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System and Organization Controls Drive Trust with Transparency
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November 19, 2023 | Issue | | |
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The fundamental assumption at the core of outsourcing is that the service provider (the service organization) will be able to build a robust internal control framework. In doing so, the user organization (the organization that outsources activities) needs to gain comfort that the data, processes, inputs and outputs at the service provider’s location are effectively handled and the service organization is able to mitigate risks relating to financial reporting, security, availability, confidentiality, processing integrity, privacy of their customer’s data, cyber security & supply chain.
System and organization control (‘SOC’) attestations (formerly known as SAS 70 or SSAE 16 attestations) are gaining prominence due to the ability of this attestation to enable service organizations meet their customer’s requirements in the context of the afore-stated risk considerations. In addition, regulations in the United States of America and across the globe, require organizations to implement and maintain effective data security and privacy controls. SOC compliance (specially SOC 2 and SOC for cyber security) can help organizations meet these requirements.
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Why get a SOC attestation | |
Initially designed specifically for technology and cloud computing organizations, SOC attestations have become a gold standard for demonstrating a service organization’s ability to address a relatively wide ambit of risks pertinent to the user entity.
With increasing number of the user organizations requesting for SOC attestations, you run the risk of losing out on business opportunities if your organization does not have the relevant SOC attestation in place.
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Relevance of this thought leadership | | |
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MGC Global Risk Advisory is the member firm of choice for Allinial Global’s PCAOB registered CPA firms, to facilitate their SOC attestations from India. Having worked with several service organizations across the globe, we are publishing this thought leadership to enable you understand pertinent considerations and intricacies, so that you can determine an appropriate scope, nature & type of attestation that will enable your organization meet the objectives for which you are seeking a SOC attestation.
You will in the process save costs and your time.
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Deciding on the type of SOC attestation | | |
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A SOC 1 attestation enables helps a service organization examine and report on its internal controls relevant to its customers’ financial statements. This is typically undertaken for organizations that process or impact financial transactions for their clients, such as payroll processors, data centers, or financial application providers.
A SOC 2 audit examines and reports on a service organization’s internal controls relevant to one or more of 5 Trust Services Criteria (‘TSC’)s, which are (i) security; (ii) availability; (iii) confidentiality; (iv) processing integrity; and (v) privacy of their customer’s data. The objective of a SOC 2 report is to enable the clients and stakeholders of the user organization effectively manage their risks related to one or more of the 5 TSCs. The SOC 2 report applies to a broader range of service organizations, including cloud services, data storage, or other IT services, where data security and system performance are vital.
A Type 1 attestation provides a report of procedures / controls that are in place at a point of time (example - at September 30, 2023), while a Type 2 report covers the period that corresponds to the operation of the controls (example - 9 months ended September 30, 2023).
As a service organization, you will first need to decide on the nature of the SOC attestation (i.e., SOC 1, SOC 2, SOC 3, SOC for Cyber security or SOC for Supply chain). The second aspect that you would need to address is the type and period of the SOC 2 report (i.e., Type I or Type II) to meet your objectives. You can then proceed to assess your current standing vis a vis the compliance requirements for the relevant SOC attestation and get a detailed readiness report with a road map for compliance. Once you have closed the identified compliance gaps in the readiness assessment, you are set to hire a PCAOB registered CPA firm for your SOC audit/attestation.
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Set out in the ensuing table is an overview of the key differences between various SOC attestations. | | |
| Nature of report | Users | Purpose | Coverage | | SOC 1 | User entity’s controllers’ office.
User entity’s auditors. | Audits of financial statements. | Internal controls relevant to the customers’ financial statements. | | SOC 2 | Internal management.
Regulators. | GRC programs.
Oversight.
Due diligence. | TSCs. | | SOC 3 | General public. | Marketing. | TSCs. | | SOC for cyber security | Senior management.
Board of directors.
Analysts.
Investors.
Business partners. | To provide intended users with information about an entity’s cyber security risk management program for making informed decisions. | Enterprise-wide cybersecurity risk management program | | SOC for supply chain | Senior management.
Board of directors.
Analysts.
Investors.
Business partners | To provide intended users with information about the controls relevant to the SOC 2 Trust Criteria and enable management assess risks arising from business relationships with their supplier and distribution networks. | Enables an entity that produces, manufactures, or distributes products to have a supply chain assurance report. | | |
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Please do not hesitate to reach out to our SOC team by writing to [email protected].
They will help you in ascertaining (a) the relevant SOC attestation for your requirement; (b) your current state of readiness for the same; (c) develop a road map with assistance in preparing for SOC attestations; and/or (d) connect you with one of our member (PCAOB registered CPA) firms for your SOC attestation.
Have a great Sunday!
Best regards
Markets Team
MGC Global Risk Advisory
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About MGC Global Risk Advisory
Recognized as one of the '10 most promising risk advisory services firms' in 2017, as the 'Company of the Year' in 2018 &, 2019 (both in the category of risk advisory services), one of the 'Top Exceptional Companies to Work For' in 2020, amongst the 'Top 25 Customer Centric Companies' in 2020, 'The Consultant of the year' in 2021 (in the category of risk advisory services) and 'Top Exceptional Leaders in Risk Advisory Services' in 2023; MGC Global is an independent member firm of Allinial Global.
MGC Global provides services in the areas of internal audits, enterprise-wide risk management, control assessments (SOC, IFCR & SOX), process re-engineering, governance frameworks, IT risk advisory, GDPR, VAPT, ISO readiness, cyber security, vCISO, CxO transformation, forensic, ESG & CSR services.
Our firm has the capabilities to service its clients through its offices in Bengaluru, Mumbai, NCR; and has service arrangements with associate firms in all major cities in India.
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About Allinial Global
Allinial Global (formerly PKF North America) is currently the world's second-largest member-based association (with collective revenues of approximately US$ 5 billion) that has dedicated itself to the success of independent accounting and consulting firms since its founding in 1969. It currently has member firms in over 105 countries, who have over 28,000 professional staff and over 6,000 partners operating from nearly 700 offices across the globe.
Allinial Global provides its member firms with a broad array of resources and support that benefit both its member firms and their clients in the key impact areas of learning and development, human resources, international outreach, technical support, knowledge-sharing through its specialized communities of practice, information technology and practice management.
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