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LEADING INSIGHTS INTRODUCTION TO SYSTEM AND ORGANIZATION
CONTROLS (SOC 1®) REPORT

How do User Entities gain assurance that the outsourced controls relevant to their financial reporting processes are effective? That is where a SOC 1® Report comes into the picture. The SOC 1® Report provides User Entities with assurance that the controls that Service Organizations have put in place to protect their assets are effective.

Introduction to System and Organization Controls (SOC 1®) Report

By Beni Venkatesan, Senior Manager

Overview

It used to be common for firms to rely on internal / overhead support to perform all operational tasks, including payroll, Information Technology (IT), and facilities management. However, the upkeep of such operations can be costly and inefficient. As organizations began to look for efficiencies, many turned to Service Organizations to perform these duties. A Service Organization can complete the process cheaper, faster, and more efficiently than the User Entities. However, when user entities outsource these operations, it also outsources the internal control functions that were previously in-house. So, how do User Entities gain assurance that the outsourced controls relevant to their financial reporting processes are effective? That is where a SOC 1® Report comes into the picture. The SOC 1® Report provides User Entities with assurance that the controls that Service Organizations have put in place to protect their assets are effective.

Here are some key terms included in Attestation Standard – Clarified (AT-C) 320 that are common to every SOC 1® Report:

Contents of a SOC 1® Report

After a Service Organization hires a qualified, independent Service Auditor, there are requirements for each SOC 1® Report. A brief overview of the minimum requirements to look for in every SOC 1® Report (focus on Type 2), which all contain five total sections, is shown below.

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This publication is for informational purposes only and does not constitute professional advice or services. Readers should first consult with a professional before acting with regard to the subjects mentioned herein.

Kearney & Company is a Certified Public Accounting (CPA) firm exclusively focused on providing accounting, audit, consulting, and information technology services to the government. For more information about Kearney, contact Phil Moore, Partner, via e-mail at [email protected].