Key Takeaways
Controls are Cornerstones for Financial Reporting: The primary goal of a SOC 1® report is to evaluate controls related to client financial reporting. Control objectives define the goals against which a service organization’s control procedures are assessed to provide reasonable assurance against misstatements.
Four Types of Internal Controls Evaluated: A SOC 1® assessment can examine four types of internal controls: Manual Controls (human action dependent), IT-Dependent Manual Controls (human review of digital data), Application Controls (system settings for detection), and IT General Controls (system access and security foundations).
IT General Controls (ITGCs) are Key: IT General Controls are often the main focus of SOC 1® engagements. They ensure that authorized personnel have appropriate access to systems at the right time, providing foundational security for the entire control environment.
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SOC 1®* controls and control objectives are the cornerstones of a SOC 1®* report. Control objectives provide a goal from which your assessor can assess the function of your controls
Determining Your Control Objectives
When it comes to an internal assessment over financial reporting, control objectives usually relate a relevant assertion that states a specific criterion for evaluation of a company’s control procedures in a given area to provide reasonable assurance that any misstatement in regard to the controls would be reliably detected by the controls in a timely manner.
Did you know that a typical SOC 1® report covers anywhere from 10-30 control objectives? Your assessor can help you define these as part of a readiness assessment.
When defining control objectives, it is important to consider what your service organization provides to your clients. For instance, if your objective is to restrict access to critical infrastructure, you may consider taking steps like installing locks, requiring confirmation of ID, monitor, or logical access systems.
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Controls Evaluated by SOC 1®*
There are 4 types of internal controls that could be examined by your SOC 1® assessor:
- Manual Controls – These refer to controls that depend on a human action, like a manager signing off on a document.
- IT-Dependent Manual Controls – As opposed to Manual Controls that rely solely on human action, IT-Dependent Manual Controls have a digital component, such as administrators who must review user reports in order to assure proper access to systems.
- Application Controls – This one is simple! Any system setting that could be used to detect a problem could be an Application Control.
- IT General Controls – These kinds of controls are usually the main focus of most SOC 1 reports. This kind of control ensures that the right people have access to the right systems, at the right time.
Auditwerx is Your Partner for SOC 1®*
If you’re ready to find a company that can be a true compliance partner, look no further than Auditwerx. Our seasoned professionals can guide you through a successful SOC 1® report from readiness to your final report.
If this is your first SOC* engagement, it is extremely important to consider a readiness assessment or gap engagement to determine any areas where your controls could be improved and allow an opportunity for remediation before it impacts your final report.
FAQs
What is the fundamental purpose of Control Objectives in a SOC 1® report?
Control objectives establish the evaluation criteria for a company’s internal procedures related to client financial reporting. They define the desired goal (e.g., restricting access to critical infrastructure) against which a service organization’s controls are measured to ensure that any financial misstatement would be reliably detected.
How many Control Objectives does a typical SOC 1® assessment cover?
A typical SOC 1® compliance engagement usually covers a range of 10 to 30 control objectives, depending on the complexity of the services the organization provides to its clients. These objectives must be carefully defined to align with the services being delivered.
What is the difference between Manual Controls and IT-Dependent Manual Controls?
Manual Controls rely entirely on human action (like a manager’s physical signature). IT-Dependent Manual Controls have a digital component, where a human administrator must review reports or data generated by an IT system (like reviewing a system-generated user access report) to ensure proper control function.
Why should a service organization consider a readiness assessment before its first SOC 1® engagement?
A readiness assessment (or gap engagement) is a crucial preliminary step, especially for a first SOC engagement. It helps the organization identify any weaknesses or areas where controls could be improved, allowing for necessary remediation before the formal assessment takes place, thereby mitigating the risk of a negative finding in the final report.
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