Dive Into SOC Report Essentials: A Comprehensive Guide for Business Owners
If you’re a business owner working with third-party vendors, specifically those handling data or financial transactions, you’ve probably experienced requests for or received a SOC report. Short for “System and Organization Controls reports,” these are essential for verifying that service providers maintain secure and reliable systems.
But understanding the answer to the question “What is a SOC report?” is only the start. While many companies know they need a SOC 1 or SOC 2 report, few understand how to review them properly or what to do once they receive them.
Becoming more informed is a vital part of managing your risk and building trust. In our latest article, we explore SOC reports in-depth, covering the differences between SOC 1 and SOC 2, what to look for in an audit, and how to interpret the findings to protect your organization.
What Is a SOC Report?
A SOC report is a confirmation from an independent auditor that a service organization has established internal controls to safeguard its systems and data. Issued by licensed CPA firms and governed by the American Institute of Certified Public Accountants (AICPA), these reports assess whether a company’s controls are appropriately designed and functioning effectively
Broadly, SOC reports are requested by businesses, known as user entities, that rely on external vendors for services such as payroll, IT infrastructure, or cloud storage. The goal? To understand whether those services can be trusted, especially when it comes to data security, financial reporting, or system availability.
A well-reviewed SOC report can help prevent costly errors, protect customer trust, and satisfy regulatory scrutiny. But understanding what’s actually inside these reports, and how to interpret them, is key.
Categorizing SOC Reports
SOC 1 vs. SOC 2: Key Differences
Two of the most commonly requested reports are SOC 1 and SOC 2, but they serve two distinct purposes.
A SOC 1 report focuses on controls affecting internal controls over financial reporting (ICFR). This is particularly pertinent if your business offers services such as billing, claims processing, or payroll—essentially anything that may directly influence your company’s financial statements.
In contrast, a SOC 2 report is more suitable if you are a technology and cloud-based service provider. It evaluates controls based on five Trust Services Criteria:
- Security (mandatory)
- Availability
- Confidentiality
- Processing Integrity
- Privacy
Organizations that handle customer data, including Saas platforms and managed IT services, often need to present a SOC 2 report to demonstrate their ability to effectively safeguard that information.
Type I vs. Type II Reports
Both SOC 1 and SOC 2 reports come in two types:
- Type I reports evaluate the design of controls at a specific moment in time.
- Type II reports assess both the design and operating effectiveness of those controls over a period, typically ranging from 6 to 12 months.
Type II reports offer more value, especially for ongoing vendor management or long-term partnerships, because they reveal how consistently your company actually applies the appropriate controls.
What About a SOC 3 Report?
While companies get SOC 1 and SOC 2 reports for detailed internal reviews and are typically restricted to clients or auditors, SOC 3 reports serve a different purpose.
A SOC 3 report is meant for public distribution. It covers the same Trust Services Criteria as a SOC 2 (such as security, availability, and confidentiality), but it omits sensitive details, including control testing procedures and specific exceptions.
This makes SOC 3 ideal for marketing or building trust on your company’s website, where prospective customers can see that an independent audit has been completed without exposing operational specifics.
If you're looking to demonstrate security compliance to a broader audience without revealing too much, a SOC 3 is a valuable complement to your SOC 2 report.
Understanding What’s Included in a SOC Report
Understanding the contents of a SOC report helps you to read it with confidence. Most reports contain the following core components:
Auditor’s Opinion
Found in Section I, this outlines whether your company’s controls are suitably designed and/or effective. In this section, you want to see “unqualified opinion” in your report. And if your auditor indicates “adverse” or “disclaimer of opinion”, this indicates issues that require closer scrutiny.
Management Assertion
In Section II, the service organization asserts that your business has an accurate system description and that your team correctly implements the outlined controls. If this is missing or doesn’t align with the auditor’s findings, that’s a red flag.
System Description
Section III outlines the systems and services in scope, the locations where controls were tested, and descriptions of relevant processes. Pay close attention to ensure that the systems your company uses are indeed covered.
Testing and Results
In the final section, the auditor outlines each control, how it was tested, and whether it passed. It’s not uncommon to find exceptions, but understanding their significance and whether they were addressed is vital.
Reviewing Your Company’s SOC Report Effectively
Who Should Review
Typically, both internal and external auditors are the first to review SOC reports, particularly during audits or vendor due diligence. However, management teams, compliance officers, and IT leaders also have a vested interest in the review.
Remember, if a vendor is part of your core infrastructure, you need to assess whether their operations fulfill your security and compliance expectations.
Business leaders should also ensure that their teams review these reports regularly, not just once and then forget about them. SOC reports should become part of your vendor management and third-party risk program.
How To Review
Reading a SOC report without a clear review strategy can feel overwhelming. Here’s what business leaders and compliance teams should focus on:
Start with the Scope and Period
Ensure the report addresses the appropriate systems and services, particularly if a vendor offers multiple products. Verify the audit period since an outdated report may not accurately reflect current practices. If necessary, request a bridge letter to cover any gaps between audit periods.
Verify the Subservice Organization Treatment
Many service organizations rely on other providers. For example, a SaaS company may use AWS for hosting. The SOC report will indicate whether these subservice organizations are included (inclusive method) or excluded (carve-out method) from the SOC audit. If critical services are carved out, your business may need to request their SOC reports separately.
Evaluate Complementary User Entity Controls (CUECs)
SOC reports often include a list of controls for which your company is responsible. These may include measures such as restricting admin access or enabling multi-factor authentication. If these are not implemented on your side, the overall control environment might not function as intended, even if the vendor’s controls are robust.
Assess the Exceptions and Responses
Not every test will pass, and that’s okay. As long as the vendor has documented the issue, explained the root cause, and described a remediation plan, it’s OK that you don’t pass every single test.
Consider how each exception might impact your business. Was the affected control critical? Is the issue ongoing or resolved?
When to Ask Questions (and What to Ask)
Once you’ve received your SOC report back, it’s crucial you ask any questions or bring up concerns if the audit is unclear. Whether it's a vague exception, a missing service, or an outdated audit period, ask your vendor.
A reputable and reliable SOC 2 auditor will want to help answer all your questions and support you in closing your company’s gaps. SOC reports are complex documents, and even experienced auditors may need clarification from time to time. Be proactive and maintain open communication. Questions to consider include:
- Why is a key system not covered in this SOC report?
- Can you provide a bridge letter for the gap in coverage?
- Has the issue noted in the exception been remediated?
- Are your sub-service providers SOC compliant?
Turn SOC Reports Into Strategic Assets
SOC reports aren’t just technical documents; they’re strategic tools!
Whether you need a SOC 1 or SOC 2, they help you determine whether a service provider is trustworthy, resilient, and aligned with your own compliance and risk goals. And when correctly reviewed, they offer insight not just into the vendor’s systems, but into how your internal controls interact with theirs.
By learning the essentials of SOC reporting and how to read and evaluate the different audit reports, you’re protecting your business. Furthermore, you’re building a more secure and trustworthy outlook for your company.
Use these reports to ask better questions, improve your internal policies, and ensure that the vendors you depend on are truly up to the task.
At Securisea, we help organizations like yours prepare for and navigate SOC 1, SOC 2, and other compliance audits. With over 20 years of SOC auditing expertise, we offer professional guidance, gap assessments, and full-scope assurance services to each client.
Whether you're reviewing a vendor's report or preparing your own, our team ensures all the security frameworks meet today’s most rigorous standards. Talk to a Securisea Expert and take the next step toward a more innovative strategy and stronger compliance to grow your business efficiently.
Success Story: Altair + Securisea
Altair selected Securisea in 2023 to support its ISO/IEC 27001:2022 initial certification audit. Previously, Altair achieved various other compliance certifications, but this was its first foray into ISO 27001. As a global technology company, Altair takes information security seriously and sought achieving ISO 27001 certification to follow the latest global information security frameworks. Additionally, for Altair’s enterprise-level customers, having ISMS certification is becoming more important. In a world where the security boundaries between client and vendor are blurring, an ISMS demonstrates Altair's commitment to information security.
Altair told our team that they had seen many different platform options for assisting with ISO 27001 certification, but they wanted experienced, talented people working on their audit - not just a software platform. They shared that they were looking for collaborative auditors who would both give them a “fair crack of the whip” to drive good business behaviors, but at the same time provide the guidance and feedback they needed to ultimately achieve certification at the end of the process.
Our team at Securisea thoroughly enjoyed working with Altair. The audit process presented some real logistical and language challenges, which we were able to accommodate with ease. Altair has over 3,000 engineers, scientists and other team members spread across 29 countries. They have experienced, tenured professionals that were prepared, and able to quickly tackle any roadblocks that we discovered along the way. Securisea has personnel on the ground globally, which allows us to quickly adapt to country-specific needs and requests, while remaining agile and moving the certification process forward in a timely manner.
Despite their rapid growth, many acquisitions, and large global footprint, Altair has a tremendous open and collaborative culture, with some very security-minded controls in place that made this team a pleasure to work with, and we can’t wait to tackle our next project together.
Securisea Attains “STAR Attestation Auditor” Certification from Cloud Security Alliance
Firm offers SOC2, ISO + CSA STAR Audits
(Annapolis, MD, May 28, 2024) Securisea, a leading provider of security and compliance services, announced today that they have achieved CSA STAR Attestation (Security, Trust, Assurance and Risk) Auditor Listing from the Cloud Security Alliance. STAR encompasses the key principles of transparency, rigorous auditing, and harmonization of standards outlined in the Cloud Controls Matrix (CCM). Publishing to the registry allows organizations to show current and potential customers their security and compliance posture, including the regulations, standards, and frameworks they adhere to.
Securisea is one of only a handful of audit firms in the world certified to provide CSA STAR, ISO27001 and 27701, SOC2, SOC1, PCI DSS, FedRAMP/StateRAMP 3PAO, HITRUST & HIPAA assessments all under one roof. Their integrated compliance approach allows clients to leverage existing security controls from other frameworks directly into each engagement, reducing overhead and work duplication.
Founded in 2006, Securisea provides audit support for organizations of all sizes, from startups to some of the world’s most security-minded technology companies. Their customers rely on them to continue to evolve to meet an ever-changing security and compliance landscape, while maintaining a high level of expertise, responsiveness, and customer service to every unique engagement.
“We are thrilled to be able to add STAR Attest Audit services to our expanding portfolio of security and compliance offerings,” said Josh Daymont, CEO of Securisea.
“Our clients choose us again and again because of the efficiencies they can achieve with multiple assessments through a single auditor. Expanding our offerings to include STAR Attestation Audits, in combination with our strong team of experts, will fuel our growth in the years ahead.”
About Securisea
Securisea is a leading provider of security and compliance services, helping companies secure their sensitive data and systems. With a personalized approach to customer service and a deep understanding of the unique needs of large enterprise companies, Securisea has built a reputation for delivering reliable, effective, and efficient security and compliance solutions.
For more information, please visit http://www.securisea.com.
Contact Information:
Josh Daymont, CEO
sales@securisea.com
1 877-563-4230
Press Release: Securisea Authorized as HITRUST External Assessor, Expands its Range of Security and Compliance Services
San Francisco, CA (PRWEB) March 25, 2023 -- Securisea, a leading provider of security and compliance services, is proud to announce that it has become an approved HITRUST External Assessor. As a HITRUST External Assessor service provider, Securisea can now offer its clients a more comprehensive range of security and compliance services, including assessment and audit services associated with the HITRUST Assurance Program and the HITRUST CSF comprehensive security framework.
"We are extremely proud to have become an authorized HITRUST External Assessor," - Josh Daymont, CEO of Securisea.
Founded in 2006, Securisea has a wealth of experience in helping companies secure their sensitive data and systems. With a personalized approach to customer service and a deep understanding of the unique needs of large enterprise companies, Securisea has built a reputation for delivering reliable, effective, and efficient security and compliance solutions.
The HITRUST authorization demonstrates Securisea's commitment to providing its clients with the highest security and compliance standards. HITRUST is a leading healthcare information security framework and one of the industry's most widely recognized and respected security standards. The authorization ensures that Securisea has the knowledge, experience, and resources to help its clients meet the complex security and compliance requirements of the healthcare sector.
"We are extremely proud to have become an authorized HITRUST External Assessor," said Josh Daymont, CEO of Securisea.
"This is a testament to our team's hard work and dedication, and we believe that it will help us better serve our clients and meet their evolving security and compliance needs."
Adding HITRUST authorization to Securisea's portfolio of services enhances their team's ability to help security and technology executives at large enterprise companies ensure that their sensitive data is protected. With its commitment to providing personalized, high-quality security and compliance services, Securisea is well-positioned to help its clients navigate the rapidly changing security and compliance landscape.
About Securisea
Securisea is a leading provider of security and compliance services, helping companies secure their sensitive data and systems. With a personalized approach to customer service and a deep understanding of the unique needs of large enterprise companies, Securisea has built a reputation for delivering reliable, effective, and efficient security and compliance solutions.
For more information, please visit http://www.securisea.com
Josh Daymont, Securisea, http://www.securisea.com,
1 877-563-4230, sales@securisea.com
Press Release: Securisea Becomes First FedRAMP 3PAO Accredited Through New Process
In June of 2018, A2LA initiated a new system for third-party assessment organizations (3PAOs) seeking to become FedRAMP accredited. Under this system, any organization seeking to become an accredited 3PAO must first become accredited to A2LA’s Cybersecurity Inspection Body Program. Organizations accredited to this program will spend approximately one year demonstrating their adherence to the requirements of the cybersecurity program before opting to transition to the FedRAMP program. This two-step process serves to first establish a level of more generalized technical competence in the cybersecurity field before organizations are considered for the more specialized FedRAMP program. We are pleased to announce that San Francisco-based information security company Securisea is the first company to achieve FedRAMP accreditation through this newly implemented A2LA process.
Securisea is an information security company that provides a diverse array of consulting and training services. They gained their initial accreditation under the cybersecurity program in July of 2019, and thanks to promptness and diligence on their part they achieved FedRAMP 3PAO accreditation just under a year later. Securisea made the decision to pursue accreditation to A2LA’s cybersecurity program shortly after it was launched in 2018, and many other organizations have now also achieved accreditation. Several companies not seeking to become 3PAOs are also now accredited through the cybersecurity program, as it provides confirmation from an independent third party that the organization is competent and compliant, which serves as a valuable competitive advantage in their field.
For those organizations like Securisea who are pursuing FedRAMP 3PAO accreditation, the newer two-phase approach streamlines and clarifies their overall process, in addition to supporting the stringent FedRAMP requirements. Accreditation to A2LA’s Cybersecurity Inspection Body Program establishes an organization’s competence in the cybersecurity field based on the requirements of ISO/IEC 17020, the international standard for inspection bodies, as well as the relevant program specific requirements. Maintaining this accreditation involves continuous monitoring that supports an organization’s readiness to move forward with the more stringent FedRAMP accreditation requirements.
For more information about Securisea and the services they provide, please visit securisea.com. To learn about A2LA’s Cybersecurity Inspection Body Program and the FedRAMP 3PAO Accreditation Program, visit A2LA.org or contact us directly through our online contact form.
