What are System and Organizational control reporting?
System and Organizational control reporting permit companies to feel assured that service providers are operating in an ethical and amenable manner. System and Organizational control reporting establish credibility and trustworthiness for a service provider. System and Organizational control reporting employ independent, third-party auditors to examine various aspects of a company, such as:
- Reliability
- Accessibility
- Integrity
- Confidentiality
- Privacy
- Appropriate financial reporting
- SOC Cyber security
The System and Organizational control reporting are more advantageous for assessing the effects of the controls over financial reporting. SOC Reporting holds service organizations more diligently manner in terms of security controls and are guarantees to include testing of all relevant controls criteria because the supplier cannot define their control objectives.
Need for SOC Reporting
The need for SOC Reporting is required in the business as the stakeholders demand for trust and transparency. The organizations devote significant time and resources to deliver assurance. SOC Reporting helps the organization in providing cognizance and stakeholder assurance. SOC reporting offers connectivity and repeatable reporting process where companies can assess once and report out to many stakeholders. SOC reporting:
- Minimizing the compliance costs and time spent on audits and writing out the supplier questionnaires.
- Meeting contractual commitment and marketplace concerns through flexible, custom-designed reporting.
- Foreseeing risks across the organization.
- Enhances trust and transparency to the stakeholders.
Benefits of SOC Reporting
With a period of time, the organizations have increased their dependency on 3rd party service providers to perform business functions. The service providers help in maintaining the stakeholder trust and transparency by providing an independent System and Organizational control reporting. As a service organization, there are various benefits of SOC Reporting.
- SOC Reporting help assess the effectiveness of controls related to the services performed by the organization, which is not only beneficial for user entities but also for the organization, as well.
- Helps in reducing the third-party supplier risk.
- System and Organizational control reporting are suitable for understanding how the organization keeps administration over third parties that provide services to customers.
- The reporting helps in reducing the compliance commitment by providing the summarized report that represents the collective needs of multiple user entities.
- Enhances the service organization's ability to obtain and retain customers. SOC reporting and compliance is used as a marketing tool to differentiate themselves from their competition.
- System and Organizational control reporting increase the visibility of service providers.
- It clarifies the responsibilities between the organization and its clients.
- Identifies the risk across the organization.
Types of System and Organization control Reporting
SOC reporting differentiates the organization from its peers by forming the effectively designed internal corporate governance and management. It focuses on offering assurance that the service of the organization is put in place to protect their clients assets.
Majorly, there are 3 types of SOC Reporting:
SOC 1 report emphasis on outsourced services performed by service organizations that are relevant to a company financial reporting. SOC 1 report is used for assessing the effectiveness of the controls at the service organization on the user entities financial matters.
SOC 2 report directs operational risks of outsourcing to third parties outside financial reporting. These reports are based on the Trust Services standard which includes five elements: security, accessibility, management of integrity, confidentiality, and privacy.SOC 2 reports aim to meet the needs of a wide range of users who need proper information and assurance about the controls at a service organization related to security, accessibility, integrity, confidentiality, and privacy of the information processed by the systems.
SOC 3 is termed as a SysTrust or Web Trust which covers similar reporting areas as the SOC 2, but SOC 3 is not as comprehensive as SOC 2. SOC 3 report does not include certain details of the description and results of testing. SOC 2 report restricts the users whereas a SOC 3 reporting is a general-use report which is a great tool for marketing purposes.
What is SOC for Cyber security?
SOC for Cyber security is a market-oriented, flexible, and voluntary reporting structure to assist the organizations in managing their cyber security risk and the credibility of controls within that program. SOC for Cyber security is important for larger enterprises that need to calculate their cyber security position. SOC for Cyber security needs to quantify risk over time for board members who want to know if cyber security risks are being appropriately rectified.
SOC Assessment process
SOC assessment process which helps in determining the organization that which type of SOC reporting will benefit the organization. The SOC Assessment process begins with a SOC Readiness Assessment. The process is designed to help the organization in identifying the deficiencies, gaps, and other potential warnings so that the management can understand the ways to improve the situations. SOC Assessment process includes working with an auditing firm that specializes in SOC reporting.
Why request for System and Organizational control reporting from the suppliers?
In general, the suppliers do not offer a System and Organizational control reporting, which results in bad consequences that the organization needs to consider during the supplier Due to diligence analysis. Practically, there are no specific criteria for any supplier to produce a System and Organizational control report. The request for a System and Organizational control report needs to come directly from supplier's clients. The client must inform the supplier about the due diligence criteria. Many suppliers that are new to the industry must not be aware of the presence of the SOC reporting until their clients will not start to levy pressure on them.
The client shall ask for the Right SOC Report
The client shall ask for the right SOC report with its supplier. SOC Reports include all various aspects and elements of the organization. SOC 1 report is favourable for evaluating the effects of the controls over financial reporting. Whereas SOC 2 or SOC 3 report includes the aspects related to system security or availability rather than financial transaction processing.
Some organizations that produce both a SOC 1 and a SOC 2 report based on the types of services they offer to their specific clients. So it is important to make sure the report is most appropriate for the organization's risks.
It is the responsibility of the user organization to request, receive, and review the SOC reports and confirm that the reports address the appropriate services received. It is very important for the user organization to proactively monitor its suppliers activities and request SOC report from them.
How TAP GLOBAL helps its client in SOC Reporting?
TAP GLOBAL through its professionals brings proficiency and cognizance in the organizations reporting process. Our team of experts helps the organization in directing the complexities of SOC certification and reporting by:
Performs a vigilant assessment using the relevant SOC framework and provide recommendations to its client for improvement. It helps in identifying the areas with potential gaps.
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