SOC Reports
Service Organization Control (SOC) reports are attestation reports on the controls at a service organization that are relevant to user entities' internal control over financial reporting or other criteria.
Explanation
SOC 1 reports address controls relevant to user entities' financial reporting (ICFR). SOC 2 reports address controls related to security, availability, processing integrity, confidentiality, and privacy (Trust Services Criteria). Type 1 reports describe the design of controls at a point in time. Type 2 reports include testing of operating effectiveness over a period. User auditors rely on SOC reports to understand and evaluate controls at service organizations that process transactions for their clients.
Key Points
- •SOC 1 = financial reporting controls; SOC 2 = Trust Services Criteria
- •Type 1 = design only (point in time); Type 2 = design and operating effectiveness (period)
- •User auditors rely on SOC reports when clients outsource processing to service organizations
Exam Tip
Know that a Type 2 report provides more assurance than a Type 1 because it tests whether controls operated effectively over a period of time.
Frequently Asked Questions
Related Topics
Internal Controls (Audit Perspective)
Internal controls are processes designed by management to provide reasonable assurance about the reliability of financial reporting, effectiveness of operations, and compliance with laws.
Audit Evidence
Audit evidence is all information used by the auditor to arrive at the conclusions on which the audit opinion is based, evaluated for sufficiency (quantity) and appropriateness (quality).
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