Interaction Determines SOC 1 Need

Level of interactivity determines need for SOC 1.

Summary

 The type of interaction between user entities and service organizations providing the information technology services is defined by the degree the user is able to monitor the services of the service organization, that are separate from the user entity, and the user entity’s ability to establish controls over those services.  A user auditor may decide that the interaction between the user entity and service organization is sufficient to allow the user entity to establish its own controls and avoid the need for a service organization to perform a SOC 1 audit.

For a user auditor to evaluate the controls of a service organization the auditor should understand the five components of the user entity’s internal control environment; risk assessment process, information and communication system, control activities and monitoring controls. This is necessary to determine if the entity’s internal controls are sufficient and to assess the risk of material misstatements, whether due to error or fraud. This permits the auditor to design the nature, timing, and the requirements of additional audits in accordance with paragraph 40 of Statement on Auditing Standards (SAS) No. 109, Understanding the Entity and Its Environment and Assessing the Risks of Material Misstatement (AICPA, Professional Standards, AU sec 314).

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.

 

 

CPAs Outsource SOC 1 Audits

Financial audits may need to include SOC 1 Type 2 audits of any service organizations involved.

 Summary

  • User financial auditors have the option of outsourcing SOC 1 audits
  • SOC 1 audits in support of user auditors auditing accounting data increases assurances of reliable financial status.

CPAs performing financial statement audits have the option to outsource a SOC 1 audit of their client’s information technology data controls to provide their client with a higher level of confidence in the financial report. As more companies begin to comply with new AICPA standards for auditing information technology systems, it will become necessary for them to require SOC 1 Type 2 audits of IT systems as validation of the accuracy of the accounting data used in their financial statements and compliance with the new control standards. Users of information technology that can provide assurances to their customers and other service organizations today are being sought out by others that have been certified.

The auditing team at Integrated Accounting Services LLC provides SOC 1 reports for CPA  firms to assist auditors in providing assurances to their clients that their reports are based on validated data.  The team leaders are CPA.CITP  approved with experience in both accounting audits and IT systems audits.

The team also performs SOC 2 audits and issues SOC 3 certificates of compliance for financial institutions, service organizations and others using systems when security, availability, processing integrity, confidentiality  and privacy are required.

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.

Why You Need SOC Audits

SOC audits assess whether IT systems are compliant with new federal laws and IT international standards.

Summary

  • The AICPA has created SOC standards to address the problem of data security.
  • Federal regulations require that businesses safeguard personal, and nonpublic data.
  • SOC 1 reports replace SAS 70.
  • SOC 2 and SOC 3 reports provide new standards to assure greater data security.

 Cyber espionage has become major problem for information technology in the United States and internationally.  Part of the reason is the system designs and operating effectiveness of the technological information systems used by financial institutions, service organizations and others that process private and nonpublic information do not provide adequate privacy and protection controls    These intrusions have become a serious financial problem for users of information technology systems.  Federal law requires that all financial institutions, service organizations and others handling private and nonpublic utilizing information technology provide evidence that they have incorporated adequate controls for the protection of the data. To provide proof of meeting the law, those processing the data must produce a management description of their system and controls that asserts the suitability and the effectiveness of the controls protecting the system. An independent CPA experienced and knowledgeable about IT systems or a CPA.CITP auditor must be engaged to attest to the suitability of the measurements and effectiveness of the controls described by the management report before the information system  can be certified to be in compliance with the Service Organization Controls (SOC) standards.  The AICPA have issued regulations and guidelines for those performing the audits and preparing reports to determine if the system is certifiable.

The Statement of Standards for Attestation Engagements, No. 16 (SSAE 16) issued April 2010 by AICPA’s Auditing Standards Board became effective on June 15, 2011.  SSAE 16, establishes a universal standard and recommended guidelines for the audit of financial institutions, service organizations and others processing confidential, private and nonpublic data. The standards and guidelines were issued in response to the dictates of the Safeguards Rule contained in the Gramm-Leach-Bliley Act that became law on November 12, 1999. They establish a universal standard for for all SOC audits. SSAE 16 is considered to contain the same requirements as contained in the International Standard on Assurance Engagements (ISAE) 3402. SSAE 16 includes new guidance for assurance audits of Internal Controls over Financial Reporting (ICFR) for Service Organizations that is also effective June 15, 2011 .

The Safeguards Rule requires all financial institutions to design, implement and maintain safeguards to protect customer information. The Safeguards Rule applies not only to financial institutions, that collect information from their own customers, but also to financial institutions such as credit reporting agencies, appraisers, and mortgage brokers that receive customer information from other financial institutions. (For details see Disclosure of Nonpublic Personal Information, codified at 15 U.S.C. §§ 6801.)

The new  uniform auditing standards are set forth in AICPA’s guide; Reports on Controls at a Service Organization Over Security, Availability, Processing Integrity, Confidentiality or Privacy, issued in 2011 and became effective June 15, 2011.  The guidelines document is known as Service Organization Controls , (SOC).  The guidelines describe three types of audits labeled  as SOC 1, SOC 2 and SOC 3.

A SOC 1 audit examines and tests information technology (IT) infrastructures according to the terms associated with ICFR that replaces SAS 70 which are part of the Statement of Standards for Attestation Engagements, SSAE 16- Reporting on Controls at a Service Organization adopted April 2011.

SOC 2 and SOC 3 audit processes are conducted in accordance with AT Section 101 and relies on the recently released AICPA audit guide titled ‘’ Reports on Controls at a Service Organization over Security, Availability, Processing Integrity, Confidentiality or Privacy’’.

These audits include tests of the information systems and controls along with other procedures necessary to enable the auditor to express an unqualified opinion that the information technology systems and controls described by the management assertion allow, in all material respects, conformity with the established standards.

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.


 

SSAE 16 Implements Safeguards Rule In Gramm-Leach-Bliley Act

Thanks, guys.

Phil Gramm, Jim Leach and Thomas Bliley, authors of the Gramm-Leach-Bliley Act

SSAE 16 establishes Service Organization Controls

Summary

  • The  GRAMM-LEACH-BLILEY ACT  requires new IT  system controls.
  • Safeguards Rule requires IT system controls certified.
  • SSAE 16 guidelines replaces SAS 70 audit reports.

The Statement of Standards for Attestation Engagements, No. 16 (SSAE 16) issued April 2010 by American Institute of Certified Public Accountants (AICPA) Auditing Standards Board became effective on June 15, 2011.  SSAE 16 is  in response to the dictates of the Safeguards Rule contained in the Gramm-Leach-Bliley Act that became law on November 12, 1999, establishes a universal standard for service organization and user audits. The Safeguards Rule requires all financial institutions to design, implement and maintain safeguards to protect customer information. The Safeguards Rule applies not only to financial institutions, that collect information from their own customers, but also to financial institutions such as credit reporting agencies, appraisers, and mortgage brokers that receive customer information from other financial institutions. (For details see Disclosure of Nonpublic Personal Information, codified at 15 U.S.C. §§ 6801)

Audit opinions and reports such as SAS 70 will no longer be acceptable because they were based on inadequate guidelines for auditing evaluations and testing of security, availability, processing integrity, confidentiality or privacy of information technology infrastructures. As such, SAS 70 did not provide adequate assurance that the safety controls of a service organization were sufficient for the protection of user entities. Audits are now performed according Service Organizational Controls (SOC) established by American Institute of Certified Accounting Professionals  (AICPA) with the passage Statement of Standards for Attestation Engagements (SSAE) 16 in April 2010.

SSAE 16 requires the same level of evidence and assurance that sufficient controls are in place that was intended under a SAS 70 service auditor engagement. Unfortunately, SAS 70 standards failed to define the degree and type of auditing necessary to provide adequate security and privacy .

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 in compliance with GRAMM-LEACH-BLILEY ACT.

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.

 

SOC Audit Standards for Service Organizations

SOC standards define new guide lines for auditors assessing IT systems for compliance.

Summary

  • New federal law requires IT systems that process private and nonpublic personal data have controls to protect data from theft.

  • SAS 70 audits are no longer are evidence of proof of compliance.

  • All business must comply that collect, process, and store private and nonpublic data.

  • A CITP is approved by AICPA to certify IT system compliance to standards.

New standards for entities processing private and nonpublic data were established in response to a federal law requiring that IT systems have adequate controls to protect private and nonpublic data. The uniform auditing standards for assessing compliance are set forth in AICPA‘s guide; Reports on Controls at a Service Organization Over Security, Availability, Processing Integrity, Confidentiality or Privacy, which was issued in 2011. SAS 70 reports are no longer issued or accepted as evidence of sufficient controls for the protection of data.  Service organizations, data centers, financial institutions and others who provide information technology (IT) infrastructure for data collection, processing, storage, and data reporting of financial transactions for clients are now required to comply with the new federal standards.  To receive an AICPA certificate from a Certified Information Technology Professional (CPA.CITP) as being in compliance with the new standards, all entities using an information technology infrastructure to process data must be audited.  A CPA.CITP audit determines the suitability of the system design and operating effectiveness of data controls according to Service Organization Controls (SOC) 2 standards. 

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.


 

 

 

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