System and organization control reports are a vital part of businesses’ risk management programs. SOCs are market-driven reports that businesses worldwide rely on to assess risk. These reports use the latest accounting standard, SSAE 18 (which supersedes previously cited standards, including SSAE 16, AT-101, and SAS 70). Learn to implement SOC reporting in your business.
Although SOC reports are not a regulatory requirement, there are still compelling reasons to use them. For starters, they provide an audit-based opinion from an independent party. An independent party helps increase transparency and build trust between the service provider and its customers. Companies take a leap of faith sending all their data to a service provider, and it’s likely your customers’ auditors might ask to see your SOC reports if they haven’t already.
Service organizations such as software-as-a-service companies or payroll processors, in particular, can benefit greatly from SOC reports. More recently, SOC reports have become an aid for those looking into a standard report over cybersecurity programs beyond just a service provider.
SOC reports serve as standardized reporting metrics for how companies address emerging risks.
In a time when breaches and data security are top of mind, SOC reports can reduce the number of questions from your customers that pertain to security during the request for proposal process. They might also reduce the volume of audits required by your customers.
Security regulations and guidelines such as HIPAA, FFIEC, and others require third-party (sometimes fourth-party) vendor risk management. A review of SOC reports has become a standard request to support customers’ vendor management programs.
3 Steps to Implement SOC Reporting
SOC reports can be a significant benefit for many businesses, as long as they’re used effectively. That requires a few steps that are well within reach of most businesses:
1. Do your research.
Given the importance of SOC reports, make sure your team is informed. If your company is still unsure whether your current control environment is ready for a SOC report, consider reviewing the American Institute of CPAs’ SOC criteria.
Additionally, a readiness assessment can be performed by a CPA firm. This assessment can alleviate concerns about security and compliance reporting before undergoing a future examination, and it can identify weaknesses that need correction and validate the scope of the report.
2. Determine which type of SOC report is right for you.
It’s essential to understand the differences between the SOC reporting options: SOC 1, SOC 2, SOC 3, and SOC for cybersecurity are the current suite of SOC reports (SOC reporting for supply chains is in development). In a nutshell, SOC 1 focuses on internal control over financial reporting.
This report does not come with predefined criteria, but it typically focuses on general IT controls and business transaction processing controls. SOC 2, SOC 3, and SOC for cybersecurity, on the other hand, are focused on a standard set of cybersecurity criteria, including security, and optional incremental criteria, including confidentiality, processing integrity, and privacy.
To determine which report is necessary or the most beneficial, focus on the services you provide to your customers. Do your services impact your customers’ financial statements? If so, choose SOC
- If your services include processing or storing client data, opt for SOC.
- If services relate to customer financial statements and include processing and storing customer data, both types of reports are warranted. SOC 3 is a shorter version of SOC 2 and is intended as a public-facing report.
- SOC for cybersecurity is a newer report with a broader focus that can expand to the entire organization or select business units rather than merely a product or service.
3. Ensure you have leadership in place to oversee reporting.
SOC reports can be instrumental in cybersecurity reporting, an essential concern for many companies. They can also benefit internal board reporting regarding threats from data breaches and other cybercrime. Plus, private equity firms conducting due diligence on cybersecurity practices before making a deal can use these reports as a standardized tool. But to reap these kinds of benefits, businesses have to have the right leadership in place.
Whether your business opts for SOC 2, SOC 3, or SOC for cybersecurity reporting, the chief information officer (or, better yet, the chief information security officer or other designated member of the security committee) should be responsible for ensuring that controls for in-scope systems are designed, implemented, and operated effectively. They must also monitor service commitments to customers.
Many of the SOC criteria are based on the company’s commitments to its customers, so management must ensure compliance. Management includes controls of the infrastructure, software, people, procedures, and data.
CISOs should also select the trust service criteria (e.g., security, confidentiality, availability, privacy, and processing integrity) that apply to the system in scope. The system must also provide an assertion about the description and the suitability of design and operating effectiveness of controls.
Once businesses have done their homework, decided which type of report is the best fit, and made sure they have leadership in place to oversee reporting, they can begin to reap the numerous benefits of SOC reports.
The post 3 Steps to Implement SOC Reporting in Your Business appeared first on ReadWrite.