SOC Report for Supply Chain

A SOC audit report for Supply Chain is designed to provide intended users with information about a system that produces, manufactures, or distributes products and the effectiveness of controls within that system (that is, controls related to one or more of the applicable trust services categories of security, availability, processing integrity, confidentiality, or privacy) that are necessary to provide reasonable assurance that the entity's principal system objectives were achieved based on the applicable trust services criteria.

The AICPA SOC audit report is designed to provide intended users with the information they may use to identify, assess, and manage risks from their relationships with the entity.

A SOC Audit Report for Supply Chain is intended for use by those who have sufficient knowledge and understanding of the entity, the products it produces, manufactures, and distributes, and the system that produces, manufactures, or distributes them. The expected knowledge of intended users usually includes the following:

  • The nature of the goods produced, manufactured or distributed by the entity
  • Internal control and its limitations
  • The applicable trust services criteria
  • The risks that may threaten the achievement of the entity's principal system objectives and how controls address those risks using SOC Audit

Managing SOC Audit for Supply Chain Risk of Suppliers

Manufacturers, producers, and distribution companies (organizations) must manage a complex network of plants, service providers, and suppliers to operate efficiently and meet commitments to customers. At the same time, the threats to and vulnerabilities of each supplier in the chain have increased significantly. When a supply chain is disrupted, the organization is at risk of failing to meet production or delivery commitments to its customers. Causes of disruption to supply chains include:

  • Weather and other natural disasters (such as hurricanes or tornadoes) in a geographic area that is home to a supplier’s facility.
  • The threat of war or military action in a geographic area that is home to a supplier’s plant.
  • The lack of financial well-being of a key supplier or shipper.
  • Wide-spread diseases (such as COVID-19 coronavirus) that can affect the entire SOC audit supply chain.

For these reasons, an organization’s ability to achieve its objectives is increasingly dependent on events, processes, and controls that are not visible to the organization and are often beyond its control, such as controls at suppliers. Manufacturers, producers, and distribution companies are looking for visibility across their complex supply chain networks. This is to better understand the risks of doing business with suppliers and the controls suppliers have in place to mitigate those risks. Failure to manage these risks appropriately can result in:

  • reputational damage,
  • loss of intellectual property,
  • disruption of key business operations,
  • fines and penalties,
  • litigation and remediation costs, and
  • exclusion from strategic markets.

This is why supply chain risk management has become such a significant issue for many organizations and their stakeholders. Suppliers are also increasingly interested in communicating how they manage production and distribution risks in their own systems. This is a way of reassuring the organizations with whom they do business.

SOC for Supply Chain Benefits:

  • SOC reports can cover the entire year and the effectiveness of the controls in place.
  • It is a Third-Party Period- of-Time assessment and so has Accountability.
  • Most other assurance programs or audits are only, at a point in time.
  • Since it is a period assessment, it is more like continuous compliance with low risk and high reliability. It also provides assurance on the operative effectiveness of controls.
  • Comprehensive Framework by AICPA.
  • Provides a high-reliability SOC Seal by AICPA.