SOC Reports: A Mini-Guide for Business Owners Who Want to Establish Credibility

As a business owner, you want to do everything you can to gain the trust and respect of your customers, This will not only help you keep the ones you do have, but will help you gain new ones as well. As you earn more and more credibility, you should see your revenue increase as well.

Preparing SOC reports

One of the best ways for service organizations to earn that credibility is to use SOC reports. These reports can help organizations identify problems with their services as well as let them know needs and wants of their customers. If this sounds like something your business needs, you can get an SOC Audit Report by Holbrook & Manter. Here are a few facts about these reports and what they can do.

What is an SOC Report?

SOC stands for Service Organization Controls and can give great insight into your business operations. Written by a Certified Public Account, these reports are meant as a tool for companies that operate or provide services to information systems to gain credibility with their customers.

Business that can benefit from SOC reports include companies that are in sectors such as application service providers, cloud computing providers, web design and development, social media aggregators, medical billing and rebate processing. These types of business are all considered service organizations because they sell services rather than products.

SOC reports are beneficial because they can replace the need for customer organizations to perform their own audits on the service organization, which can eliminate, the interruptions in operations that such audits may have. They also serve as effective marketing tools because they will give insights into your business and help you keep your finger on the pulse of your customers.

There are three types of SOC audits than can be performed, depending on what type of information you would like to gather.

Understanding SOC reports

source: Baker Tilly

Here’s a quick rundown of each one and what they offer.

SOC 1

The SOC 1 report is designed to give service organizations and their users insight into the company’s financial situation. They can be performed by the organization, its users or a third-party auditor and will help assessing financial risks within the company.

There are two types of SOC 1 reports — types 1 and 2 — that perform different functions and give different insights into the company. Type 1 audits the management’s fairness in presenting the design of the organization’s systems and the controls that are in place to achieve those designs. Type 2 audits the same things, but takes a deeper look into the operating effectiveness of the controls that are in place for the organization to achieve is system goals.

Both types of SOC 1 reports are effective at evaluating the state of the organization’s systems.

SOC 2

The SOC 2 reports audit the effectiveness of the service organization’s privacy policies as well as its security, confidentiality and processing integrity. These reports are designed for users and can help the organization build confidence with its customers.

User who may like to use the SOC 2 report include stakeholders, regulators, suppliers, business partners and even management teams who want to get a better understanding of their organization’s security needs. These reports can identify any flaws or defects in security systems that can cause customers to lose confidence in the service organization.

As with the SOC 1 report, there are two different types that are designed for different insights. The first type reports on the management’s description of the security protocols and whether or not they are being implemented in a confident manner. The second type audits the suitability of the design controls of the security systems.

SOC 3

The final SOC report is designed specifically for for users of the service organization and audits the trustworthiness of the organization’s designs and controls.

This report generates a general use audit that gives current and possible customers insight into the organization’s overall systems health, which can impart confidence and can be used as a marketing tool to increase revenue. The SOC 3 report can look into the same areas as the SOC 2 reports, but it’s designed to be for general use and may not be as technical as the other type of report. Because they are general use, they can be distributed however the organization sees fit and, unlike the other reports, are not solely auditor-to-auditor communications.

SOC reports can give effective insight into a service organization’s security, risks and overall financial health that can help give customers confidence in their services.

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