Accounting
SOC 2 reports reimagined: From burden to business enabler
Perception is a powerful force. Few challenges are greater than overcoming perceptions, especially those supported by historical realities, facts and cultural norms. However, in an era when the accounting profession is defined by change and technological evolution, our most significant opportunities lie in challenging those perceived beliefs. That is precisely what we should be doing with SOC reporting today.
System and Organization Control 2 reports have historically been viewed as slow and complicated engagements defined by frustration. The projects require extensive and detailed evidence collection and demand a high level of subjective judgment and customization, which are very different challenges from the financial statement audits many SOC professionals were raised performing. Approaching these engagements with spreadsheets and flash drives has also made the process very cumbersome and frustrating, solidifying the perception of SOC 2 reports as daunting and difficult.
Fortunately, an increasing number of organizations have continued to dredge through the process — the report’s value is immense, and it is often a requirement to conduct business. This provides a broad level of tolerance for flawed systems and acceptance that friction is core to completing a SOC 2 report or even viewed as a feature of a high-quality audit.
This perception — confusing, slow and frustrating with high quality — hinders innovation. It doesn’t result in simple acceptance of the status quo or fear of change but manifests as outright hostility towards ingenuity. If these audits are “supposed to be hard,” then any suggestion to make them easier is rejected.
And yet, in recent years, that has all begun to shift: There is real excitement and investment in SOC 2 services from innovators outside of public accounting. They are challenging every aspect of how these audits are conducted with broad positive and negative impacts that demand the evolution of the perspectives of auditors, clients and the industry as a whole. It’s time to change our outlook and embrace the advancements in performing SOC 2 audits to fully realize the incredible amount of value and competitive advantage the service can provide.
Legacy tools and processes
Financial statement audit processes, the foundation of most assurance practices, were created using a shared language between auditor and client. Most clients in that world have backgrounds as auditors and are supported by well-established financial terminology and systems. When an auditor asks for an “invoice” or “purchase order,” the CFO knows exactly what is being requested.
Such a luxury does not exist when working with the information security community, which has a diverse vocabulary with varying definitions, pronunciations, and an unlimited number of acronyms. Accountants have spent hundreds of years establishing translation guides and systems. If anything, the level of standardization in technology is astounding, but this is a new industry experiencing dramatic change. So, it makes sense that approaching SOC 2 services with the same tools and rhythms as a financial statement audit has not proven successful.
From a growing need, new tools emerge
In an effort to bridge that gap and provide automated control monitoring, governance, risk and compliance platforms have been created to help clients manage policies, access risk, control user access, and streamline compliance. Through the use of policy templates and checklists adopted by each client, these GRC platforms have created standardization, where there previously was none, and concentrated resources that make this service attainable for small companies.
In the same way that Apple brought the home computer into our living rooms, these tools are making SOC 2 reports mainstream.
GRC platforms are also capable of producing automated evidence, which attracts most of the attention and provides significant benefits. Yet the greater impact is the friction they’ve removed. This simpler and scaled approach to SOC 2 reports reduces the noise created by the back and forth between auditor and client while removing the poor organization so begrudgingly accepted, allowing the auditor to focus on providing value. That value can come from conducting a simple and straightforward, low-touch engagement or an in-depth and intense control inspection that identifies true vulnerabilities and significant risks to the business.
Regardless of the approach, the technology supporting these engagements continues to improve. Last year, the RegTech industry was valued at
The challenges attached to compliance shifts
This growth and evolution of SOC 2 compliance is not without consequences. As speed has increased and prices have dropped, there has been a growing resentment towards these new approaches, not all of which are unfounded. Concerns about overreliance on automated evidence, auditor relationships with GRC platforms, and subject matter expertise within an engagement team are very real challenges the profession must continue to address.
However, by ignoring and shunning the existence of these new tools in an effort to retain the engagement’s status as “hard,” auditors avoid any opportunity to create value that exists beyond the paperwork.
Identifying that value and educating the world on the need to blend these tools with the expertise and professionalism that has always accompanied these services is a critically important message right now. Without that shared understanding and positive messaging, we continue to struggle through the communication challenges we started with and drown in the noise.
Overcoming obstacles with the right message
SOC 2 audits are going to keep getting easier, faster, and cheaper. Emerging technology and growing demand have made SOC reporting a very competitive and fast-paced industry that will feel some bumps along the way, but the need this service fills will shape the profession.
And if the perception isn’t slow, frustrating, and resource-intensive — what should it be?
SOC 2 reports are really a storytelling mechanism. They allow companies to communicate the security practices they value and demonstrate they are deserving of trust. These details can then be exchanged with outside parties to support decision-making in ways that were not previously possible. Companies are now sharing the completion of these reports through trust pages on their websites and online marketplaces as a sales differentiator, which allows CPAs to impact businesses in new and exciting ways.
The value they provide internally can also not be ignored. Accountability and organizational alignment allow mature and growing businesses to thrive. These aspects of SOC 2 compliance have always been valued, but the new supporting tools have suddenly made the experience practical, which should be celebrated.
When viewed as a mechanism for sharing information and allowing the client to be the author, you not only offer validation but a new mechanism for them to understand their own needs. It serves to track, evaluate, and understand critical aspects of their business in the same way the accounting ledger helps them understand their financial position. Instead of being a challenge or roadblock to overcome, you position clients to thoughtfully understand, own and communicate the aspects of their security program, which can be embedded into the organization’s way of life.
President-elect Donald Trump and his Republican party clarified one aspect of the uncertainty surrounding taxes with a resounding victory in the election.
That means that the many expiring provisions of the Tax Cuts and Jobs Act of 2017 — which Trump signed into law in his first term — are much more likely to remain in force after their potential sunset date at the end of next year. Financial advisors and tax professionals can act without worrying that the rules will shift underneath them to favor much higher income duties.
However, the result also presents Trump and incoming Senate Majority Leader John Thune of South Dakota and House Speaker Mike Johnson of Louisiana with a series of thorny tax policy questions that have tricky, time-sensitive implications, according to Anna Taylor,
READ MORE:
Considering the fact that
“They’re going to have to pick their budget number on the front end,” Taylor said. “They’re going to have to pick that number and put it in the budget resolution, and then they’ll kind of back into their policy so that their policies will fit within their budget constraints. And once you get into that process, you can do a lot in the tax base, but there are still limits. I mean, you can’t do anything that affects the Social Security program. So they won’t be able to do the president’s proposal on getting rid of taxes on Social Security benefits.”
Individual House GOP members will exercise their strength in the negotiations as well, and the current limit on
The president-elect and his Congressional allies will have to find the balance amid the “real tension” between members from New York and California and those from low-tax states such as Florida or Texas who will view any increases to the limit as “too much of a giveaway for the wealthy New Yorkers and Californians,” he said.
“You will need almost perfect unity — more so in the House than the Senate,” Traub said. “This really gives a lot of power, I think, to any small group of House members who decide that they will lie down on the train tracks to block a bill they don’t like or to enforce the inclusion of a provision that they really want. I think the place we’ll watch the most closely at the get-go is over the SALT cap.”
READ MORE:
Estimates of
The Treasury Department could “use their extraordinary measures to get them through a few more months before they actually have to deal with the limit,” she said.
“But they’re going to have to make a decision,” Taylor continued. “Are they going to try to do the debt limit first, maybe roll it into some sort of appropriations deal early in the year? Or are they going to try to do the debt limit with taxes, and then that’s going to really force them to move really quickly on taxes? So, I don’t know. I don’t know that they have an answer to that yet. I’ll be really interested to see what they say in terms of how they’re going to move that limit, because they’re going to have to do that at some point — rather soon, too.”
Looking further into the future at the end of next year with
READ MORE:
Both parties have used reconciliation in the wake of the last two presidential elections. A continuing resolution-style patch on a temporary basis would have been more likely with divided government, he said.
“Had that been what the voters called for last Tuesday, I think that the odds of a short-term extension into 2025 would have been a lot higher,” Traub said. “I don’t think that anybody in the GOP majority right now is thinking about a short-term extension. They are thinking about, ‘We have an unusual ability now to use reconciliation to affect major policy changes.'”
The deal will grow Aprio’s geographic footprint while enabling it to expand into new local markets and industries. Financial terms were not disclosed. Aprio ranked No. 25 on Accounting Today’s 2024 list of the Top 100 Firms, with $420.79 million in annual revenue, 210 partners and 1,851 professionals. The deal will add five partners and 31 professionals to Aprio.
In July,
KKB has been operating for six decades offering accounting, tax, and business advisory services to industries including construction, real estate, professional services, retail, and manufacturing. “There is tremendous synergy between Aprio and KKB, which enables us to further elevate our tax, accounting and advisory capabilities and deepen our roots across California,” said Aprio CEO Richard Kopelman in a statement. “Continuing to build out our presence across the West Coast is an important part of our growth strategy and KKB is the right partner to launch our first location in Southern California. Together, we will bring even more robust insights, perspectives and solutions to our clients to help them propel forward.”
The Woodland Hills office will become Aprio’s third in California, in addition to its locations further north in San Francisco and Walnut Creek. Joe Tarasco of Accountants Advisory served as the advisor to Aprio on the transaction.
“We are thrilled to become part of Aprio’s vision for the future,” said KKB managing partner Carisa Ferrer in a statement. “Over the past 60 years, KKB has grown from the ground up to suit the unique and complex challenges of our clients. As we move forward with our combined knowledge, we will accelerate our ability to leverage innovative talent, business processes, cutting-edge technologies, and advanced solutions to help our clients with even greater precision and care.”
Aprio has completed over 20 mergers and acquisitions since 2017, adding
House Speaker Mike Johnson said Donald Trump’s plan to end income tax on tips would have to be paid for, injecting a note of caution into one of the president-elect’s key campaign pledges.
“This is one of the promises that he wants to deliver on,” Johnson said Sunday on CNN’s State of the Union. “We’re going to try to make that happen in the Congress. You’ve got to do the math.”
Johnson paired his comment with pledges to swiftly advance Trump’s economic agenda once the newly elected Congress is in place with Republican majorities in the House and Senate. The former president rolled out a series of tax-cut proposals during his successful bid to return to the White House, including rescinding taxes on overtime, Social Security checks and tips.
Tierney L. Cross/Bloomberg
“You have got to make sure that these new savings for the American people can be paid for and make sure the economy is a pro-growth economy,” said Johnson, who was among
Congress faces a tax marathon next year as many of the provisions from the Republicans’ 2017 tax bill expire at the end of 2025. Trump’s declared goal is to extend all of the personal income tax cuts and further reduce the corporate tax rate.
A more immediate challenge may be ahead as Trump seeks to install loyalists as cabinet members for his second term starting in January, including former Representative Matt Gaetz as Attorney General, Robert F. Kennedy Jr. as secretary of health and human services and former Representative Tulsi Gabbard for Director of National Intelligence.
Gaetz was under investigation by the House Ethics Committee for alleged sexual misconduct and illicit drug use, which he has denied. RFK Jr. is a vaccine skeptic and has endorsed misleading
Donald Trump Jr., the president-elect’s son who has been a key player in the cabinet picks, said he expects many of the choices will face pushback.
“Some of them are going to be controversial,” Trump Jr. said on Fox News’ Sunday Morning Futures. “They’re controversial because they’ll actually get things done.”
‘Because of my father’
Trump Jr. suggested the transition team has options if any candidate fails to pass Senate muster.
“We’re showing him lists of 10 or 12 people for every position,” he said. “So we do have backup plans, but I think we’re obviously going with the strongest candidates first.”
Trump Jr. said incoming Senate Majority leader John Thune owes his post to the president-elect.
“I think we have control of the Senate because of my father,” he said. “John Thune’s able to be the majority leader because of my father, because he got a bunch of other people over the line.”
As market experts talk of ‘animal spirits,’ here’s how to invest now
Stocks making the biggest moves premarket: WMT, LOW, SMCI, BNTX
United sees nearly 30% surge in demand for flights to European Christmas markets versus 2019
Are American progressives making themselves sad?
U.S. Beneficial Ownership Information Registry Now Accepting Reports
New 2023 K-1 instructions stir the CAMT pot for partnerships and corporations
-
Technology1 week agoAI Use Cases: Retail, Finance & Healthcare Solutions
-
Blog Post1 week agoThe Essential Practice of Bank and Credit Card Statement Reconciliation
-
Accounting3 days agoHow to Create an Effective Invoice Process for Small Businesses
-
Technology1 week agoThe Rise of Superapps: How AI is Powering the Next Generation of Mobile Apps
-
Personal Finance4 days agoOlder voters prioritized personal economic issues on Election Day: AARP
-
Economics5 days agoClimate change and the next administration
-
Economics5 days agoWholesale prices rose 0.2% in October, in line with expectations
-
Economics5 days agoSenate Republicans flex their independence