SOC 1
System and Organization Controls 1
Audit report focused on controls relevant to user entities' internal control over financial reporting.
What is SOC 1?
SOC 1 (formerly SAS 70) is an audit report that focuses on a service organization's controls relevant to their user entities' internal control over financial reporting (ICFR). SOC 1 reports are essential for organizations that provide services impacting their clients' financial statements.
SOC 1 reports come in two types: Type I describes the service organization's system and the suitability of control design at a specific point in time, while Type II additionally includes testing of control operating effectiveness over a period of time (typically 6-12 months).
Who Needs SOC 1?
- Payroll processing companies
- Financial transaction processors
- Loan servicing organizations
- Claims processing services
- Any service provider affecting client financial reporting
Key Requirements
Core compliance areas for SOC 1
Control Objectives
Define control objectives relevant to user entities' financial reporting.
Control Activities
Implement and document controls that achieve the stated control objectives.
Management Assertion
Management must assert the fairness of system description and control design/operation.
Auditor Testing
Independent CPA firm tests controls and provides opinion on their effectiveness.
Complementary Controls
Document controls that user entities must implement for overall control effectiveness.
Benefits of SOC 1 Compliance
- Satisfies customer audit requirements
- Supports SOX compliance for clients
- Reduces individual audit requests
- Demonstrates operational excellence
- Competitive advantage in financial services
- Foundation for broader compliance programs