When it comes to SOC reporting, Systems and Controls are of paramount importance. An ISAE 3402 | SOC 1 report is geared towards financial outsourcing, including services like asset management, SaaS providers for financial software, and data centers responsible for financial data storage. On the other hand, ISAE 3000 | SOC 2 reporting encompasses a broader IT scope, catering to user organizations with additional requirements concerning security, availability, processing integrity, confidentiality, and privacy. These requirements fall under the umbrella of Trust Service Criteria or Trust Service Principles. Our consultants regularly guide boards of both corporations and SMEs in achieving the ultimate goal: obtaining a professional and unqualified SOC Report. But how can you reach this goal?
The initial steps involve understanding the criteria, defining the audit scope, and adhering to a structured approach for implementation. In this article, we will outline the process – the “how.” Receiving an unqualified report hinges on various factors and necessitates disciplined adherence to procedures and controls. However, effective structuring and planning can make a substantial difference.
The criteria for an ISAE 3402 | SOC 1 report are primarily contingent on the reporting procedures of the user organization, the SLA agreement, and other user organization requirements. In contrast, the criteria for an ISAE 3000 | SOC 2 report are developed by the American Institute of Certified Public Accountants (AICPA). The AICPA has devised Trust Service Criteria, which provide a more detailed framework covering the control environment, risk management, communication, and specific technical criteria.
In simpler terms, the Trust Service Criteria outline what needs to be achieved, while organizations are granted the flexibility to develop the controls – the “how.” During SOC audits, auditors verify, observe, and re-evaluate an organization’s controls to determine whether they are well-designed, operational, and effective in achieving the desired outcomes. The first step in the SOC implementation process is defining the audit scope.
Obtaining a comprehensive understanding of the organizational environment and systems is crucial for defining the audit scope. This is precisely why Risklane’s SOC implementation projects commence with a meticulous analysis of the organization, its infrastructure, the services it delivers, and its processes. Without this analysis, the quality of the SOC report may fall short, potentially leading to a qualified opinion or, at the very least, an ineffective ISAE 3402 | SOC 1 or ISAE 3000 | SOC 2 audit. For an ISAE 3000 | SOC 2 report, the subsequent step is grasping the Trust Service Criteria.
Understanding Trust Service Criteria
The first phase in comprehending the criteria entails obtaining them from the AICPA website and studying them in conjunction with the defined scope. Although the Trust Service Criteria documentation is quite extensive and may at times feature complex language, dedicating time to study it will ultimately yield dividends during the audit. The Trust Service Criteria document includes examples for each criterion, highlighting the associated risks and controls that typically mitigate these risks. After grasping the criteria, the next step is aligning controls with risks and vice versa.
Mapping Risks and Controls
One of the most common issues identified in existing frameworks is the presence of non-matching or redundant controls. Non-matching controls are those that do not effectively cover a defined risk or are absent where risks exist (control mismatch). Redundant controls, on the other hand, are controls covered by others or that do not address any risk at all. These redundant controls essentially exist without a genuine purpose. Following this analysis and matching, the subsequent phase involves creating a Control Matrix.
Creating a Control Matrix
Documentation of control objectives and related controls within a structured Control Matrix proves beneficial for several reasons. It serves as a foundational source for structuring and implementing risk controls and becomes a vital reference document for SOC auditors. For instance, Trust Services Criteria related to monitoring controls are aligned with a list of confirming controls, illustrating how these controls mitigate the relevant risks, demonstrate effective design, and operate efficiently. In our experience, these details should be as comprehensive as possible, addressing questions such as: Who is responsible for the control? What information is employed? What are the outcomes? How is this documented? Providing answers to these questions greatly assists the auditor in validating the presence of controls, their alignment with control objectives, and their effectiveness. In future articles, we will delve deeper into structuring your control framework. After this phase, the readiness assessment and remediation take place, preparing for the audit.
The aforementioned process may seem daunting at first, but there’s no need to panic. We are always available to support you throughout the process. We can aid in defining the scope, understanding the Trust Service Criteria, and providing guidance on effectively aligning controls with risks and eliminating redundant controls. You can also consider acquiring a ControlReports license for ISAE 3402 | SOC 1 or ISAE 3000 | SOC 2 implementation, which offers a well-defined approach and efficient workflow for scoping, understanding, and defining the