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Topic starter 01/08/2025 10:27 pm
📊 SOC 1 (System and Organization Controls 1) is a type of audit report designed to evaluate a service organization’s internal controls over financial reporting (ICFR). It’s governed by the AICPA (American Institute of Certified Public Accountants) and is especially relevant for companies that handle financial data or processes on behalf of clients.
🧠 What SOC 1 Covers
- Control objectives: Focuses on how well a company’s systems support accurate financial reporting
- Risk mitigation: Ensures controls are in place to prevent errors or fraud
- Third-party assurance: Gives clients confidence that their financial data is handled securely
📘 SOC 1 Report Types
| Type | Description |
|---|---|
| Type I | Evaluates the design of controls at a specific point in time |
| Type II | Assesses the operational effectiveness of controls over a period (e.g., 6–12 months) |
🏢 Who Needs SOC 1?
Organizations that impact their clients’ financial statements, such as:
- Payroll processors
- Loan servicers
- Investment advisors
- Retirement plan operators
- Payment processors
🔍 Why It Matters
- Audit readiness: Helps clients meet their own compliance requirements
- Trust building: Demonstrates reliability and accountability
- Risk management: Identifies gaps in financial control systems
