SOC Report Benefits Beyond Compliance: The Value of SOC Reporting

As a profit-driven organization, it is important to maximize the value of every dollar invested. To assess investments, businesses often calculate a Return-on-Investment (ROI) by creating a business case. A Service Organization Controls (SOC) audit is no exception. Fortunately, SOC audits provide several benefits, adding value to any organization.

What is a SOC Report & Why is it Important?

A service organization controls (SOC) audit is an independent assessment of the controls implemented by a service organization to warrant the security, availability, processing integrity, confidentiality, and privacy of the data they handle on behalf of their clients. Such audits are conducted by a third-party auditor and involve an evaluation of the service organization’s controls over the system and the data they manage, including the design, implementation, and effectiveness of those controls.

A SOC audit is important because it provides assurance to clients, stakeholders, and regulators that the service organization has effective controls in place to manage risks and protect their data. The results can also provide valuable insights for the service organization to improve its control environment and reduce risk. Examples of service organizations that may undergo controls audits include cloud service providers, data centers, and other outsourcing providers that handle sensitive information for their clients. The audit report is often used as a basis for providing assurance in the form of SOC reports, which can be provided to clients or other interested parties.

Having a SOC report can give the service organization a competitive advantage and increase customer trust, as it demonstrates its commitment to security and compliance.

The Benefits of SOC Reports 

The benefits of SOC reporting are numerous. Firstly, a “clean” SOC audit report differentiates organizations from competitors, providing operational credibility to the organization. Secondly, SOC reports help in winning and retaining customers. Thirdly, the investment in SOC audits easily impacts the bottom line leading to the maintenance or increase in profits. Finally, right-sizing processes and controls, operations run in a cost-effective manner, and more importantly, operations continue to deliver on organizational objectives and client needs without being bureaucratic or creating roadblocks.

SOC 1 reports evaluate the controls over financial reporting. SOC 2 reports evaluate controls relevant to the security, availability, processing integrity, confidentiality, and privacy of the system. SOC 3 reports are similar to SOC 2 reports but are general-use reports that can be freely distributed on the internet. The benefits of SOC 1, SOC 2, SOC 3, and other SOC reports are that they provide a level of assurance around security, availability, processing integrity, confidentiality, and/or privacy to the customers of the service organization.

Regardless of the type of report, the purpose of a SOC report is to provide assurance to an organization’s customers and stakeholders that the operational and control environment has been audited by an independent third-party auditor. SOC reports can provide the following benefits:

1. Increased Trust and Confidence: A SOC report can provide assurance to an organization’s customers that their operations are secure and reliable, increasing trust and confidence in the organization.
2. Regulatory Compliance: SOC reports can help organizations demonstrate compliance with regulatory requirements.
3. Competitive Advantage: A “clean” SOC report can differentiate an organization from competitors and provide operational credibility to the organization.
4. Improved Risk Management: A SOC audit can help identify areas of weakness in an organization’s control environment, allowing for improvements to be made to better manage risks.
5. Cost Savings: A SOC audit can help identify areas where costs can be reduced, such as through process improvements or more efficient use of resources.
6. Increased Efficiency: By right-sizing processes and controls, organizations can operate in a more cost-effective and efficient manner.
7. Improved Relationships with Stakeholders: A SOC report can help improve relationships with stakeholders, including customers, shareholders, and regulators.

Increase in Profits

Businesses are outsourcing their non-core competencies, which is why SOC reports have become crucial in providing a level of assurance around security, availability, processing integrity, confidentiality, and/or privacy.  SOC audits differentiate organizations from competitors, providing operational credibility to the organization. This increases the engagement of customers, helping to win and retain them. The investment in SOC audits easily impacts the bottom line, leading to the maintenance of or increase in profits.

Cost-Effective Investment in the SOC Environment

The key to a successful SOC audit is a strong operational environment with effective controls.  Most organizations will have some work to perform prior to having a SOC audit. Some environments require minor tweaks, while others create environments from scratch. A readiness assessment or gap analysis is crucial to address process and control improvements to make certain SOC audit efforts are successful.

At this point, many organizations lose focus on the objective of a SOC audit. Efforts change from an investment focus to that of compliance. Often, processes and controls are implemented based on a checklist or without thought to how the organization runs, or needs to run — a one-size-fits-all approach. Organizations need to remind themselves their SOC audit efforts are an investment rather than costs or expenses. SOC efforts are an investment and should focus on ROI and the business purpose of undertaking such SOC audit efforts.

Delivering Value of SOC for Business Needs

In right-sizing processes and controls, operations run in a cost-effective manner. More importantly, operations continue to deliver on organizational objectives and client needs without being bureaucratic or creating roadblocks. As control environments become intrusive, controls begin to break down with individuals bypassing controls to get work done.

Why Do Companies Need a SOC Report?

A SOC audit provides a company with an independent and objective evaluation of its internal controls over its services. The purpose of a SOC audit is to assess the effectiveness of the service provider’s controls to ensure that they are operating efficiently and effectively.

Here are some reasons why a company should get a SOC audit:

1. Compliance: SOC audits are often required by regulators, industry standards, and client contracts to ensure that companies are meeting specific regulatory and compliance requirements.
2. Risk Management: SOC audits provide assurance to customers and stakeholders that a company has adequate controls in place to manage risks associated with their services. This can help reduce the risk of potential losses or damages caused by errors or fraud.
3. Competitive Advantage: A successful SOC audit can provide a competitive advantage to a company by demonstrating its commitment to security and the quality of its services.
4. Trust and Transparency: SOC audits increase transparency and provide third-party validation of a company’s controls. This can help build trust with customers and other stakeholders, which is essential for long-term success.

A SOC audit provides a comprehensive evaluation of a company’s internal controls and can help a company meet regulatory requirements, manage risks, gain a competitive advantage, and build trust with customers and stakeholders.

Summary

In summary, a SOC report can provide numerous benefits to an organization beyond just compliance. By viewing SOC efforts as an investment rather than a cost or expense, organizations can focus on the ROI and the business purpose for undertaking such efforts. By right-sizing processes and controls, organizations can operate in a cost-effective and efficient manner, while still delivering on organizational objectives and client needs. And ultimately, a SOC report can provide a competitive advantage by showcasing the effectiveness of an organization’s operational and control environment, increasing trust and confidence from customers and stakeholders, and contributing to the organization’s bottom line.

If you would like to learn more, check out our blog, or if you are interested in engaging the services of Linford & Co for your upcoming audit, please feel free to contact us.

This article was originally published on 8/15/2021 and was updated on 5/3/2023.