Are you a company that provides services? Are the services having an impact on your customer’s financial reports? Consider soc1 soc2 audit reports. Also, consider their differences. In addition, this will let you know which is right for your business.
SOC stands for ‘System and Organization Controls’. These reports enable ethical and compliant services. Especially for the service providers and potential service providers. Moreover, SOC reports found credibility and reliability for a service provider.
Most importantly, SOC reports assure the protection of the client’s data. Of which is a company’s asset.
It examines the different areas of a company. This includes the following:
- Processing integrity
- Financial Report Controls
- Cybersecurity Controls
Let us consider two types of these reports. Namely, SOC1 and SOC2 audit reports. Then, know the difference between the two. This must help you find the right audit report to use.
What Is the SOC1 Report?
SOC 1 report focuses on outsourced services. These services are specially done by service organizations. Of which are related to the company’s financial reporting.
A SOC1 report centers on the description of the controls of a service organization. Also. focuses on the way these controls are designed. With the goal of achieving the control objectives within the specified dates.
In addition, SOC1 audit reports are restricted. This shall only be to the management, user entities, and auditors.
What is the SOC2 Report?
On the other hand, SOC2 reports focus on the service organization’s controls. This relates to availability, security, processing integrity, privacy, and confidentiality.
Moreover, you may pick a SOC 2 report that centers on any or of all the 5 trust principles. Or, it could be a Type I or a Type II audit. In addition, a SOC 2 report also includes detailed information. These may include the service auditor’s test of controls and results.
The reason why the SOC2 report was created. It is due to the rise of cloud computing and business outsourcing of functions. Because of the demand to make sure of the confidentiality and privacy of information. Of which are all processed by the system.
Why Are These Reports Important?
These reports help service organizations gain clarity. Specifically, into the company’s specific controls and tests by the auditor.
It could either mean success or failure. Why? Because these controls have a direct influence on the organization. Both in its reputation and stability. And most importantly, with its financial statements.
The Receiver And Reviewer
Now, who will receive and review these reports? It is the user entity’s auditors. They are assigned the organization’s internal controls. Also, of the regulatory and IT compliance.
Consider these key elements when going through the SOC report:
- For SOC1 reports. Consider the time period of the tests of controls. Does it provide enough coverage for a fiscal year?
- Another, do the reports thoroughly define the services that you outsource?
- How about the service auditor’s professional background and reputation?
- Also, determine the impact of assessment on the service organization. Do this by reviewing testing exceptions.