Our customers and potential customers regularly question us, “What are SOC 1 reports and when they should be considered?” We normally reply by asking, “Can your service impact the financial statements of your clients?”
WHAT IS & WHO CAN PERFORM A SOC 1 AUDIT REPORT?
An audit report with a SOC 1 scope covers tests and goals for both business process and information technology controls. A CPA company that specialises in assessing IT security and business process controls must issue a SOC 1. Reports used for attestation are SOC 1 reports. Know more about soc 1 vs soc 2
A CPA firm evaluates the controls connected to management’s assertion and expresses an opinion on whether it agrees with management’s assertion in a SOC 1 report. Management claims certain controls are in place to achieve the control goals listed in the report. There is no standard set of requirements verified for SOC 1s; instead, they are customised for the service organisation receiving them. Contrary to a SOC 2 report, which has standards for preset trust services, this one does not. A qualified or unqualified auditor’s opinion will be included in a SOC 1 report.
HOW DO CONTROL OBJECTIVES WORK? WHAT PURPOSE DOES A SOC 1 REPORT SERVE?
The goal for controls inside a SOC 1 process area is known as a control objective. You might think of them as broad statements for each component of the report’s audit process. The risks that control in each process area are designed to reduce should be the focus of control goals.
A SOC 1 report’s scope encompasses all of the pertinent control objectives it addresses. An example of a sample control aim is:
Controls offer a reasonable level of assurance that only authorised and appropriate users are permitted logical and physical access to programmes, data, and computer resources relevant to user entities’ internal control over financial reporting and that these users are only permitted to carry out authorised and appropriate actions.
Finding control goals that effectively address the risks assumed by system users is the goal of the auditor working with management. Controls inside a specific process support control goals. A Type II SOC 1 report must have sufficient controls that are designed and operating correctly for each control objective to make the control objective assertion without qualification.
SOC 1 REPORT: WHO NEEDS ONE?
SOC 1 reports may be obtained by any number of service organisations. The possible influence on the ICFR of user entities should be the unifying thread throughout service organisations. The following are a few instances of organisations that could get SOC 1 reports:
- Processing of payroll
- Healthcare claim administrators
- Companies that service loans
- Datacenter businesses
REPORT SOC 1 SUMMARY
Your clients or stakeholders could demand that your business obtain a SOC 1 report. SOC 1 reports encompass the goals of business process controls and basic IT controls that deal with user risks associated with using your service.