Understanding SOC Report Opinions

What are the four types of System and Organization Controls (SOC) report opinions?

SOC 1 and SOC 2 reports are attestation reports, where an independent third party (service auditor) expresses an opinion on a subject matter that is the responsibility of another party (service organization).  

Management of the service organization is responsible for identifying the specific subject matter to be examined, designing and operating controls to achieve the control objectives (SOC 1) or applicable trust services criteria (SOC 2), and providing an assertion as to whether the controls stated in the description are fairly presented, suitably designed (Type 1 Report) and operating effectively (Type 2 Report).

The service auditor will then issue its opinion on the subject matter based on its examination. Both the subject matter information, including the responsible party’s assertion, and the practitioner’s attestation report are made available together to the intended users.

Typically, if you are reviewing a vendor’s SOC report, one of the first things you want to review is the service auditor’s opinion. The opinion is usually within Section I of the SOC report, titled “Independent Service Auditor’s Report".

The Four Types of SOC Report Opinions

• Adverse Opinion: This is the most undesirable opinion and would be considered a “failure” of the examination by most users. With an adverse opinion, the service auditor might be able to obtain the sufficient, appropriate evidence, but based on the evidence has concluded that there are material or pervasive misstatements or deficiencies in the description of the system and/or the suitability of design or operating effectiveness of controls that prevent the achievement of all or most of the control objectives or criteria.
• Disclaimer of Opinion: If the service auditor is unable to obtain enough sufficient, appropriate evidence and the possible effects on the subject matter of undetected misstatements could be material and pervasive, a disclaimer of opinion may be rendered. This scenario can happen when a service organization has undergone its first SOC report with minimal to no preparation, or if the organization refuses to provide the evidence. A disclaimer of opinion is not common, but the service auditor must render such an opinion if the circumstances warrant.
• Qualified Opinion: A qualified opinion means that the service auditor has found issues that materially impact the achievement of one or multiple control objectives or criteria. This does not mean that the service organization has necessarily failed the examination (remember, a SOC report is an attestation and not a certification), but this does mean that the service auditor determined that some or multiple controls were not suitably designed or operating effectively.
• Unqualified Opinion: This is a considered a “clean” opinion. An unqualified opinion means the service auditor has determined that the description of the system is fairly presented, the controls stated in the description were suitably designed (Type 1 Report) and operating effectively (Type 2 Report) to provide reasonable assurance that the control objectives or criteria would be achieved in all material respects.

Keep in mind that it is possible to have exceptions and still receive an unqualified report. The impact of any testing exceptions depends on numerous considerations, including the number and nature of the deficiencies, any mitigating controls, and the materiality of the exceptions to meet the control objectives or criteria.

The service auditor will discuss any deficiencies and the related impact with management of the service organization in forming its overall opinion.

How Can Schneider Downs Help?

If you have any questions about SOC compliance, assessments and readiness, please contact us at [email protected] or visit our dedicated SOC page.

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