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In our previous article, we delved into the concept of System and Organizations Controls (SOC) and emphasized its crucial role in securing sensitive data and building trust for businesses, particularly for companies like iTrustCapital. As the digital landscape continues to evolve, the protection of sensitive information remains a top concern for both companies and their clients. In this next installment, we're going to dive deeper into the key differences between SOC 1 and SOC 2.
SOC 1 vs. SOC 2:
SOC 1: The Financial Reporter
The SOC 1 audit examines a service organization's internal controls over financial reporting (ICFR). It assesses the effectiveness of these controls in preventing errors or fraud in financial reporting. Businesses that process or impact financial transactions for clients, such as payroll processors, data centers, or financial application providers, find this audit particularly relevant.
SOC 2: The Data Security Champion
SOC 2 audits scrutinize a service organization's controls regarding the security, availability, processing integrity, confidentiality, and privacy of a system. The goal is to assure clients and stakeholders that the organization effectively manages risks related to these areas. The SOC 2 report applies to a broader range of service organizations, including cloud services, data storage, or other IT services, where data security and system performance are vital.
Now that we've covered the basics of SOC 1 and SOC 2 audits let's explore the two types of SOC reports – Type 1 and Type 2.
Type 1 and Type 2:
A Type 1 report evaluates an organization's control design at a specific point in time. Auditors examine the controls in place and determine if they are aptly designed to achieve their objectives. This report offers a glimpse of the control environment, highlighting control adequacy but not evaluating its effectiveness over time.
In contrast, a Type 2 report examines both the design and operating effectiveness of an organization's controls over a specified period, typically six months to a year. Besides assessing the adequacy of control design, auditors test the controls' effectiveness by gathering evidence of their consistent operation during the review period. A Type 2 report provides a more thorough understanding of the control environment and offers greater assurance to stakeholders about the ongoing reliability and effectiveness of the organization's controls.
SOC reports are pivotal in securing the safety and reliability of businesses handling sensitive data and financial transactions. At iTrustCapital, we’re committed to upholding strict internal controls and safeguarding client assets, ensuring they stay off-balance sheet and separate from our business operations. That’s why our qualified custodians are SOC 1 and SOC 2 Type 2 certified. So, why wait? Sign up today and experience the difference!
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