How to Use SOC 1 to Ace Financial Audits, Build Reports, and Verify Internal Controls
SOC 1, System and Organization Controls 1, are standards to guide processes and controls for financial reporting.Learn More
User entities that outsource financial transactions, and service providers or sub-providers for those services, need SOC 1.Learn More
There are multiple types of SOC reports, each one has different goals, objectives, controls, and reporting requirements.Learn More
There are two types of SOC 1 reports. Which one do you need?Learn More
Unlike other compliance programs, SOC 1 doesn't have a framework or detailed list of controls your organization should use.Learn More
User entities are responsible for ensuring their service organizations are compliant with SOC 1 requirements.Learn More
Learn what you can do to prepare for your SOC 1 report audit and how to decrease the time a SOC report usually takes.Learn More
Are you ready for your SOC 1 report? Solutions like Apptega's Audit Manager can help you know what to expect.Learn More
Check out answers to some frequently asked SOC 1 questions.Learn More
Apptega has everything you need to prepare you for a SOC 1 report so you'll have confidence you can ace your audit.Learn More
System and Organization Controls 1 (SOC 1) are a set of standards companies (user entities) can use to determine how effectively their service providers (service organizations) implement and manage controls that may impact financial reporting. AICPA says these controls are “relevant to security, availability, and processing integrity of the systems the service organization uses to process users’ data and the confidentiality and privacy of the information processed by these systems.”
Some examples of SOC 1 user entities are:
While user entities can outsource a range of financial tasks to service organizations, the user entity is ultimately responsible for ensuring providers implement effective controls for third-party services.
If you’re a service provider, for example, a software-as-a-service (SaaS) company or a data center, and your services may impact a user entity’s financial statements, then you may need to attest your business meets SOC 1 criteria. In simple terms, being a SOC 1 compliant service organization demonstrates you’re using industry recognized best practices to assess and manage risk. In some cases, an internal department within a larger organization could be considered a service organization.
Some other examples of SOC 1 services providers are:
In some cases, service organizations outsource services to other third parties. If those third-party services are relevant to the user entity’s ICFR, then they may also require SOC compliance. When this occurs, the service organization is responsible for the overall system of internal controls.
There are two types of SOC 1 reports, SOC 1 Type 1 and SOC 1 Type 2. Which SOC report is right for your organization depends on a number of factors, such as the nature of your business, types of services provided, types of data handled, and your company’s risk appetite. Certified public accountants (CPAs) manage SOC compliance reports.
Depending on report type, SOC reports generally include:
AICPA focuses on promoting best practices to help organizations fairly and accurately handle financial reporting and management. SOC reports are an example of this. Each report type has a specific purpose and function. For SOC 1 compliance, there are two report types:
Many companies offer SOC readiness assessments to determine if you’re ready for a SOC 1 audit. During a readiness assessment, your consultant or software solution should give you insight into the processes, controls, and documentation you already have in place, how they’re performing, discover gaps or other issues, and make recommendations to mitigate those issues before your actual CPA audit.
There are also software solutions to help you prepare. Apptega’s Audit Manager, for example, can assess your current controls and sub-controls with a real-time compliance assessment, help you prepare and store all the documentation required for the audit, and enable you to track your audit processes — all within a single platform.
And, if you need more help and want to work with a SOC 1 consultant or need other resources, you can find everything you need in Apptega Edge.
Once you’ve determined you’re ready, it’s time to engage with your auditor. While each auditor's report may vary, here are some common areas auditors will likely address:
● Audit scope
● SOC report type
● Service organization assertions about controls and risk
● System and control descriptions including control objectives, activities, and user entity controls
● Auditor's findings
● Did management accurately describe control objectives?
● Is the design of the controls reasonable to the services provided?
● Which tests did the auditor conduct?
● After testing, did the controls perform as intended?
● Other information (for example, management response to any deficiencies found in the audit or other relevant information such as a business continuity plan)
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