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SOC (System and Organisation Controls)

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What is a SOC Report?

SOC stands for System and Organisation Controls. A SOC compliance ensures that an organisation follows best practices related to protecting its customers’ data before entrusting a business function to that organisation. These best practices are in the areas of finance, security, processing integrity, privacy, and availability. The reports which are generated and approved by the third party provide independent assurance and help clients/partners understand the potential risks associated with collaborating with the organisation that has been assessed.

You may choose to pursue SOC compliance because you are working on signing a potential client that values your security or your own company works with sensitive data and you wish to be proactive in implementing security power.

Based on the information required and the type of organisation involved, there exist multiple versions of SOC reports, they are SOC 1, SOC 2, and SOC 3.

What are the various SOC Reports?

SOC 1 Report:

SOC 1 report is in compliance with Internal Control over Financial Report (ICFR). It is documentation of the internal power that may be relevant when conducting an audit of a client’s financial statements.

The two types of SOC 1 Reports are:

  • TYPE 1: It lays emphasis on the design of controls in order to accomplish the associated objectives, including the opinion of the service auditor, the management statement, and the description of the system. This describes the power over service units at a particular point in time.

 

  • TYPE 2: It emphasises the design and operating efficiency of power over a period of at least six months, including all the information in Type 1 with the addition of the tests performed by the service audit. According to auditors, this type provides assurance over the controls of an organisation.

 

SOC 2 Report:

It defines the criteria for managing client’s data on the basis of five “trusted service principles”: security, availability, processing integrity, privacy, and confidentiality. It is specific to each business unit. In accordance with specific business practises, each develops its own power to conform to one or more of the trust principles. These provide you with important information about how your service provider handles data.

The two types of SOC 2 Reports are:

  • TYPE I: It describes a supplier’s system and whether its design is suitable for meeting relevant trust principles on a specific date.
  • TYPE II: It describes the operating effectiveness of such systems for a specified period of time.

SOC 3 Report:

SOC 3 report is designed for Trust Service Criteria for General Use Report. It summarises the content of a SOC 2 report but excludes details of the tests performed and the results of these tests. A SOC 2  report must have been prepared to receive a SOC 3 report.

SOC for Cyber Security:

Performance and reporting requirements for a review of an entity’s cybersecurity risk management program and associated controls.

Which organisation requires a SOC report?

Any service unit that requires independent validation of powers relevant to the manner in which it transmits, processes, or stores customer data may require SOC compliance. Furthermore, due to the increased scrutiny of third-party controls, clients are increasingly demanding SOC compliance from their organisations.

What determines the cost of a SOC report?

Achieving SOC compliance may not be costly, as cost mostly depends on many factors such as the type and number of controls in place, the system complexity, related environmental control, etc. A Type 2 is more expensive than a Type 1 due to testing levels and documentation requirements.

What is the most effective way to prepare for a SOC exam?

In almost all cases, we recommend a readiness assessment prior to a business unit commencing a SOC review for the first time. As part of a readiness assessment, we will undertake a high-level assessment of power within the scope and document our findings. This gives the concerned organisation an opportunity to fill the gaps before we start the SOC reporting process. Moreover, much of this work can be utilised in the SOC.

Does the SOC have the opinion of the auditor?

Yes, the SOC has the auditor’s opinion. A SOC shall contain the opinion of the auditor covering the following areas:

  • If the service organisation controls are fairly described.
  • If the controls of the service unit are designed in an effective manner.
  • If the service organisation controls are operating effectively over a set period of time (only Type 2)

 

If the above elements have been achieved by the organisation, the auditor would provide a clean opinion. If the above has been met, but the auditor has found significant exceptions (i.e. such that an objective was not in place or was ineffective), the auditor would issue an “amended opinion“. However, if the organisation physically failed one or more of the above elements, the auditor would issue a “negative” opinion.

Is it possible for someone to distribute a SOC for marketing purposes?

No, no one is allowed to circulate SOC 1 report and SOC 2 report for marketing purposes. In such a case, only the SOC 3 report may be distributed for marketing purposes. It is a general-use report as mentioned earlier, which means that the service provider is allowed to give this to anyone.

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