SOC for Service Organizations: Information for Service Organizations

Publicly-traded companies who are found to be out of compliance with SOX could be fined millions of dollars and their leaders could be charged with up to 20 years in prison.

Organizations should be sure to request a SOC 2 report from all critical vendors handling sensitive information or data. It’s best practice to request this report during initial vendor selection and contracting to be sure IT and security controls are in place and functioning as intended before getting too far into a contract. One critical determining factor when choosing between SOC 1 or 2 is whether your organization’s controls would affect your client’s internal control over financial reporting.

Which Report Should I Request from My Service Provider?

This blog post will focus on exploring the differences between SOC 1 vs SOC 2. As organizations outsource more of their core operational functions, there’s been a large increase in demand for system and organization control (SOC) 2 reports. Are you feeling spread too thin in while covering all your bases when it comes to audits and regulations? Check out our guide to regulatory compliance and discover how a visitor management system can help you. Let’s go into detail about the two types of reports and their requirements and see how all this affects your business. These reports are essential for controlling and monitoring the protections built within the control base of the data to ensure that those protections are working.

• According to Marqeta, 65% of consumers have been more concerned about fraud since the start of COVID-19.
• The bridge letter will provide a statement from the service organization about whether they are aware of any changes since the last issued report.
• Service Organization Controls (SOC) reports, known as SOC 1, SOC 2, or SOC 3, are frameworks established by the American Institute of Certified Public Accountants (AICPA) for reporting on the internal controls within an organization.
• SOC 3, unlike SOC 2, isn’t a private report and is used to showcase publicly how effective an organization’s internal controls are.
• SOC 2 requirements govern engaged, technology-based service organizations which store client information in the cloud.

According to Marqeta, 65% of consumers have been more concerned about fraud since the start of COVID-19. At the same time, up to 96% of consumers intend to continue using contactless payments post-pandemic. For example, a modern retail POS system like Xstore relieves the fear of payment fraud. “Retailers are entrusted with a treasure trove of customer, cost, recipe and supplier data that is increasingly under attack. Oracle Retail provides mission-critical functionality to our community and now gives them the additional confidence of SOC 1 and SOC 2 certification for our entire SaaS platform. This unique milestone allows our customers to deliver a more secure shopping experience and underscores the significant R&D and security investments made to serve retailers.,” explains Oracle Retail SVP and GM Mike Webster.

SOX vs. SOC: Conclusion

System and Organization Controls (SOC) is a suite of reports from the American Institute of CPAs (AICPA), instituted amidst the rise of cloud computing, which has increased accessibility to applications and data. SOC reports are issued by a third-party auditor after a thorough examination of a service provider’s operations to verify that they have effective controls for security, availability, processing integrity and confidentiality. These reports provide assurance over the design and effectiveness of controls and outlines any potential risks for customers or partners that are considering working with the service provider.

Simply obtaining a SOC Type 2 report does not mean the organization can rely upon the controls at the service organization. There are key components of the report that require evaluation and assessment to provide assurance that the controls can be relied upon. This process is generally a key SOX control that states the organization obtains and reviews the SOC report. The documented review of the report is assessed and must include the following assurances. Our innovative solution packages are designed to fit the exact needs of our customers while being scalable, repeatable, and configurable. Through our Gartner and G2 recognized software, we empower organizations to build a better tomorrow.

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Once it has been determined whether a SOC 1 or SOC 2 is required (or both) and whether a type 1 or type 2 report will be the first report, the service organization then needs to prepare for the examination. A readiness assessment can be beneficial to validate that controls are in place to meet the control objectives or control criteria. At Linford & Company, we prefer to complete the readiness assessment for our new clients to make sure the first examination is successful. For additional information on readiness assessment please see our blog post on SOC readiness assessments. An easy example of the flexibility in controls is around physical access to a facility.

• Oracle Retail provides mission-critical functionality to our community and now gives them the additional confidence of SOC 1 and SOC 2 certification for our entire SaaS platform.
• This unique milestone allows our customers to deliver a more secure shopping experience and underscores the significant R&D and security investments made to serve retailers.,” explains Oracle Retail SVP and GM Mike Webster.
• SOX (Sarbanes-Oxley Act) compliance and SOC (System and Organization Controls) compliance are two different types of compliance frameworks.
• They are typically provided for third-party service providers, insurance companies, payroll and benefit processors, loan servicers, and trust companies.

Dropbox has validated its systems, applications, people, and processes through a series of audits by independent third-party, Ernst & Young LLP. When you have high volumes of sensitive data in the cloud, you require superior security, privacy, and compliance controls— and regular reports on their effectiveness. As a reminder, the results of a SOC 2 report can only be shared internally; service organizations that wish to share their results with the general public will need to undergo a SOC 3 examination. Though that might seem fairly straightforward, there are two primary types of SOC reports, each of which pertains to a different set of internal controls. Without specific guidance, it can be unclear as to which type of SOC report a current or prospective client is looking for.

That’s SOC, Not SOX: SOC Reports Audit the Safety of Company Data

Internal data control is a crucial component of compliance, ensuring that organizations exercise confidentiality and care in the handling of their internal financial and workflow data. Organizations, as well as their service organizations, are also less likely to be exposed to compliance violations that can result in various forms of liability, including fines. For these reasons, some organizations have begun to stipulate their preference for using integrated frameworks as a means of obtaining third-party assurance by writing it into their service organization contracts.

As a result, Oracle Retail is the only solution provider in its space to have both SOC 1 and SOC 2 compliance for all retail cloud services. This compliance is critical in ensuring retailers have the most robust security, privacy, and confidentiality while running their business operations on our retail solutions. Enacted after several notable financial scandals sox vs soc toward the beginning of this century, SOX — short for Sarbanes Oxley — is a 2002 federal law governing record keeping and financial disclosures. It applies to publicly traded companies and requires an annual audit of their finances and reporting mechanisms. SOX is meant to protect shareholders and the public from deceptive or illegal financial practices.