How To Prepare for a SOC Audit

Have you recently received a client request for a SOC (Service Organization Controls or System and Organization Controls) report that has left you scratching your head and scrambling to comply? Maybe you have previously performed SOC audits in the past but were left with results you felt weren’t reflective of your business’s overall quality.

In any case, if you are staring at a SOC audit request, wondering how to proceed for optimal results, you are in the right place.

WHAT IS A SOC AUDIT AND WHY DOES YOUR ORGANIZATION NEED ONE?

As a service organization, you bear certain responsibilities regarding different facets of your business to each of your clients, according to the AICPA.

SOC reports are designed to help meet your needs in fulfilling specific client (or user entity) requests, which come in the form of SOC 1 (SSAE 18), SOC 2 or SOC 3.

SOC 1 (SSAE 18) for Service Organizations: ICFR

The SOC 1 (SSAE 18) audit, addresses Internal Control over Financial Reporting (ICFR), in accordance with Statement on Standards for Attestation Engagements 18.

Anything likely to be relevant to an audit of a user entity’s financial statements is the focus for a SOC 1 audit.

Further, there are two different types of SOC 1 reports available:

  • The Type 1 report offers an opinion of your auditor that your system is designed suitably to achieve the related objectives on a specified date.

  • The Type 2 report contains all the same information of Type 1 but focuses on testing the controls to prove their effectiveness over a period of time.

SOC 2 for Service Organizations: Trust Services Criteria

The SOC 2 audit is used when a company outsources technological and data-related services, such as data hosting, colocation, data processing and Software-as-a-Service (SaaS). The SOC 2 report focuses on the controls at a service organization that relate to security, availability, processing integrity, confidentiality and privacy of a service organization’s technological systems, operations and regulatory compliance.

This report is particularly helpful in areas that include organizational oversight, vendor management programs and regulatory oversight.

SOC 3 for Service Organizations: Trust Services Criteria for General Use Report

Designed to meet the needs of user entities that need specific information about certain criteria of a SOC 2 report—covering only a period of time with no need to focus on a point in time—but do not need everything that a SOC 2 report entails. A SOC 3 report can be issued on any one or all of the trust services principles and is delivered in the form of an opinion letter only.

SOC for Cybersecurity

SOC for Cybersecurity is the new kid on the block when it comes to the System and Organization Controls family, but it is critical to demonstrate the controls of a service organization’s cybersecurity risk program.

YOUR PREPARATION GUIDE AND 6-TIP CHECKLIST FOR YOUR NEXT SOC AUDIT

Now that you are familiar with the different types of SOC audits and reports that you may need—and much of the groundwork for each one is similar—you can start your preparation.

  1. Define Your Audit’s Objectives
  2. Ask yourself what your user entity wants to learn from the audit and resulting report. If they want to learn something specific about your organization’s financial controls, you will need one of the SOC 1 audits. If the user entity is concerned about cybersecurity then you will need to prepare materials for a SOC for Cybersecurity audit.

  3. Determine the Scope of Your Audit
  4. The scope of your audit may vary between SOC 1 and SOC 2/SOC 3.

    • SOC 1.
    • The scope of your SOC 1 audit may involve issues such as classes of transactions, procedures for processing and reporting transactions, accounting records of the systems and report preparation for users.

    • SOC 2/SOC 3.
    • The scope of SOC 2/SOC 3 audits may revolve around infrastructure, software, procedures, people or data while covering the trust principles (security, availability, confidentiality processing integrity and privacy).

    • SOC for Cybersecurity.
    • The scope of SOC for Cybersecurity addresses the cybersecurity risk management program of the service organization. The audit is intended to satisfy the interests of stakeholders who require assurance that your service organization’s risk management program is designed and operated effectively.

  5. Address Any Regulatory Compliance Concerns
  6. Regulatory compliance concerns are determined by the industry that you serve and any relevant local, state or federal rules, policies and regulations. For a SOC 1 audit, you will need to stay up-to-date on the GLBA (Gramm-Leach-Blieley Act) while HIPAA/HITECH are required for service organizations working with healthcare providers.

  7. Write Out Policies and Procedures
  8. Developing and writing out—the writing portion is paramount since your written rules and policies are what CPAs use as your standard for auditing—written policies is crucial, particularly when it comes to SOC 1.

    Written policies and procedures also help employees stay on course since they can refer to your organization’s expectations for compliance, as well as possible consequences for non-compliance.

  9. Perform a Readiness Assessment
  10. A readiness assessment can help you determine your preparedness for a SOC audit. You can either choose to perform a readiness assessment on your own, or you may engage an auditing firm to perform your review. Such an assessment gives you a chance to perform a warm-up for the official audit, which can help you sort out any issues in advance.

  11. Hire a CPA at a Trusted Auditing Firm
  12. Your CPA can help guide you through the process of performing any of the SOC audits. He or she can also help you work through the various tips listed here, as well as many other tips that can help ease the process for you.

    When it is time for your official audit, your auditor will do the following:

    • Work with you to agree upon testing dates.
    • Provide a list of requested evidence (usually a month in advance of the audit).
    • Visit your site for interviews, walkthroughs and document reviews.
    • Document testing results and work with you to clarify any testing exceptions.
    • Prepare and Deliver a SOC report to you.

Let Us Help You Prepare for Your SOC Audit

Our auditors at I.S. Partners, LLC. have years of experience in helping service organizations remain in good standing with user entities. Our team members understand how stressful SOC audits can be for seasoned service organizations. They also understand how overwhelming these audits may seem to those new to the service organization industry and auditing procedures.

Our skilled and experienced experts can provide the careful auditing you need to know that your system is compliant with the latest standards. To learn more about how we help businesses like yours, call us at 215-675-1400, request a quote, or launch a live chat to start a conversation.

Editor’s Note: This post was originally published in December 2015 and has been updated for accuracy and comprehensiveness.

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