuring compliance with necessary regulations.
One additional benefit of SOC examinations is that they are usually conducted once a year, which enables you to stay current on changing regulatory environments.
Enhance your competitive edge and increase your clientele: In today’s world, where cybersecurity issues are constantly making headlines, it is highly probable that a potential customer will choose a company that can provide a SOC report over one that cannot prove their compliance when deciding between two service providers. By having a SOC report, the service organization demonstrates its strong dedication to security and safeguarding data.
The frequency of organizations needing SOC audits has been on the rise and businesses are now including them as a contractual obligation with their customers. Having a strong cybersecurity program and controls is critical in today’s evolving world. SOC is one way to help organizations build and retain a loyal customer base.
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