In today’s ever more digitized business world, it’s becoming increasingly common for businesses to obtain a SOC examination. These examinations, which come in a variety of forms, assess the internal controls that exist within an organization.
SOC examinations are often requested by potential clients, partners, or vendors. They serve as an independent indicator that your business is taking sufficient steps to safeguard confidential information.
If you’re unfamiliar with SOC audits, a client requesting you undertake a SOC examination 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 examinations 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 examination? And if you’re a business based in 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 examination.
Strothman+Co is an independent CPA firm headquartered in Louisville, KY. We provide a wide range of data and technology advisory services to businesses in Kentucky, Indiana, and beyond, including SOC examinations and data advisory services. Contact an advisor today to learn more.
What is a SOC Examination?
A System and Organization Controls (SOC) examination, 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 examinations. 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 examination is being requested.
To pass a SOC examination, a business must satisfy the criteria outlined by the AICPA. During the examination, 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 Examination
SOC 1 examinations focus on an entity’s internal financial controls. There are several common scenarios where an organization may be required to obtain a SOC 1 examination:
- Financing partners, such as banks, may require your business to undergo a SOC 1 audit before issuing loans or credit facilities.
- 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 Examination
SOC 2 examinations focus more on your organization’s data governance policies. They examine security controls in five key areas referred to as the Trust Services Criteria:
- Processing Integrity
As data continues to play an increasingly prominent role in the way many businesses operate, SOC 2 examinations 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 examination on a routine basis.
Other Types of SOC Examination
There are several other types of SOC examinations available to organizations in Kentucky and Indiana. Here is a brief overview of each:
- SOC 3 Examination: these examinations are similar to SOC 2 examinations, but the reports they produce are intended to be public-facing and used for marketing purposes.
- SOC for Cybersecurity: these audits evaluate the cybersecurity infrastructure that an organization has in place to manage enterprise risk.
- SOC for Supply Chain: these audits are designed for producers, manufacturers, and distributors, and attest to the presence of controls that reduce supply chain risks.
Obtaining a SOC examination should just be one element of your organization’s overall data strategy. To learn more about the other components, visit our Complete Guide to Data Analytics Services in Kentucky and Indiana.
Where Can I Get a SOC Examination in Kentucky and Indiana?
SOC examinations are 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.
While SOC examinations can be conducted virtually, it’s more common for auditors to visit your office and perform the audit in person. 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 Strothman+Co, we’re proud to provide SOC 1 and SOC 2 examination services to businesses across Kentucky and Indiana: a region where we’ve been serving local businesses for over 40 years.
How Does a SOC Examination Work?
Provided your business has the relevant controls in place, a SOC examination tends to be a relatively straightforward process. While every firm conducts these audits slightly differently, at Strothman+Co, we follow a simple three-step process to provide SOC reports to businesses in Kentucky and Indiana:
- 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 of all relevant controls.
- Step Three: Assurance Report – the auditor delivers an Independent Attestation Report that your business can share with potential clients and partners.
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 Examination with Strothman+Co
At Strothman+Co, your success is our success. Our goal is to help your business excel. 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 SOC examination 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 examination from a local Kentucky and Indiana CPA firm, reach out today.