Understanding the Differences Between SOCs, SOX, and SOC Audits

In today’s day and age, technology has been revamped in a million ways, but there are still cyberattacks and risks that organizations must deal with. When looking at properly addressing these risks, certain solutions can be implemented to help reduce this risk. These solutions can include Security Operation Centers (SOCs) and frameworks such as Sarbanes-Oxley Compliance (SOX) audits and Service and Organization Control (SOC) audits. Although their acronyms are homonyms, they all differ when it comes to their scope, focus, and application, and each can be an important part of cybersecurity and regulatory compliance within an organization. This article will help differentiate these areas.

Security Operation Centers (SOCs)

Security Operation Centers (SOCs) serve as a centralized unit within an organization to aid in cybersecurity. Composed of several Information Technology (IT) and Information Security (IS) professionals, they are responsible for observing, identifying, evaluating, and acting on cybersecurity incidents in real time. SOCs utilize countless techniques to proactively fight against threats within an organization. These include Security Information and Event Management systems (SIEM), threat intelligence platforms, and automated incident response tools.

Key characteristics of a SOC include:

• Observing: SOCs operate 24/7 to oversee network activities and identify possible security breaches.
• Incident Response: SOCs have protocols to respond quickly to security incidents to minimize damage and downtime of an organization’s software.
• Threat Intelligence: SOCs use threat intelligence to keep in front of emerging threats and vulnerabilities.

Sarbanes-Oxley (SOX) Compliance Audits

The Sarbanes-Oxley Act (SOX) of 2002 is a federal law that requires certain practices for financial reporting and record keeping for publicly traded corporations. To prevent fraud, SOX compliance primarily focuses on internal controls and financial reporting. Section 404 (SOX 404) requires the Securities and Exchange Commission (SEC) mandate that annual reports must include an internal control report. Sarbanes-Oxley was created to ensure that all financial statements are accurate and internal controls are designed and operating effectively.

Key components of SOX compliance include:

• Internal Controls over Financial Reporting (ICFR): Determines and preserves the effectiveness of internal controls over financial reporting to ensure the precision and consistency of financial statements.
• Corporate Governance: Strengthens the independence of external auditors and the board’s oversight and responsibility, including audit committee duties.
• Disclosure Requirements: Discloses reliable and accurate material information to investors and stakeholders in a timely manner.

System and Organization Control (SOC) Audits

System and Organization Control (SOC) audits are conducted by independent auditors that evaluate an organization’s controls to verify that these controls are operating as the organization says they are. These audit reports provide reasonable assurance concerning the operating effectiveness of internal controls over financial reporting (SOC 1) along with security, and optionally availability, processing integrity, confidentiality, and privacy (SOC 2) to ensure operational effectiveness.

Key differences between SOC 1 and SOC 2 audits include:

• SOC 1: SOC 1 audits test the design and operating effectiveness of internal controls over financial reporting.
• SOC 2: SOC 2 audits test design and operating effectiveness of controls related to security. Availability, processing integrity, confidentiality, and privacy principles, which are part of the Trust Services Criteria appointed by the AICPA, may also be included in a SOC 2 report. These audits are crucial to ensure that a client’s operational integrity is intact.
• Type 1 reports cover design effectiveness only, while Type 2 reports test the design and operating effectiveness of controls.

In conclusion, companies who are looking to keep their assets safe, uphold regulatory compliance, and keep their shareholders’ trust should understand the differences between SOCs, SOX, and SOC Audits (SOC 1 and SOC 2). By using the correct application of these three areas, companies can accurately navigate the complicated environment of security and regulatory obligations, guaranteeing the utmost achievement in an endlessly digital and interconnected world.

For more information, be sure to visit our System and Organization Controls (SOC) service page, and don’t hesitate to contact Dave Hammarberg, CPA, CFE, CISSP, GSEC, MCSE, CISA with further questions regarding SOC 2 reports and our services.

This article was written by SOC intern Taylor Portzline under supervision of Director Lynnanne Bocchi during McKonly & Asbury’s 2024 Summer Internship Program.

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