SOC 1 Type 1 Versus SOC 1 Type 2
What’s the difference between SOC 1 Type 1 and SOC 1 Type 2 reports?
Summary
- SOC 1 Audits examine a service organization’s controls relevant to a user organization’s internal controls over financial reporting.
- SOC 1 Type 1 reports cover the suitability of design of controls on a specific date.
- SOC 1 Type 2 reports cover suitability of control design as well as the effectiveness of those controls over a period of months.
User entities require SOC 1 audits to be performed on IT systems of service organizations when their information technology (IT) infrastructure is a part of the user entity’s IT system and the user entity needs to verify that the service organization controls relevant to the user entity’s own internal control over financial reporting are adequate. There are two types of reports that can be written as a result of a complete SOC 1 engagement. In a SOC 1 Type 1 report, also called a Report on management’s description of a service organization’s system and the suitability of the design of controls, the service auditor expresses an opinion on the fairness of the description of the system and the assertion about the system written by the service organization’s management. A Type 1 report only covers the suitability of the design of the controls to achieve specific control objectives; it does not discuss the effectiveness of those controls which are described in Type 2 report. Additionally, a SOC 1 Type 1 reports on controls as of a specified date. All Posts
A SOC 1 Type 2 report, referred to as a Report on management’s description of a service organization’s system and the suitability of the design and operating effectiveness of controls, covers both the suitability and the effectiveness of the controls. A SOC 1 Type 2 audit includes the information in a Type 1 report as well as the service auditor’s opinion on the effectiveness of controls in meeting control objectives over a period of months. While a Type 1 report may be suitable at times, a Type 2 report will be more desirable in most instances as it provides more information for a user auditor for a longer time period.
To provide a professional solution for these new standards the team at Integrated Accounting Services (IAS) performs audits for service organizations and their clients during the same testing period where possible. IAS’s integrated approach to auditing both the service organization and its clients provides increased security, integrity and privacy for all systems. Timely coordinated reports and periodic follow-ups are part of the integrated approach to qualifying service organizations and their user entities and reporting the higher level of assurance to responsible parties.
This article is provided by Integrated Accounting Services for those seeking clarification of IT system and control requirements. Please contact us if you need an assessment of your system and to determine whether you need a SOC 1 or a SOC 2 audit to assure clients of your compliance with new standards.
