A SOC 1 audit examines the internal controls over financial reporting (ICFR) a service provider has in place to ensure transaction processing or data manipulation on behalf of its customers is done consistently and reliably. A clean SOC 1 report provides assurance that transaction and data processing is performed consistently, and the information and can be relied upon by the service organization’s customers and their financial statement auditors.
Planning for an effective SOC 1 audit involves answering a series of questions:
- Which teams should be involved? This will depend on the product features and processes that can affect client financials.
- What monitoring period dates should we choose? This will depend on how soon you need a completed audit.
- How do we identify relevant controls? Focus on the product features that affect your client’s financials and the controls in place to make sure those features operate appropriately.
Scoping conversations about your SOC 1 audit should take place early in the process and will typically involve your auditors. Often times, the scope of the SOC 1 can be determined by the purpose of the SOC 1, who is requesting the SOC 1, and what business functions they want coverage over.
Mastering SOC 1 Readiness
An effective SOC 1 audit starts with the readiness phase. Before the audit, you’ll want to establish control objectives, identify the appropriate controls to meet those objectives, and draft control language. Ensuring your controls are best suited and assigned for the purpose of your software and planning for your auditors to walk through your processes, paves the way for a smooth and successful SOC 1 audit.
Most service organizations will have controls within several broad categories:
- Internal controls over financial reporting. These will typically include the organization’s structure, policies, and procedures; access controls; transaction processing controls; segregation of duties; system monitoring; and other controls to support effective risk management and financial reporting.
- Entity-level controls that describe how the organization is governed and managed. Common examples include controls over employee onboarding and offboarding, tone at the top, and other key processes and policies.
- IT general controls, such as customer data at rest being encrypted and the approval process for system changes.
If a service organization has a completed SOC 2 audit, many of these controls can be mapped over to a SOC 1 report.
If your company only needs a SOC 1, it may make sense to obtain project management resources to work with the company on the core elements of a SOC 1 control environment, such as policies and procedures, entity-level controls, and other key details. Someone with SOC and controls experience can greatly benefit the company.
To learn more, our guide, Getting Your First SOC 1 Report, highlights the compelling benefits a SOC 1 report provides service organizations, and the value of leveraging a completed SOC 2 audit to launch a SOC 1 audit.
