To ensure vendors provide protective and reliable services, your organization can request a system and organization controls (SOC) report. Conducted by an external auditor, SOC reports are official documents that review vendor practices. They are crucial to help verify you can trust the vendor with sensitive information.<\/p>\n
SOC reports help businesses gauge how reliably their vendors protect their data. They also reveal any potential vulnerabilities in vendors\u2019 services. By requesting and properly evaluating SOC reports, organizations can make informed decisions to mitigate cybersecurity risks<\/a>.<\/p>\n Because there are three types of SOC reports, selecting which one to request from a service provider can be tricky. Choosing the right SOC report <\/a>ensures you are evaluating a vendor for services that are essential to your daily operations.<\/strong> If you don\u2019t choose the right SOC report, you might be assessing your vendors for less critical services, thereby missing crucial insights into their operations.<\/p>\n In this blog, we will break down the variations of SOC reports so you can choose the right one. You’ll learn how to find a report that aligns with your organization\u2019s needs and protects its greatest assets.<\/p>\n The basic intentions of the three reports are as follows:<\/p>\n Below, we elaborate on what SOC 1 and SOC 2 reports entail. This includes who the intended user is, and which organizations would benefit the most:<\/p>\n Another consideration is whether to obtain a Type 1 or Type 2 SOC report.<\/p>\n Type 1 reports can provide extensive detail about a service organization\u2019s purpose and controls. When you need more rigor and due diligence, Type 2 tests those controls to assess their operating effectiveness.<\/p>\n An example of a situation requiring a SOC 1 would be ABC Inc. ABC is a publicly traded company that outsources its payroll processing to a vendor. ABC\u2019s financial auditor and internal audit department need to obtain a SOC 1 Type 2 report to gain comfort over the controls at the payroll processing vendor in terms of internal control over financial reporting.<\/p>\n In this case, both management (typically through the internal audit department) and external auditors are the intended users of the report. It is built to support their purposes and goals. They need comfort in internal control over financial reporting to properly support their related certifications and opinions.<\/p>\n An example of a situation involving a SOC 2 would be BCD Bank. BCD outsources its data center function to an external data center company. The security, compliance, operations and other functions at BCD want to gain comfort over one or all the five trust principles at the data center provider.<\/p>\n A report focused on internal control over financial reporting may touch on those principles. However, it would not provide comfort in those areas that a SOC 2 report does. SOC 2 shows whether the controls at the service organization address the trust services principles. It provides evidence on whether the service organization is operating controls as committed or agreed.<\/p>\n A question that often follows these descriptions is \u2013 Are there companies that should issue both a SOC 1 and SOC 2? Increasingly, the answer is becoming yes.<\/strong><\/p>\n In our second example of BCD Bank, let\u2019s add that BCD is a publicly traded entity or one that has a strong need related to internal control over financial reporting. BCD\u2019s financial and internal auditors want to see a SOC 1 report related to the data center. This is in addition to other department needs for the detailed rigor of SOC 2 surrounding trust services principles. With that fact pattern, both SOC 1 and SOC 2 apply.<\/p>\n In this blog, we provided some high-level facts about a complicated process. Understanding the nuances of SOC reports will empower your organization to make informed decisions about the quality of services your vendors provide. Choosing the right SOC report tailored to your organization\u2019s specific concerns is essential to secure your sensitive information and minimize risks.<\/p>\n In our upcoming articles, we will explain how you should review SOC reports and evaluate the external auditor\u2019s opinion so you can strengthen your organization\u2019s cybersecurity defenses<\/a> and enhance its overall wellbeing.<\/p>\n \n The Three SOC Reports<\/h2>\n
\n
SOC 1 and SOC 2 Reports<\/h3>\n
\n
Type 1 and Type 2 SOC Reports<\/h3>\n
\n
Three SOC Scenarios<\/h2>\n
Soc 1<\/h3>\n
Soc 2<\/h3>\n
Soc 1 and Soc 2<\/h3>\n
Conclusion<\/h2>\n