SOC Reporting and COVID 19

SOC Reporting and COVID 19

Brief Overview

COVID-19, the most buzzed word these days, a virus that has not only impacted health of the humans
but has also affected almost each and every industry in the world including organizations (user
organization) relying on other companies (service organization) to provide their services. Companies
have either shifted their staff to remote environments or laid off their workers. Organizations looking
for a SOC (System and Organization Controls) report from their service organizations are in a dilemma
whether they will be able to get a renewed report or not for the COVID year.
SOC examinations are designed to test the information technology and business process control
systems that a company has implemented to protect the security of its customer’s data (SOC 2), or
ensure the accuracy and completeness of financial transaction processing and reporting (SOC 1). If
your customers and the related stakeholders do not perform SOC reports on a timely basis, it could
influence their business objectives.
Further, the entities who issue SOC reports (i.e. independent third party audit firms) , are anxious on
how to support the remote attestation of controls during this time where companies have a reduced
headcount, decreased revenues, ceased operations due to government / mandatory requirements to
continue operations. Remote assessment of risks and attestation either of internal controls over
financial reporting (SOC 1) or AICPA’s trust service criteria (SOC2) without being physically present at
the client location has become a big challenge. However, the business must go on so should the SOC
reporting.
In this article, we will be touching upon the considerations that should be taken care by service & user
organizations as well the third party auditors during the pandemic scenario.

Service Organizations

Service organizations should evaluate their Operations and IT environments to determine if any
controls have been impacted.
 The company should examine any impact on functioning of controls caused by reduced number
of employees and any SoD (segregation of duties) conflicts should be addressed using
additional monitoring controls
 The company employees accessing the regulated data should receive appropriate trainings on
handling that data in a remote work environment.
 The new user provisioning / user termination processes should operate effectively with
sufficient authentication of remote users.
 Supplementary guidance on remote work cyber security practices should be communicated to
staff working from a remote location.
 Security of applications enabled for remote work should be taken care along with the
implementation of multi-factor authentication (MFA) which should be required for all critical
systems.
 Service organizations should discuss the procedures around video conferencing to perform
virtual walkthroughs with their service auditors. Most common procedures include physical
security walkthroughs of buildings and data centers that ensure security measures and
environmental protections are in place.

User Organizations

They as a receiver of the SOC 1 and/or SOC 2 reports, should have frequent communications with their
vendors to discuss whether COVID-19 has impacted their operations and their SOC report. Following
things should be considered as one reviews the SOC reports where evaluation period includes the
timing of the pandemic.
 The SOC report should be reviewed for any disclosures on changes to the system, operations or
controls due to the impact of COVID-19. An assessment should be done to identify if any
change impacts you and your reliance on the SOC report.
 The SOC report should also be reviewed for any exceptions and you can expect to have
increased number of exceptions within your service organizations due to the pandemic. These
exceptions and their corresponding impacts should also be evaluated.
 The complementary user entity considerations should be reviewed. Analysis should be done if
the service provider has included any additional items due to any changes in the controls or
system description.

Learn More to visit on Taxation 

Assessors / Auditors
Following key aspects should be considered by the auditor while performing a third party assessment
remotely.
 Risk associated with key personnel should be evaluated and the organization should have
adequate personnel available to support critical business and IT functions.
 Changes related to the organizational structure should be assessed and their possible impact on
segregation of duties should be analyzed.
 Organization’s Disaster Recovery and Business Continuity Plans should be evaluated and
appropriate changes should be suggested as required in a pandemic situation.
 Keeping in consideration the travel restrictions, Distance Audit methods such as video
conferencing should be used to perform virtual walkthroughs like physical security
walkthroughs of buildings and data centers to ensure security measures and environmental
protection methods are adopted.
 Video conferencing can also be used to communicate with client personnel and gain an
understanding of client’s systems for a new engagement, or test the effectiveness of controls
for on-going engagements.
 For the controls not operating during the testing period due to pandemic situation, auditors
should simply add an additional rationale in the report explaining the reason. However, the
overall report opinion is not modified.

The critical functions such as review of risk assessments, reviewing policies, periodic user access
reviews, or ticketing for timely removal of terminated user access should continue to operate
uninterruptedly and should be tested as usual. For exceptional cases, an annual control can be
rescheduled to occur in future months, as long as it is still within your SOC examination period.
In other instances, those activities may can be performed virtually.

You can also visit below link to read AICPA articles related impact of COVID 19 on audit and assurance.

https://future.aicpa.org/topic/audit-assurance/covid-19-audit-assurance

Please reach out to us in case you would like to discuss more on this topic or if you have any queries
related to SOC reporting.

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