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Understanding Your SOC 1 Report: What is a Gap Analysis?

A gap analysis is designed to prepare organizations for an audit. If it’s your first time going through an audit (SOC 1, SOC 2, PCI, HIPAA, HITRUST CSF, etc.), KirkpatrickPrice strongly recommends a gap analysis. This is a process of discovery, a chance to find areas of weakness, and an opportunity to gain industry insight. A gap analysis is not an audit. This process will examine your internal controls in order to identify operational, reporting, and compliance gaps and to provide advice on strategies to manage control objectives going forward. A gap analysis is an efficient way to determine the steps you need to take in order to reach your information security and compliance goals based on the current state of your organization’s security controls.

Through a virtual or onsite gap analysis, one of our experienced, senior-level auditors will spend time with your team and review policies and procedures, perform interviews of responsible personnel, and create a gap analysis report. If a gap analysis is performed, KirkpatrickPrice will document identified gaps and recommended actions in our Online Audit Manager and provide the raw findings. After an organization has remedied the non-compliant findings, KirkpatrickPrice will continue with the audit.

If it’s your first time going through an audit of a specific framework, let us be your guide. Contact us today for more information on the value of gap analysis and what KirkpatrickPrice’s process is.

Video Transcript

One of the things that we offer to assist organizations in the beginning of their SOC 1 audit is a gap analysis. One of our experienced, senior-level auditors will come to your facility and spend time with you to review your policies, procedures, and practices, interview your staff, and quickly identify any gaps that must be addressed in order to proceed with the audit. Our firm provides audit services worldwide, so no matter where you are, this gap analysis can be a very valuable way to quickly analyze what you have in place and what you need to have in place in order to complete a SOC 1 audit.

Understanding Your SOC 1 Audit Report: What is an Assertion?

What is an Assertion?

One of the things that management must provide to the auditor as part of a SOC 1 engagement is an assertion. What does that mean? What is an assertion?

In our everyday life, an assertion is a confident statement of fact or belief. In the world of auditing, assertions are still confident statements of fact or belief, but with a twist. Assertions are claims made by management regarding certain aspects of their business. An assertion is comprised of management’s description of the system that you’re providing as a service to your clients. This assertion will provide a detailed description of how the system is designed and operating, and the auditor must determine if this is fairly presented in the audit report. For a SOC 1 audit, assertions are related to a company’s financial statements.

Types of Assertions

Auditors rely upon a variety of assertions regarding a company. Assertions will fall into one of the following categories:

  • Assertions Related to Transactions – This type of assertion could be related to the occurrence of a transaction, the completeness of transactions, the accuracy in recording transactions, the cut-off date of accounting periods, and the classification of transactions.
  • Assertions Related to Account Balances – Assertions of this type focus on assets, liabilities, and equity balances at the end of a period. These assertions will be related to the existence of assets, liabilities, and equity balances at the end of a period, the completeness of the recording account balances in financial statements, the rights and obligations of the entity, and the valuation of assets, liabilities, and equity balances.
  • Assertions Related to Presentation and Disclosures – Assertions in this category highlight how information like transactions, balances, and other events are presented within financial statements. Assertions will relate to the occurrence of transactions and events disclosed in financial statements, the completeness of transactions and events disclosed in financial statements, the classification and understandability of transactions and events disclosed in financial statements, and the accuracy and valuation of transactions and events disclosed in financial statements.

Testing Assertions

Assertions must be validated by auditors during a SOC 1 engagement. If an assertion states that the salaries and wages of all employees have been accounted for, then an auditor will test to ensure this. Reviewing documentation is a major part of an auditor’s testing. An auditor, for example, might follow your organization’s procedure for checking the occurrence of transactions. If the result of the procedure doesn’t match the assertion, this is an issue.

More questions about SOC 1 audits? Want help demonstrate to your clients your commitment to security and compliance? Contact us today.

Video Transcript

One of the things that management must provide to the auditor as part of a SOC 1 engagement is an assertion. The assertion is comprised of management’s description of the system that you’re providing as a service to your clients. This assertion will provide a detailed description of how the system is designed and operating, and the auditor must determine if this is fairly presented in the audit report.

3 Reasons to Stop Hesitating and Complete Your SOC 1 Audit

With the compliance landscape rapidly changing, it’s important to stay up-to-date with current standards to gain trust and respect from your clients. If you’ve been considering getting a SOC 1 audit, but keep putting it off, what are you waiting for? Here are three reasons to stop hesitating and start your SOC 1 audit today.

1. Gain a Competitive Advantage

Completing a SOC 1 audit allows you to pursue clients that require a SOC 1 report to meet their own regulatory requirements. They simply can’t afford to work with an at-risk vendor. It also tells clients that you are serious about the controls and security at your organization. Engaging in a SOC 1 audit demonstrates that you have taken initiative by hiring a third party to conduct the audit and, in turn, formalize your audit process.

2. Mature Your Environment

By completing a SOC 1 audit, your organization will be ahead of the curve in maturing your security and business practices. Management should choose to test your employees and get outside services to help your business processes mature. A review of your controls by an independent auditor can help to point out things you may have missed during your own assessment of risk. Catching these inefficiencies can help your organization stay secure and up to date on security and compliance best practices and can protect you from a loss of business or operability.

3. Save Time and Money

By being proactive about the security of your organization, you will save your organization time and money by reducing the burden of questionnaires and site visits from your clients’ auditors. If you don’t already have a current report, you could face multiple clients’ auditors individually and continue to repeat the process, over and over. By completing a SOC 1 audit, you’ll have a verified report that meets the requirements of each of your clients.

Don’t hesitate to begin your SOC 1 audit. For more information on whether or not a SOC 1 is right for your business, contact us today or click here to learn how you can prepare for your SOC 1 audit.

Will I Pass a SOC 1 Audit? What if I Fail The Audit? Reasonable Assurance Explained

Organizations put valuable resources into completing SOC 1 audits: time, money, people, technology, and more. We know that often times, a SOC 1 audit can make it or break it for our clients’ business and we don’t take that lightly. When someone asks us, “Will I pass a SOC 1 audit? What if I fail the audit? What happens if I fail?”, we want to give them the best explanation we can in regards to reasonable assurance.

Reasonable Assurance Explained for SOC 1 Audits

When explaining reasonable assurance, there’s one important lesson to understand: SOC 1 audits do not work on a pass/fail system. The purpose of a SOC 1 report is to provide user entities reasonable assurance that their controls relevant to internal controls over financial reporting (ICFR) are suitably designed and operating effectively. Instead of passing or failing your organization, an auditor will issue a qualified or unqualified opinion. Understanding reasonable assurance changes your mindset from, “What if I fail the audit? Will I pass the audit?” to “How would an auditor assess these controls?”

If an auditor determines that a control was not in place or effective, then a qualified opinion would be issued. This would sound something like, “Except for Control X, reasonable assurance is there. The controls have been suitably designed and operating effectively.” An unqualified opinion means there are no qualifications or significant exceptions being issued and reasonable assurance has been determined.

Understanding the concept of reasonable assurance can help you approach SOC 1 audits in a healthy way. Instead of asking, “Will I pass a SOC 1 audit? What if I fail the audit?”, you can look at your organization’s controls and ask, “Would an auditor see that these controls are suitably designed? Are they operating effectively? Would we achieve reasonable assurance?”

If it’s your first time having a SOC 1 audit performed, we strongly recommend starting with a gap analysis of your organization’s internal controls in order to identify operational, reporting, and compliance gaps and to provide advice on strategies to manage control objectives going forward. If you have questions about SOC 1 audits or want help demonstrating to your clients your commitment to security and compliance, contact us today.

 

Video Transcript

One of the questions that we get all the time is: will I be able to pass the audit? What if I fail the audit? The SSAE 16 (now SSAE 18) does not work on a pass/fail system. It works on a threshold of reasonable assurance. The auditor will issue an opinion about whether or not the controls are suitably designed and operating effectively during a period of time.

An unqualified opinion means that there are no qualifications or opinions being issued and reasonable assurance has been determined. Whereas a qualified opinion would be an opinion where there are some qualifications to that opinion. For example, “Except for this or that, reasonable assurance is there. The controls have been suitably designed and are operating effectively.”

Understanding the concept of reasonable assurance is good way to approach your audit so that you can understand if an auditor can achieve reasonable assurance when they look at your controls and determine if they’re operating effectively.

Do I need a SOC 1 Type I or a SOC 1 Type II Report?

When considering having a SOC 1 audit performed, there are two different report options available. Knowing whether you need a SOC 1 Type I or a SOC 1 Type II report will depend on your client’s needs and timing constraints.

What’s the difference between a SOC 1 Type I and a SOC 1 Type II report?

A SOC 1 Type I and a SOC 1 Type II both report on the controls and processes at a service organization that may impact their user entities’ internal control over financial reporting. The main difference to note is that a SOC 1 Type I report is an attestation of controls at a service organization at a specific point in time, whereas a SOC 1 Type II report audits controls at a service organization over a period of time (minimum six-month period) in order to attest to the operating effectiveness of the controls.

Do I need a SOC 1 Type I or a SOC 1 Type II Report?

If your client has requested a SOC 1 report from you but doesn’t require a specific type, how do you determine whether you need a SOC 1 Type I or a SOC 1 Type II report? If it’s your first time going through a SOC 1 audit, we commonly advise clients to begin with a Type I and then move to a Type II the following audit period. SOC 1 Type I reports are less constraining than a SOC 1 Type II report. SOC 1 Type I reports also give you the opportunity to work with your auditor on designing controls and ensuring that the description of controls would be fair and accurate in the report.

If you’re required to receive a SOC 1 Type II report, additional testing is necessary to determine that the controls are not only in place, but also operating effectively over a period of time. SOC 1 Type II audits take more time to conduct because you’re looking at controls over a period of time.

It’s important to consider these factors, client needs, and timing constraints, when trying to decide if you need a SOC 1 Type I or a SOC 1 Type II report. If you have questions about which type of SOC report you need or want help demonstrating to your clients your commitment to security and compliance, contact us today.

Video Transcript

The type of report that you should receive for your SSAE 16 (now SSAE 18), many times is determined by what your client is asking you to do. Sometimes your request from your client will be an SSAE 18 report, period. There are two types of reports. There’s a Type I and a Type II. If you’ve never done an SSAE 18 report before, it’s a good idea to begin in the first year with a Type I report. If your client is not requiring you to constrain to the Type II report, a Type I report gives you the opportunity to work with the auditor on designing your controls and ensuring that the description of your controls would be fair and accurate in the report. That’s the threshold for a Type I report.

If they are requesting you to do a Type II report, there is additional testing that must take place from the auditor in order to determine that the controls are not only in place, but also operating effectively over a period of time. A Type I is a good place to start because you’re able to address the design and description of the controls as of a certain date, whereas a Type II report takes a little bit more time to conduct because you have to look at those controls having been in place over a period of time. Please consider those factors as you determine if you need a Type I or Type II SSAE 18 report.