SOC Reports: Why Does Your Company Need Them?
The adoption of SaaS has risen across the board, particularly among major organizations. Currently, there are over 30,000 SaaS businesses that serve millions of users. This movement has exacerbated the already serious security concerns associated with the modern cloud.
When it comes to saving money and improving productivity, cloud services provide significant benefits to big businesses. However, this relies on people trusting service providers with private information.
Customers may rest easy knowing their data is protected by SaaS providers thanks to SOC reports. It encourages openness and fosters confidence in the system. In addition, this boosts service providers’ competitiveness. Keep reading to learn what SOC reports are and why your company needs them.
What is a SOC Report?
The Service Organization Control (SOC) report is an internationally recognized, voluntary compliance framework used to assess whether or not a service provider meets a set of compliance criteria designed to protect the privacy and confidentiality of its client’s data.
SOC 1, SOC 2, and SOC 3 are the three types of SOC reports. Let’s explore them more thoroughly:
SOC 1 Report
The SSAE 18 (Standards for Attestation Engagements) reporting standard is the basis for SOC 1 reports, which concentrate on financial reporting. It verifies procedures that influence or might affect clients’ financial reports.
To demonstrate that you can control the quality and consistency of your service’s design and operation, you must achieve SOC 1 compliance.
If your service has the potential to affect your client’s internal controls over financial reporting, you will need to present a SOC 1 report.
SOC 2 Report
There are five trust services criteria detailed in a SOC 2 report, which are security, availability, processing integrity, confidentiality, and privacy. These standards focus on internal controls that aren’t associated with internal control over financial reporting.
The TSC is in full compliance with other security frameworks such as PCI-DSS and HIPAA. SOC 2 criteria provide you with greater leeway in determining how to fulfill the trust service criteria, in contrast to PCI-DSS’s clear requirements.
Common criteria testing, which includes testing of security controls, is a requirement of SOC 2 audits. However, the other parts aren’t required. So you’ll need to decide which factors are relevant to how you do business. Each service provider needs a separate SOC 2 report because of this.
Attestation Standards 101 is used to create SOC 2 reports. These regulations are wide in scope and offer a baseline for conducting audits of businesses.
SOC 3 Report
Due to their intended audience, SOC 3 reports are shorter and less in-depth than SOC 2 reports, but they nevertheless include all the same information.
Protecting the information in a SOC 2 report is important since it reveals critical details about a company’s systems and network controls. Publicly available SOC 3 reports do not include any personally identifiable information and do not reveal any sensitive information about the organization’s internal controls.
This executive summary does not provide specifics about internal controls, allowing for its unrestricted distribution. A brief auditor’s assessment, management’s claim, and a description of the system are typically included.
Who Does the Report and How?
SOC reports are generated following an audit by an independent, third-party CPA certified by the AICPA. The scope of a SOC audit may include any or all of the following trust service principles and criteria:
- Intact processing
- Cybersecurity-related controls
- Financial reporting controls
No law mandates SOC testing. But major businesses often ask for one to ensure that their service providers are following the law and doing business ethically. Presenting your service risk-free to potential clients helps facilitate simple hiring choices.
Why Do You Need a SOC Report?
Companies that provide services or software that involve the touching, storing, processing, or impacting of the financials or sensitive data of their clients or users could greatly benefit from undergoing a SOC audit. Companies that offer financial, payroll, and healthcare services are a few examples, as are service providers such as cloud storage and web hosting.
Clients can get insight into a provider’s commitment to data and system security via SOC reports. It also helps businesses find and address security issues before their clients do. It might be challenging to figure out what kind of SOC report is best for your company. That’s why having a clear understanding of the various forms of reporting is essential.
To implement and manage functions like information technology and accounting, businesses often partner with service providers. However, they need reassurance that the partner they have selected is reliable, secure, and compliant with all relevant regulations.
SOC reports are a seal of trust between businesses and service providers. If you’ve never had a SOC audit before, it might seem overwhelming, which is why you must partner with the right licensed CPA firm.