Implementing Trust Services Criteria & COSO Framework

Effective December 15, 2018, all SOC 2 audits now need to comply with TSP Section 100—the 2017 Trust Services Criteria for security, availability, processing integrity, confidentiality, and privacy, building upon the COSO framework. 

The new SOC 2 audit reports will focus on changes meant to address head-on the current security breach landscape, which appears to be getting worse with each incident.

Many of these changes align with the 2013 Committee of Sponsoring Organizations of the Treadway Commission (COSO) Internal Control criteria already in place but feature tighter controls to thwart and mitigate cybersecurity breaches and increase flexibility in the application of controls over areas such as security and privacy. The new framework affects those service organizations which will be issuing SOC 2 and/or SOC 3 reports with reporting periods ending after December 15, 2018. Companies, who did not early adopt the new standard, will need to prepare for examinations of their controls under the new Trust Services Criteria, which aligns with the new COSO framework. 

The new points of focus include:

Security: The effectiveness of policies and procedures governing the way organizations protect themselves against unauthorized access and respond to security breaches resulting in unauthorized disclosure of information will be periodically evaluated.

Availability: Information and systems must be available for operation and use to meet the entity’s objectives.

Confidentiality: Information designated as confidential must be sufficiently protected from unauthorized access to meet organizational effectiveness.

Processing Integrity: System processing should be complete, valid, accurate, timely, and authorized to meet organizational objectives.

Privacy: Personally identifiable information must be collected, used, disclosed, and disposed of in a secure manner.

What Are the Main Implications?

The primary implications of these changes include positive impact on reporting clarity as a result of a defined level of transparency between service organizations and their users. Adding to the positive impact of the new framework, the detailed and thorough audits will be more satisfactory to service organization's clients and assessors. For service organizations, the revisions issued over the past 15 months represent new compliance challenges, which require additional controls, as well as additional effort preparing the system description.

The main principles guiding the 2013 COSO Internal Control–Integrated Framework are comprehensive and are outlined here:

Control Environment

Your organization should demonstrate a commitment to integrity and ethical values. This starts with the board of directors ensuring oversight over management and performance of internal controls.

Management, in turn, should work closely with the board of directors in pursuit of organizational objectives, which include the commitment to attract, develop, and retain competent staff and hold employees accountable for their internal-control responsibilities.

Risk Assessment

Your organization must not only identify and assess risks with sufficient clarity but also analyze those risks as a basis for how risks should be managed when they arise.

In other words, have a well-thought-out plan of action.

Your organization should also consider the potential for fraud in assessing risks to ensure the integrity of the process and identify changes, which could significantly affect the system of internal control―a fail-safe measure.

Control Activities

Your institution must select and develop control activities, which contribute to the mitigation of risk to the achievement of your goals to acceptable levels. Basically, you need to select processes for governing technology, which support your objectives, and you should deploy policies and procedures to establish expected outcomes.

Information and Communication

Governments and other related entities rely on information gathering to support their activities. Your organization is no different when it comes to meeting the new SOC 2 audit requirements.

You will need to obtain and use relevant, quality information to support the functioning of internal control. In addition, it is essential to effectively communicate any information internally and externally―perhaps with third parties―regarding matters, which affect the functioning of internal control. In other words, all parties must talk to each other.

Monitoring Activities

Compliance is a function of how well you self-monitor your own activities. Your organization is expected to select, develop, and perform ongoing evaluations of the effectiveness of each component of internal control and its functional efficiency.

If an internal control deficiency is identified, you are expected to communicate your findings to all parties responsible for taking corrective action, including C-suite executives, the board of directors, and other decision makers.

As the cybersecurity landscape evolves, compliance becomes a constantly moving target, which often brings with it confusion over how to remain compliant.

With such major changes coming your way, you may need to consider a Readiness Assessment to update your compliance program to align with the new Trust Services Criteria.