In today’s ever more digitized business world, it’s becoming increasingly common for businesses to be asked for or required to obtain a SOC report. These assessments, which come in a variety of forms, assess the internal controls that exist within an organization.

SOC reports are often requested by potential clients, partners, or vendors. They serve as an independent indicator that your business is taking sufficient steps to safeguard clients data and have the appropriate internal controls in place that may impact customer financial data.

If you’re unfamiliar with SOC audits, a client requesting you undertake a SOC report might come as a surprise. But provided you know what to expect and are adequately prepared, there’s nothing to worry about. In fact, SOC reports often represent an opportunity to showcase the strength of your business’s internal controls to new customers, broadening your addressable market and helping you sleep easier at night.

So, what exactly is a SOC report? And if you’re a business based in Tennessee, Kentucky or Indiana, where should you get one? In this guide, we answer those questions and more. Read on to discover everything you need to know to get started with a SOC report.

What is a SOC Report?

A System and Organization Controls (SOC) report, also called a SOC audit, investigates the internal controls and governance policies that a business has in place. These examinations are carried out by an independent CPA firm and culminate in the production of an independent attestation known as a SOC report.

There are several different types of SOC reports. If a client has asked for your business to obtain a SOC audit before starting to work together, it’s important to understand exactly what type of SOC report is being requested.

To pass a SOC audit, a business must satisfy the criteria outlined by the AICPA. During the assessment, the business will describe the internal controls they have in place. Auditors will then observe processes to assess whether these processes are in place and issue a report for the business to share with interested parties.

SOC 1 Report

SOC 1 focuses on an entity’s internal financial controls. There are several common scenarios where an organization may be required to obtain a SOC 1 report:

  • Financing partners, such as banks, may require your business to undergo a SOC 1 audit before issuing loans or credit facilities.
  • Businesses that process information and data for a publicly traded company may require a business to undergo a SOC 1 audit.
  • Businesses that manage money on behalf of other firms (for example, a defined contribution plan sponsor), will likely deal with customers that require the business to obtain a SOC 1 audit.
  • Businesses that are being audited, or are subject to due diligence, are often required to undertake a SOC 1 audit.

SOC 2 Report

SOC 2 focuses more on your organization’s security posture and data governance policies. They examine criteria in five key areas referred to as the Trust Services Criteria:

  • Security
  • Availability
  • Processing Integrity
  • Confidentiality
  • Privacy

As data continues to play an increasingly prominent role in the way many businesses operate, SOC 2 reports are becoming increasingly common. If your business handles confidential data on behalf of external parties, it will likely be required to obtain a SOC 2 report on a routine basis.

Obtaining a SOC report should just be one element of your organization’s overall data strategy.

Where Can I Get a SOC Report in Tennessee, Kentucky and Indiana?

SOC reports are governed by the American Institute of Certified Public Accountants (AICPA) and require a SOC audit to be conducted by CPA firms that serve as independent auditors. Not every CPA firm has the internal capabilities to provide these services, so it’s important you select a partner with a proven track record in this field.

SOC audits are often completed on an annual or bi-annual basis, with the same firm conducting the audit each time. The first audit can take a little longer, but subsequent audits are typically much more streamlined, provided the business’s internal controls remain in compliance.

Establishing a relationship with a CPA firm that you can trust is critical to a successful SOC examination process. At LBMC, we’re proud to provide SOC 1, SOC 2 and SOC 3 audit services.

How Does a SOC Report Work?

Provided your business has the relevant controls in place, a SOC audit tends to be a relatively straightforward process. While every firm conducts these audits slightly differently, at LBMC, we follow a simple three-step process to provide SOC reports to businesses:

  • Step One: Kickoff Meeting – the process begins with an introductory meeting that determines the appropriate type of SOC audit. A preliminary assessment of your business’s readiness for an audit will be conducted at this stage.
  • Step Two: Onsite Audit – the audit team, composed of CPAs and information security professionals, visits your business to conduct an onsite assessment or performs remote interviews of all relevant controls and performs testing of all defined controls.
  • Step Three: Assurance Report – the auditor delivers an Independent Attestation Report that your business can share with potential clients and partners.

If you have never been through a SOC audit before, a readiness assessment may also be recommended prior to beginning a formal audit. If the audit discovers compliance issues that would cause your business to fail the examination, the auditor will typically provide recommendations on how these deficiencies should be remediated.

SOC 1 and SOC 2 Assessments with LBMC

At LBMC, your success is our success. Our goal is to help your business grow and stand out. Obtaining a SOC report often does just that: helping your business build new partnerships, unlock valuable customer relationships, and fuel growth into new markets and sectors.

Our team of experts brings the technical expertise required to assure your business’s prospective new partners that you operate your business on sound internal governance frameworks.

If you’re interested in learning more about obtaining a SOC 1 or SOC 2 report from a local Tennessee, Kentucky and Indiana CPA firm, reach out today.