If you are a service organization which performs processing for financial transactions through an IT system, that is relevant to your customer’s financial reporting (i.e. payment processing, claim processing, payroll, financial services processing), then you are in need of a SOC 1 report which provides assurance to your customers on how you are processing their transactions.
A SOC 1 Type I report will provide an opinion of your overall environment and how transactions are process for a point in time. A Type I report normally services as a starting point for a subsequent Type II evaluation. A Type II report provides assurance over a period of time (typically 6-12 month period), and testing is performed over the entirety of the period. It’s important to note that only Type II reports are acceptable for SOX compliance.
Many of your clients may be subject to SOX controls which would require you as a subservice organization to obtain a SOC 1 report. Your customer’s financial auditors will then rely on the report during the annual financial audit. By obtain a SOC 1 report, your customer’s auditors will likley not request to perform an on-site audit of your control environment.
While a SOC 1 report cannot be distributed publicly, it will help to distinguish your company from other competitors.
A SOC 1 audit also will help your company to re-evaluate it’s processes, and potentially help you identify necessary controls, which ultimately leads to improved internal control and a higher standard of services.