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Imagine this, it's a late Wednesday afternoon and you are wrapping up your previous SOC engagement while simultaneously working on your current engagement. A check of your upcoming schedule reveals that next week, yet another SOC engagement for a client in your area looms. Juggling multiple engagements can be tricky, but must less so if there’s a tried and true process that’s become routine. Here are five easy steps to help an auditor prepare for a SOC engagement.

It may come as a bit of a surprise—maybe not—but there are actually two types of SOC reports. Upon examination, the service organization is responsible for specifying whether or not a “Type 1” or “Type 2” will be performed. It’s important to note the specific use of “Type” as a distinguisher--not “SOC 1” or “SOC 2,” as the different specified “types” are options for both the SOC 1 and SOC 2 reports. For those of you that are now thinking, “that’s confusing,” I agree 100% with you. In fact, “Type 2” and “SOC 2” are not at all the same thing, and the “type” of each SOC examination presents important differences for service organizations.

As global cyberattacks become more common, organizations are fine tuning, or even implementing, a cybersecurity risk management program — and there is no better way to validate your cybersecurity risk management program than with an independent validation.

Why would a financial services company need a SOC 1?

The short answer is...yes. Now for the long answer - a SOC 2 report requires that a service organization has sufficient control activities in place to address the Trust Services Principles and Criteria (TSPC) developed by the AICPA.  However, there are no stipulations by the AICPA as to what those control activities have to be.  As long as the criteria are satisfactorily addressed to align with the risks that a service organization has identified, a service organization has some flexibility with the controls they implement.

SSAE 18. You have probably seen blog articles circulating about the "new change" to SSAE 18, including Schellman’s article in Accounting Today.  Yes, the new standard imposes some important but relatively minor changes; changes which guide us, the service auditors performing these assessments.  You may even see some adjustments to our approach in your next SOC examination. 

Here are five steps to help successfully prepare: 1. Validate the Nature of the Request. Does your client base understand the various SOC reporting options and what they are asking of your organization from a compliance reporting perspective? Is there a connection to internal controls over financial reporting (ICFR) of the services that you provide to your clients, or are you looking at general controls of a system that are relevant to security, availability, processing integrity, confidentiality, and/or privacy? SOC 1 can oftentimes be misused by the general public as a generic reference to third party examinations. There is misconception in the marketplace; help prevent it.

I am often asked who is responsible for determining and selecting which principle(s) will be included in the scope of the SOC 2 examination, but the answer may not always be what service organizations want to hear.