By: Mark A. Welp, CPA, CFE
You have decided the time is right to begin working towards having a SOC Report completed for your organization. Whether you start the process by having us perform some consulting work with you in order to prepare you for the report or you are ready to jump right in and get started, you should be aware of the benefits that lie ahead for you once your report is completed. The benefits vary by report type and knowing the end result for each is an important part of the process. Let’s take a look at the benefits of each report:
SOC 1: This type of report takes an up close look at the internal controls of a service organization that directly impact a user entity’s internal control over financial reporting. In the event of successful completion, the service organization receives a document that sets it apart from its peers by showcasing its sound control objectives and control activities. The report also displays these facts to all user organizations and their auditors, often satisfying the user auditor’s requirements. Without a successful report to present, the service organization may have to comply with audit request s from other entities. A successful report allows the auditors of those you do business with to truly grasp the internal controls of your organization.
SOC 2: A SOC 2 tells the story of the controls at the service organization that cover security, availability, processing integrity, confidentiality or privacy. It is important to note that there are two types of SOC 2 reports. A Type I focuses on the accurate personation of management’s description of the organization’s system and the suitability of the design of the control to meet what applicable trust services criteria as of a certain date. With a SOC 2, Type II, the same information is presented, but was gathered throughout a specified period. No matter what the type, a successful SOC 2 Report is a powerful weapon for any service organization as it sets you apart from competitors by shining a spotlight on your effective strategy and controls. A SOC 2 Report allows customers and stakeholders to quickly develop confidence in your organization thanks to your efforts to present your controls in such a transparent manner.
SOC 3: I have told you in past blogs that you must have a SOC 2 performed before embarking on a SOC 3. The thought that a SOC 3 is the cheapest and least invasive route in regards to SOC Reports is false. A SOC 3 addresses the same subject areas as a SOC 2 Report, but is presented in a shorter summary type format. Unlike the results you receive from a SOC 2 that can generally only be viewed by parties that already how knowledge about the nature of your services and organization, A SOC 3 Report can be used as a marketing tool of sorts. Your successful results can be shared with potential clients and customers to show them that you have the appropriate controls in place to side-step risks on non-financial issues. This will allow them to place trust in your organization and you will have a completive edge that makes your SOC investment a worthwhile one.
The benefits of each report extend far beyond what I was able to cover in just one blog post. Our team would love to sit down and learn more about your organization to see which report would best suit your needs.