Tag: ISAE 3000

SOC 1 & SOC 2

The primary and widely used term for service organizations reporting on third-party risks to user organizations is the Systems and Organization Control Report, often referred to as the SOC report. This term was introduced by the American Institute of Certified Public Accountants (AICPA) as a replacement for the SAS70 framework.

Previously, these were known as Service Organization Control reports. SOC encompasses a suite of reports that originated in the United States. ISAE 3402 is aligned with the US Statement on Standards for Attestation Engagements (SSAE) 18 US standard. An ISAE 3402 report delivers assurance on a service organization’s system description and the appropriateness of its control design and operational effectiveness as presented in a Service Auditor’s Report.

ISAE 3402 | SOC 1: In an ISAE 3402 | SOC 1 report, organizations establish their own control objectives and controls and align them with customer requirements. The scope of an ISAE 3402 report typically includes all operational and financial controls that impact financial statements, as well as IT General Controls (e.g., security management, physical and logical security, change management, incident management, and systems monitoring). In essence, if an organization hosts financial information that could affect its client’s financial reporting, pursuing an ISAE 3402 | SOC 1 audit report is the most logical choice and is often requested. ITGCs, operational controls, and financial controls fall within the purview of an ISAE 3402 | SOC 1 audit.

SOC 1: In a SOC 1 audit, control objectives essential for accurately representing internal control over financial reporting (ICOFR) are required. Organizations subject to SEC filings in the United States typically include these objectives.

Given the importance of IT service providers, cloud service providers, and datacenter/housing providers as key suppliers to financial institutions, standards like SAS70, SSAE 18 SOC 1, and ISAE 3402 have gained significant prominence in the IT industry. They have become the most comprehensive and transparent standards for effective IT outsourcing and risk management. Organizations seeking an ISAE 3402 | SOC 1 report often contemplate ISAE 3000 | SOC 2 reports.

ISAE 3000 | SOC 2: In ISAE 3000 | SOC 2 reports, the Trust Services Principles and Criteria (TSPs) are applied. These TSPs consist of specific requirements developed by the AICPA and Canadian Institute of Chartered Accountants (CICA) to provide assurance concerning security, availability, confidentiality, processing integrity, and privacy. An organization can select the specific aspects that align with their customers’ needs. An ISAE 3000 | SOC 2 report may encompass one or more principles. When an organization handles various types of information for clients that do not impact financial reporting, an ISAE 3000 | SOC 2 report is more relevant. In such cases, clients are primarily concerned about the secure handling and availability of their data as stipulated in their agreements. A SOC 2 report, like a SOC 1 report, evaluates internal controls, policies, and procedures.

SOC 1 or SOC 2: Organizations that manage, process, or host systems or information affecting financial reporting should invariably provide an ISAE 3402 | SOC 1 report. ISAE 3000 | SOC 2 is suitable when all systems and processes are unrelated to financial reporting. Datacenter providers, Infrastructure as a Service (IaaS) providers, and Platform as a Service (PaaS) providers often issue hybrid reports, incorporating both an ISAE 3402 | SOC 1 for finance-related processes and systems and an ISAE 3000 | SOC 2 for unrelated processes and systems. The content of both reports is typically identical.

Benefits: Improving Risk Control and transparency

Organizations often encounter inquiries from (potential) clients about security standards, with questions regarding the distinctions between ISAE 3402 | SOC 1, ISAE 3000 | SOC 2, and ISO 27001 audits. They seek to determine which standard is more suitable for their company and weigh the advantages and disadvantages of ISAE versus ISO 27001. ISAE 3402 | SOC 1 and ISO 27001, in reality, are significantly different standards, with divergent applications. The primary disparities are in the reporting format and the nature of the audit itself.

Notable Benefits:

  • Proficiency in risk management
  • Enhanced market trust
  • Streamlined audit processes
  • Improved control measures

ISAE and Security: ISAE 3402 is an attestation performed by an independent certified accountant or firm that assesses System and Organization Controls (SOC) information against defined audit objectives or criteria. In an ISAE 3402 | SOC 1 report, IT general controls (ITGCs) and, consequently, security aspects are included, but the primary focus revolves around financial procedures and controls. On the other hand, an ISAE 3000 | SOC 2 report concentrates on the Trust Service Principles, encompassing security, availability, and privacy. It shares more common ground with ISO 27001. An essential distinction is that ISAE 3402 | SOC 1 and ISAE 3000 | SOC 2 reports are forms of attestation, whereas ISO 27001 is a certification.

ISO 27001: ISO 27001, in contrast, is a risk-based standard designed to establish, implement, and enhance an organization’s security framework or Information Security Management System (ISMS). This security framework adheres to the ISO and IEC standards and is validated by independent certification bodies.

The organization must have the procedures and controls outlined in Annex A of the ISO 27001 framework in place. These procedures and controls effectively mitigate risks, thereby bolstering information security. ISO 27001 provides a comprehensive system for ensuring information security, and all organizations that adopt ISO 27001 should have an information security management system in operation.

Choosing Between ISO 27001 and ISAE 3402 | SOC 1: The landscape has evolved. ISO 27001 has traditionally served as the gold standard for information security. However, given the ever-evolving information security risks, many organizations now seek a higher level of assurance concerning information security. ISO 27001 prescribes a fixed set of controls, while ISAE 3402 and ISAE 3000 standards are principle-based. This means that the controls cannot be rigidly stipulated but must function effectively. An auditor will qualify the ISAE 3402 | SOC 1 assurance opinion if this is not the case. An ISAE 3402/3000 audit entails a comprehensive examination that centers on the effectiveness of the risk framework in managing risks. If risks are not adequately managed, the ISAE 3402 report will reveal this deficiency. This level of transparency is essential in the evolving global economy and the ever-changing threat landscape.

How does a service organization prepare for SOC 1?

The SOC 1 standard necessitates that service organizations take a proactive approach to fulfill the requirements outlined by service auditors, typically accountants. To navigate this process effectively, service organizations can derive significant advantages from conducting an ISAE Readiness Assessment, which aids in comprehending the reporting prerequisites.

These reporting prerequisites encompass:

  1. Developing a comprehensive description of the service organization’s system.
  2. Drafting a written management statement (referred to as a statement of assertion) that will be incorporated in the final SOC 1 report.

Furthermore, the service organization’s internal audit department may participate in the entire assurance engagement process if the service organization’s accountant (auditor) deems their objectivity and professionalism to be acceptable. For instance, conducting a SOC 1 Readiness Assessment becomes instrumental for service organizations in clarifying the assignment’s scope and grasping the reporting obligations associated with the SOC 1 standard.

About Securance
Securance provides services in the realms of information security, risk management, and governance. Beyond offering advisory services and risk sourcing, Securance provides software solutions empowering organizations to autonomously implement complex standards. This positions Securance as a forward-thinking and market-leading entity in the Netherlands. Securance specializes in delivering solutions for risk management and the implementation of various standards, including ISAE 3402 (SOC 1), ISAE 3000 (SOC 2), GDPR/AVG, ISO 27001, ISO 9001, and COSO.

Steps to a successful SOC 2


Preparing an organization for a SOC 2 audit can be a demanding task. Several key steps can aid in this process:

  1. Scope Definition: In the initial phase of the SOC 2 journey, the first step involves a two-fold approach. Firstly, determine the scope of the system and, secondly, establish the scope of the criteria (standards). The system’s scope defines what the SOC 2 statement should encompass. Focus on meeting the needs of the report’s user (your potential customer and their auditors). This means understanding which system they require assurance about and what falls outside that scope. For more details on defining criteria scope, refer to specific documentation.
  2. Understand the Criteria: It’s crucial to grasp what will be assessed. Thoroughly examine the criteria and always question the intent behind each one. This allows you to align the appropriate control measures with the criteria and identify any gaps, missing controls, or undescribed processes. An IT auditor can provide valuable insight into understanding the criteria.
  3. Document and Implement: IT service organizations are often driven by practicality but may lack formal procedures and process-oriented work. However, it’s essential to establish formal policies, procedures, plans, and guidelines to ensure processes can be consistently followed, and responsibilities are clearly defined. Describe the “what,” “how,” “when,” and “who” within the organization, and ensure that the documents capturing this information are readily available. Equally important, the organization must diligently execute what’s documented. A successful audit requires more than just a well-crafted narrative.
  4. Foster Awareness: The effectiveness of control measures hinges on the organization’s people. Creating a culture of awareness at all levels is crucial for maintaining a secure environment. This includes practices like reporting and documenting security incidents, secure handling of company assets and data, and thorough onboarding and offboarding processes for employees. Many control measures heavily rely on the actions of individuals within the organization.
  5. Ensure Accountability: Some control measures can be challenging to validate, particularly when ad-hoc actions or consultations occur without proper documentation. For meetings and consultations, maintain minutes or reports. For tracking tickets and requests, ensure there’s a detailed record of actions taken. Moreover, for routine activities like access security checks, ensure there is a clear record of how, what, when, and by whom these activities were conducted. Select a method that suits your organization to minimize additional work.
  6. Learn from Past Audits: Evaluate and consolidate findings from previous audits, whether internal or external (e.g., ISO or SOC 2 type1). It’s not necessary to implement every recommendation, but it’s essential to show a reasoned decision-making process when evaluating and potentially declining certain recommendations.
  7. Facilitate Knowledge Sharing and Detailed Planning: SOC 2 standards cut across various fields, teams, and departments within an organization. The IT auditor will likely need to engage with individuals responsible for HR, management, development, and operations. When scheduling the audit, ensure these key personnel are available for interviews and walkthroughs. Collaborate with the IT auditor to determine the necessary time allocation for each area, facilitating the creation of a comprehensive and detailed audit plan.