Key Strategies to Help Get an Unqualified Opinion SOC Report

System and organization controls (SOC) reports are a powerful tool providing boards, executive management, or investors critical insight into an organization’s performance.

Investors and potential investors analyze and break down SOC reports to base their investment decisions on. This can lead to new investors, a growing customer base, and new opportunities.

Conversely, a less-than-favorable report can steer investors away from a company, potentially affecting a company’s ability to maintain business.

There are four primary types of SOC report opinions:

• Unqualified
• Qualified
• Disclaimer of opinion
• Adverse

Learn about the different types of reports and steps your organization can take to help obtain a favorable report.

SOC report type 1: Unqualified opinion

This type of opinion may initially sound negative, but when auditors say a SOC report opinion is unqualified, this is considered a “clean report”. This means the auditors determined that the controls operated effectively and were suitably designed to achieve the control objective identified by the organization being reported upon. This type of report is free from adverse comments and typically the kind of report a company would want to receive... It should be noted that an unqualified opinion is not free from exceptions or deviations of some kind; but instead notes that they were not pervasive or cause a concern as part of the opinion. Investors or readers should still understand the exceptions or deviations identified.

SOC report type 2: Qualified opinion

A qualified opinion is determined when issues were identified as they relate to the system description, the design of controls, or the effectiveness of those controls. For example, during a SOC 2 Type 2, and auditor could determine through testing of controls, that certain controls were not operating effectively to achieve an applicable Trust Services Criteria. Because of this type of opinion, investors or readers should assess and inquire if this is a “one-off” issue, or if the service organization would be prone to this type of opinion. While it is true that a qualified opinion is not desirable, it is not an uncommon opinion but not as severe as a disclaimer or adverse opinion.

SOC report type 3: Disclaimer of opinion

When an auditor issues a disclaimer opinion, this is an indication that the service organization did not provide the auditor with adequate information to form a basis of opinion. Consequently, the service auditor is unable to provide an opinion on the fairness of the system description, the appropriateness of the control design, or the effectiveness of the controls over time. This situation is uncommon, as most service organizations aim to showcase the effectiveness of their internal control environment.

SOC report type 4: Adverse opinion

The final type of opinion, the adverse opinion, is considered to be a red flag for any service organization to receive and for readers or investors to read about as a result of the auditor’s testing procedures. But what does an adverse opinion mean? This type of opinion indicates to readers and investors that there were a significant number of controls that were tested did not operate effectively, or were not effectively designed, or there were a significant number of misstatements present in the system description.. Adverse opinions are seen as unfavorable. Investors and readers should reach out to the service organization to better understand the cause of the opinion and how the service organization plans to address these significant exceptions.

How can a company obtain a SOC report with an unqualified opinion?

Auditors play a vital role to companies, and their opinions are the result of an assessment of the service organization’s internal controls. To possibly obtain an unqualified opinion, companies should strive to:

Implement internal controls

Create and implement appropriate internal controls and have the means to measure against them by providing evidence. This allows a company to improve operational effectiveness and provide accurate reporting during audits.

Create strong policies

Strong policies are the roadmap for a company’s day-to-day operations and provide guidance in decision-making. Emphasize to employees all policies and procedures need to be followed.

Conduct regular reviews

Companies should have their controls and policies reviewed regularly, either by an internal audit team or through an external readiness assessment. Reviews and readiness assessments help determine if a company is considered “audit ready.”

How CLA can help improve SOC reports

A SOC report can help provide reasonable assurance for customers and other stakeholders that you have effective internal controls in place to satisfy the SOC objectives and criteria.

Organizations should strive to obtain an unqualified SOC report, and CLA can help you achieve that goal by providing recommendations to assist you in developing enhanced policies and internal controls.

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