Are You Guilty of These 3 SOC Report Review Mistakes?

Vendor management is more critical than ever as organizations rely heavily on vendors to successfully deliver their services. However, partnering with vendors who lack strong control environments can result in data loss or breaches, damaging customer trust and leading to significant financial losses.

To effectively manage the risks associated with vendors, organizations should implement a robust vendor management program that includes due diligence for new vendor relationships and ongoing monitoring of existing ones. As part of this process, many organizations request SOC reports from vendors to assess their control environments and the effectiveness of the controls.

SOC reports often contain a wealth of information, making it easy for reviewers to overlook key details. This can result in errors and missed information that may increase your organization’s risk. In today’s article, we’ll examine the top three mistakes made by those reviewing vendors’ SOC reports.

1.     Not Understanding the Scope of the SOC Report

The most common mistake when reviewing a SOC report is the reviewer fails to understand and confirm the scope covered within the report. The SOC reports issued by your vendors may not cover all the products and services they provide to your organization.

Based on the services you’re provided and the ones that pose the most risk, you should determine if these items are covered in the report by reviewing the system description, where the report’s boundaries should be clearly outlined.

With this knowledge in hand, consider the following questions to assess whether the report you received meets your needs:

• Does the report include all the products and services I receive from the vendor?
• Does the vendor provide me with a SOC 1 or SOC 2 make sense based on the services and products they provide to my organization?
• Does the report include all the control areas with which I am concerned with?

The final question is another key consideration for your review. Beyond confirming that the report addresses the correct products and services, it’s important to evaluate whether it covers all the control areas that matter to you.

Unfortunately, not all SOC reports are created equally. Some auditors may decide certain controls, like vulnerability management, don’t need to be included. If this is a critical control for you and it’s not addressed, follow up with the vendor to request additional information. A reliable vendor will gladly provide overview documents for the relevant control areas or offer to schedule a call to address your concerns.

2.     Untimely Review of the Issued SOC Reports

For many organizations, the individuals responsible for reviewing SOC reports often have numerous other day-to-day tasks, which can lead to this responsibility being deprioritized. As a result, reports may not be reviewed in a timely manner. Since SOC reports provide a retrospective evaluation of your vendors’ controls by the auditor, delaying the review reduces the relevance and utility of the information they contain.

Additionally, a delayed review of a vendor report with a negative opinion can harm your organization by preventing timely action to address the issues. For those in regulated industries, such delays could also trigger backlash from regulators and result in poor ratings on your vendor management program’s effectiveness. To effectively manage the risks posed by your vendors, it’s essential to act on timely information that enables accurate conclusions about their control practices.

3.     Failure to Take Action

As outlined above, your vendors may fall short of expectations by issuing reports that exclude relevant products or services, overlook critical control areas, or contain negative auditor opinions. The last thing you should do in these situations is file the report away without taking action. As a reviewer, it is essential to fully understand the issues raised in these reports and have a process in place to document and escalate them.

All individuals responsible for reviewing these reports should use software or a checklist to guide their process. The checklist should include a section for documenting any concerns identified during the review. Depending on the severity of the concern, it may be appropriate to note mitigating factors and take no further action. In more serious cases, the issue may require escalation to management, a risk committee, or the board for guidance on how to proceed.

The actions may include adding the vendor to a watch list for more frequent monitoring until the issues are resolved. Your organization might choose to meet with vendor representatives to discuss the issues and how the vendor plans to address them, followed by enhanced monitoring to ensure follow-through.

In severe cases, you may need to consider replacing the vendor. Regardless of the situation, it is crucial that your vendor management program anticipates potential vendor issues and outlines how these issues will be tracked and escalated to ensure timely and appropriate actions.

At Wolf, our team is dedicated to guiding organizations through the complexities of vendor management and SOC reporting. If you have any questions regarding these common mistakes or want to discuss your organization’s vendor management program, reach out to a member of our IT Assurance team today.