The Essentials of Service Organization Control Reports

Today’s businesses rely heavily on outsourcing certain business functions to third-party service organizations which are often core to their operations. Third parties (aka Service Organizations) create additional risks for the user entity. Security has become increasingly more critical in light of ongoing high profile internal-control breakdowns, hacking, privacy breaches and fraud. To address the need for security and compliance user-entity management has increased their due-diligence and governance oversight of service organizations. Rapid technological changes have heightened the need for service organizations to demonstrate the confidentiality, integrity, and accuracy of systems used to process user entities’ data.

User entities want trust to be independently verified. The AICPA´s Service Organization Controls (SOC) reports demonstrate that the organization went through an in-depth audit of their controls, specifically the control objective and control activities. SOC reports are widely recognized as “the gold standard” for assessing internal controls of service provider organizations.

Advantages of a SOC 2 to the Service Organization

  • Provides a competitive advantage over other businesses in your industry that don’t have a SOC Report.
  • SOC reports help win new business and are often pre-requisites to RFP’s
  • Builds trust and confidence with clients; reinforces client relationships.
  • Positive impact on ensuring controls are properly designed and operating effectively.
  • Assists with meeting other regulatory and compliance requirements such as PCI, HIPAA, and SOX.
  • Identifies opportunities for improvements in operational areas.
  • Helps steer the organization’s operations to offer improved services by understanding the risk faced by clients.


Advantages of a SOC 2 to the Service Organization’s Clients

  • Provides an independent assessment of the Service Organizations control structure
  • Creates trust and reduces the risk of doing business with the Service organization
  • Eliminates cost to clients in sending their auditors to Service Organization to perform their procedures
  • Assists client’s auditor in planning the audit of your client’s financial statements
  • Assists clients in meeting their own regulatory and compliance requirements such as PCI, HIPAA, SOX, GLBA, Red Flag