Key Takeaways
- Increased Scrutiny on Automation: Recent updates to the AICPA Peer Review checklist have introduced stricter guidelines for evaluating automation tools used in preparing SOC 2® reports. The compliance review process is now rigorously checking to ensure these tools do not lead to inappropriate approval of reports.
- Conflict of Interest and Objectivity: A significant concern is the risk of self-review and compromised objectivity when SOC 2® tool providers are affiliated with the firms that perform the compliance verifications based on the tool’s output.
- Licensing Requirement: There is a heightened risk regarding firm qualifications, as most state boards of accountancy require that attestation engagements, such as SOC 2® assessments, be performed only by properly licensed firms.
AICPA Guidelines Around Automated Tools
If your organization is undergoing a SOC* assessment and using an automation tool, it’s essential to be aware of the heightened scrutiny you might face. Recent updates to the AICPA Peer Review checklist, effective late 2023, have introduced stricter guidelines to ensure that automation tools don’t lead to inappropriate approval of SOC 2®* reports.
Here’s a breakdown of six critical automation risks that assessors are now evaluating:
1. Reliance on Automated Tools
One of the primary risks is over-reliance on automated tools. Assessors may place excessive trust in the information generated by SOC 2® automation tools without thoroughly validating the tool’s functionality. This can be problematic if the tool is not performing as intended or if the data it provides is incomplete or inaccurate. Assessors must ensure that these tools are rigorously tested and that the information meets the necessary standards for their specific assessment needs.
2. Professional Standards
Another significant risk involves the misconception that using SOC 2® tools reduce or eliminates assessors’ obligations to adhere to professional standards. Some assessors believe that these tools can streamline the assessment process so much that it justifies charging fees substantially below market rates. This raises concerns about whether such assessments truly comply with professional standards, especially if the reduced fees do not align with the required quality.
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3. Managerial Oversight
SOC 2® tools are often targeted at startup organizations, where management may lack IT security expertise. This situation can lead to inadequate oversight and decision-making about risk management and control activities. In many cases, the control decisions are made by consultants linked to the tool providers rather than by the organization’s own management. This lack of internal expertise can jeopardize the effectiveness of the risk management practices.
4. Conflicts of Interest
Conflicts of interest are a notable concern when SOC 2® tool providers are affiliated with the firms that perform assessments based on the tool’s outputs. This scenario can lead to self-review threats, particularly if the tool is integrated into the organization’s internal controls. Such affiliations might compromise the objectivity of the assessment, making it challenging to ensure that the assessment remains impartial and free from conflicts.
5. Ethical Standards
The relationship between SOC 2® tool providers and assessor firms can also raise ethical concerns. When a tool provider partners with an assessor firm to conduct the SOC 2® assessment, it is crucial to examine whether these firms adhere to ethical standards related to marketing and advertising. Ensuring that these firms operate with integrity and transparency is essential to maintain the credibility and trustworthiness of the SOC 2® assessment process.
6. Assessor Certifications
Finally, there is a risk concerning the qualifications of assessor organizations. Some SOC 2® tool providers feature firms on their websites that do not appear to be properly qualified firms. Most state boards of accountancy require that attestation engagements, including SOC 2® assessments, be performed by licensed firms. Using unlicensed firms for these critical assessments can undermine the validity and reliability of the SOC 2®* reports.
The Benefit of a Trusted Partner
Navigating the updated AICPA Peer Review requirements can be challenging, especially with the increased focus on automation tools. By being aware of these key risks and addressing them proactively, organizations can ensure that their SOC 2® reports are both reliable and compliant. Understanding and mitigating these risks will help maintain the integrity of the assessment process and enhance the overall credibility of your SOC 2® compliance efforts. Auditwerx can help. Contact us today.
FAQs
The primary risk is over-reliance on the automated tools without thoroughly validating their functionality or the data they produce, which can result in incomplete or inaccurate information being used in the SOC 2® report preparation.
Some compliance firms believe the tools streamline the process so much that it justifies charging fees substantially below market rates, raising concerns about whether the resulting compliance review truly adheres to required professional standards.
Management, particularly in startup organizations, may lack sufficient IT security expertise, leading to inadequate oversight where crucial control decisions are made by consultants linked to tool providers instead of by the organization’s own management.
Firms must ensure they are properly qualified and licensed. Most state boards of accountancy require that attestation engagements, including SOC 2® assessments, be performed by licensed firms to ensure the report’s validity and reliability.
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