A Service Organizational Control (SOC) 1 audit reviews the internal controls of service organizations as they relate to financial transactions conducted on behalf of the service organization’s clients. A service group that receives a SOC 1 audit is well-positioned to verify the related integrity of their controls, information technology and safeguards.
A SOC 1 audit report, referred to as a “Report on Controls at a Service Organization Relevant to User Entities’ Internal Control Over Financial Reporting”, and which is delivered to the service organization by the independent CPA firm following the audit, can be broken down into Type I and Type II reports.
A SOC 1 audit report can provide a service organization’s clients with the peace of mind to know that their financial transactions will be managed with a high degree of security and confidentiality. A report also informs the work of the organization’s financial statement auditors who may have similar internal control testing goals.
Service organizations may use a SOC 1 report as a marketing tool and as a competitive differentiator against other entities that have not been audited. AICPA offers a SOC logo that service organizations can use, providing an easy opportunity for clients and prospects to recognize that the service organization has met AICPA-designated compliance standards.
And finally, because the SOC 1 audit focuses on internal controls, any recommendations from the CPA firm provide an opportunity for the organization to consider valuable improvements.