How to Evaluate Whether a Firm Can Perform a SOC 1 Examination

SOC reports are often discussed as if they are interchangeable. In practice, that assumption breaks down quickly.

A SOC 1 report is not a general compliance exercise, nor is it a standardized assessment that can be produced from a predefined set of controls. It is an attestation over internal controls that directly affect financial reporting—controls that are shaped by how a service organization actually operates, processes transactions, and supports its clients.

That distinction matters most when a SOC 1 report is relied upon by others. Client auditors use it to determine how much assurance they can place on outsourced processes and whether additional testing is required. When the report reflects a deep understanding of the underlying business, it does its job. When it does not, the consequences tend to surface late, often during an audit, when there is little time to course‑correct.

Understanding who can perform a SOC 1 audit—and why that qualification matters—is essential for organizations whose services affect their clients’ financial reporting.

What Auditors Look For

A SOC 1 report is fundamentally different from other forms of compliance or assurance because it focuses on internal controls over financial reporting (ICFR). Rather than assessing generalized control frameworks or security practices, a SOC 1 examination evaluates whether a service organization’s processes affect its clients’ financial statements—and whether the controls around those processes are designed and operating effectively.

That distinction has practical implications. SOC 1 controls are not predefined or standardized. They must be developed based on an understanding of how a specific organization operates, how transactions are initiated and processed, and how those transactions ultimately flow into financial records. This work requires professional judgment informed by accounting standards, audit experience, and independence—hallmarks of a licensed CPA firm operating under AICPA SOC 1 standards and attestation requirements.

Because of this, SOC 1 examinations are performed under the SSAE 18 attestation framework, which requires the auditor to evaluate controls that are tailored to the service organization’s actual business activities. The objectives, risks, and controls examined in a SOC 1 engagement are unique to each organization and must be documented and tested accordingly. There is no checklist that can substitute for understanding how a company earns revenue, processes transactions, or supports its clients’ financial reporting.

A simple example illustrates the point.

Consider a payroll processing firm that calculates wages, applies multi‑state tax rules, and remits payments on behalf of its clients. The financial reporting risk does not lie in whether payroll is processed at all, but in how it is processed—how employee data is updated, how tax jurisdictions are identified and applied, and how changes are reviewed and approved. A SOC 1 examination requires the auditor to identify which of these steps could materially affect client financial statements, document the related controls, and test whether those controls operate effectively over time. That level of evaluation depends on both accounting knowledge and an understanding of the underlying business process.

This is where industry expertise becomes essential. In SOC 1 engagements, the auditor’s judgment is shaped not only by accounting standards, but by a working understanding of how transactions function within a specific industry. Payroll processing, claims administration, and revenue‑related services each introduce different risks. Identifying the controls that matter most—and recognizing where breakdowns are most likely to occur—requires familiarity with those operational realities. AAFCPAs advises that clients look for a licensed CPA firm with specific experience in their industry, particularly where transaction processing directly affects financial reporting.

When that understanding is missing, controls may fail to address areas of highest risk. Auditors who lack insight into a service organization’s operations may incorrectly document the controls.  By contrast, experienced CPA firms focus where errors are most likely to occur—and where those errors would have the greatest impact on financial statements.

SOC 1 Auditor Requirements

A licensed CPA SOC 1 examination is not simply about meeting a requirement, but about producing a report that client auditors can rely on. At a practical level, SOC 1 auditor requirements extend beyond credentials and include the ability to evaluate controls that directly affect financial reporting. A SOC 1 examination requires an auditor who can:

• Understand how a service organization’s activities affect client financial reporting
• Identify and document controls specific to those activities
• Test whether those controls operate effectively over time
• Issue an attestation under applicable AICPA standards

The Cost of Getting It Wrong

When a SOC 1 report is prepared without a clear understanding of the service organization’s business and its impact on financial reporting, the consequences tend to appear at the point of reliance. Most often, that happens during a client’s financial statement audit, when the report is reviewed to determine whether it can be relied upon—or whether additional procedures are required.

When a SOC 1 report does not address the relevant financial reporting risks or include appropriate control testing, client auditors may be unable to rely on it. This can result in expanded substantive testing, audit delays, or requests for remediation and re‑performance of the examination. In some cases, a report is rejected outright, requiring the service organization to revisit work it believed had already been completed. These outcomes reflect how auditors respond when a SOC 1 report does not align with the risks it is intended to address.

The underlying issue is typically rooted in how controls are identified and evaluated. A SOC 1 examination depends on assessing whether controls meaningfully address the points where financial reporting could be misstated. That assessment requires an understanding of how an organization’s processes actually operate, particularly for service organizations that process transactions on behalf of clients.

Industry‑specific knowledge plays a decisive role here. Service organizations that process transactions on behalf of clients—such as payroll data, claims information, or revenue‑related activity—introduce risks that vary significantly by industry and operating model. An auditor who lacks experience with those transaction flows may overlook control failures that only become visible when financial reporting is affected.

Evaluating who can perform a SOC 1 audit requires looking beyond surface qualifications to the substance of how the work is done. A report grounded in licensed CPA oversight, AICPA standards, and industry‑specific judgment is the difference between documentation and assurance.

How We Help

AAFCPAs helps service organizations navigate SOC reporting with the rigor, judgment, and industry awareness these examinations require—particularly when controls affect financial reporting and downstream audit reliance. As a Top 100 CPA firm, we perform SOC 1 and SOC 2 examinations under AICPA attestation standards, combining deep technical expertise with practical insight into how systems, processes, and transaction flows operate in real client environments. Our teams work directly with partners and senior auditors to ensure each engagement is scoped appropriately, controls are evaluated thoughtfully, and reports stand up to scrutiny from customer and client auditors.

Whether preparing for your first SOC report, responding to auditor requests, or reassessing a prior engagement, our approach emphasizes clarity, efficiency, and independence—without the delays, handoffs, or cost structures often associated with national firms. AAFCPAs advises clients to view SOC reporting as an opportunity to produce assurance that others can confidently rely on, informed by both accounting standards and industry‑specific operational realities. For organizations where SOC 1 reporting plays a critical role, our process‑driven, audit‑ready approach helps ensure the report fulfills its intended purpose—supporting trust, reducing friction, and enabling smoother audits and business relationships.

These insights were contributed by Paula Chamoun, CISA, CISSP, CISM, Managing Director, Attestation, Regulatory, and Compliance.

Questions? Reach out to our author directly or your AAFCPAs partner.

AAFCPAs offers a wealth of resources on SOC reporting guidance. Subscribe to get alerts and insights in your inbox.