Companies rely on various service providers to run their businesses and for continuous functionality of the operations. This can be seen when looking at cloud computing, data centers, and also software as a service. Also, there are some risks that will come along the convenience that these companies will be getting from the outsourced services. Internal control and their implementation are what will have to differentiate between various service providers that are available. Therefore, system and organization control is one of the ways to provide assurance to all the stakeholders in the sector. Hence, here is the definition and importance of the SOC report.
This is a report given to a business by a third party after examination on various controls that are there in the company. The report will be issued by a certified public accountant and it contains potential risks in the company. When you are dealing with another organization, it is important to make sure it is transparent for you to gain trust. Therefore, it is important to know more about the success ad failures since it will affect the reputation as well as their financial status. The services of a well-reputed company are always considered to be the best.
Knowing about the SOC, you need to understand their types. These types available are due to the diversity of controls that exist. SOC 1 is suited for the IT controls and also the business process controls. This is a report which might have a greater impact on the entity financial statement. The services of focus here include payroll processing, medical claims processing, and loan servicing companies. On the other hand, SOC 2 is directed towards the non-financial controls in an organization.
This, therefore, qualifies to be the best for overseeing the business performance. It can be the risk management issues, vendor management, oversight in the business, regulatory oversight, and many other programs. There are five main categories that the SOC 2 lies which are security, availability, processing integrity, confidentiality, and finally the privacy sector. Looking at the classes, they can be split further to get the types. This type of service is done to various organizations like the data centers, and also some network monitoring services that are there in the business environment.
When you get the auditor opinion, it is important for you to know what it means. In the categories, you will find the unqualified, qualified, adverse, and disclaimer opinions about the report generated by the auditor. Further examination of the report is needed for a conclusion. Among the opinions, an organization need to be yearning to get the unqualified opinion. Therefore, for the establishment of trust and transparency between an organization and the other entities, this is a good tool. SOC is therefore considered to be the best tool for an organization to give risk management assurance.