At VISTA InfoSec, we hear this very good question from the clients, “what is a SOC 1 report? “Today, with most organizations evolved to digitizing their businesses, we are currently witnessing a growing trend of organizations availing outsourced services. Outsourcing certain aspects of business operations bring in efficiency, accountability, and better business output. However, with that, it brings a set of new challenges pertaining to the security and confidentiality of sensitive business data.
This is when SOC Attestations come into the picture to help organizations make an informed decision about outsourcing their critical business operation. SOC 1 Attestation is an audit process that helps organizations gain transparency of specific controls implemented by the service organization. It is an audit performed by external auditors to evaluate the effectiveness of their controls. The audit results in context of the organization’s service controls have a direct or indirect impact on their credibility.
In today’s article, we have covered in detail the SOC 1 Attestation and Reports, highlighting its purpose and use to your organization. While the article gives you a basic understanding of the SOC 1 Attestation and Audit Reports, it also highlights the significance of these reports for service organizations and customers like you availing third-party services. Having said that, let us first get our basics cleared by understanding what is a SOC1 Attestation and Audit Report?
Types of SOC 1 Report
SOC 1 Type 1 report– The SOC 1 Type 1 report is referred to as a point-in-time report that determines whether the controls of the organization are designed appropriately. The Type 1 report focuses on testing the design of a service organization’s controls and not its operating effectiveness.
SOC 1 Type 2 report- The SOC 1 Type 2 report covers a detailed description of the service organization’s systems and controls determining its design and operating effectiveness over a period of time – minimum 6 months.
Who needs a SOC 1 Report?
SOC 1 Attestation is required by a service organization that may impact a internal controls over financial reporting (ICFR). Some examples of a service organization requiring a SOC 1 Attestation and Report may include Payroll processors, Medical claims processors, Loan servicing companies, Datacenter companies, and Software-as-a-Service (SaaS) to name a few whose internal controls may impact the financials of your organization. However, it is important to note that the SOC 1 reports contain sensitive information about the service organization. So, the use of these reports is restricted to the management of the service organization and user entities like you availing their services.
Benefits of SOC 1 Attestation
SOC 1 Attestation offers innumerable benefits to both the service organization and its customers. Here are some of the benefits of achieving SOC 1 Attestation-
- Validates the service organization’s internal controls and processes, ensuring its effectiveness to deliver high-quality services to you.
- Assure your sensitive data stored with the service organization is well protected.
- Prevents incidents data breach by ensuring effective controls are in place.
- Evaluates the policies and procedures that are crucial to the service organization’s operation.
- Helps identify vulnerabilities in systems and provide remediation for the same.
- Strengthens the environment, and ensures the service organization adopts industry best practices.
- Helps build a sense of trust between service providers and your organizations.
- The report gives the service organization the ability to obtain and retain customers.
- SOC1 Attestation helps reduce multiple compliance burdens by providing one report that addresses the collective needs of a service organization for multiple clients like you.
- Compliance with SOC1 Standard demonstrates your commitment to security.
- The report works as a marketing tool to differentiate the service organizations from their competitors.
SOC reports provide a detailed evaluation of the service organization’s internal controls. So, it serves as evidence to you when it comes to validating the effectiveness of the service organization’s internal controls and business operations. It helps you in the decision making of whether to partner or not to partner with service organizations for their services. SOC report gives you the context needed to determine the amount of risk involved in availing the third-party services. Further, it is a report not just beneficial to you, but also the service organization. This is because it provides valuable information relevant in many stages of the vendor lifecycle. It provides an unbiased report that validates the internal controls, policies, procedures, and ensures they are in line with the service organization’s business operation. It also helps identify vulnerabilities and inconsistencies in the organization’s systems and networks which further helps strengthen their environment. So, by the looks of it, SOC1 Attestation seems beneficial to both the parties. This is why considering SOC1 Attestation for validating controls of the service organization is essential.
You can also watch the video on who can attest a SOC 1 / SOC 2 Report?