Will I Pass a SOC 1 Audit? What if I Fail The Audit? Reasonable Assurance Explained
by Joseph Kirkpatrick / September 29th, 2017
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.
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.
