{"id":8549,"date":"2023-03-14T13:30:15","date_gmt":"2023-03-14T17:30:15","guid":{"rendered":"https:\/\/www.thelogisticsoflogistics.com\/?p=8549"},"modified":"2023-03-14T13:31:01","modified_gmt":"2023-03-14T17:31:01","slug":"podcast-modern-courier-delivery-compliance-considerations-understanding-sox-and-soc-compliance","status":"publish","type":"post","link":"https:\/\/www.thelogisticsoflogistics.com\/podcast-modern-courier-delivery-compliance-considerations-understanding-sox-and-soc-compliance\/","title":{"rendered":"PODCAST: Modern Courier Delivery Compliance Considerations: Understanding SOX and SOC Compliance"},"content":{"rendered":"

Original article: PODCAST: Modern Courier Delivery Compliance Considerations: Understanding SOX and SOC Compliance<\/a><\/p>\n

Logistics and supply chain are some of the world\u2019s most complex and regulated industries, which has been further compounded by increasing reliance on data and technology in both fields. As a result, data security and compliance have become a critical component of logistics operations, although implementing adequate controls can present numerous challenges in these complex networks.<\/p>\n

Government regulations like the Sarbanes-Oxley Act of 2002 (SOX) put additional strain on companies to maintain stringent data and financial controls, and often include provisions on how data is maintained by outside vendors and service providers. As companies attempt to manage more diverse supply chains and transportation networks, keeping up with data compliance can become an overwhelmingly complicated task.<\/p>\n

This blog will delve into the modern delivery compliance considerations as they apply to logistics and supply chain, specifically around SOX and SOC. It will explain the various types of SOC audits, how SOC certified service providers can support SOX compliance, and why most courier delivery providers fail to meet SOX requirements. Finally, it will discuss how a last mile delivery platform can solve courier delivery compliance issues through SOC certification.<\/p>\n

Additionally, scroll down to watch OneRail\u2019s Julius Tubbs, Senior Director, Information Security & Infrastructure, and his appearance on Joe Lynch\u2019s \u201cThe Logistics of Logistics\u201d podcast.<\/p>\n

Understanding SOX and SOC Compliance<\/b><\/h2>\n

From a high level, SOX and SOC compliance both serve as protective agents for consumers and organizations through enhanced data accuracy and security, and greater internal control support. There are, however, several critical differences between SOX and SOC, which can be briefly summarized as:<\/p>\n

    \n
  • SOX is a government-mandated record keeping and financial information standards law.<\/li>\n
  • SOC is a voluntary audit of a service provider\u2019s internal controls to ensure data security and shareholder confidence.<\/li>\n<\/ul>\n

    Let\u2019s take a closer look at SOX and SOC, as well as the SOC types that service providers can obtain.<\/p>\n

    What Is SOX Compliance?<\/b><\/h3>\n

    SOX compliance is an annual obligation derived from the Sarbanes-Oxley Act (SOX) that requires publicly traded companies doing business in the U.S. to establish financial reporting standards, including safeguarding data, tracking attempted breaches, logging electronic records for auditing and proving compliance. SOX is meant to stabilize markets, benefit investors and protect the American public by restoring trust in financial reporting.<\/p>\n

    All publicly traded companies, wholly owned subsidiaries, and foreign companies that are publicly traded and do business in the U.S. must comply with SOX. Private companies planning their initial IPO must also comply with SOX before going public. Additionally, all accounting firms that audit public companies must comply with SOX, regardless of their business designation.<\/p>\n

    The high-level requirements for SOX compliance can be summarized in three steps:<\/p>\n

      \n
    1. Provide financial statements that have been audited by a third party to the SEC;<\/li>\n
    2. Implement and test adequate internal controls, and submit an annual Internal Controls Report to demonstrate financial data accuracy; and<\/li>\n
    3. Report material changes to the public in nearly real-time.<\/li>\n<\/ol>\n

      What Is SOC Compliance?<\/b><\/h3>\n

      System and Organization Controls (SOC) is a suite of reports from the American Institute of CPAs (AICPA), instituted amidst the rise of cloud computing, which has increased accessibility to applications and data. SOC reports are issued by a third-party auditor after a thorough examination of a service provider\u2019s operations to verify that they have effective controls for security, availability, processing integrity and confidentiality. These reports provide assurance over the design and effectiveness of controls and outlines any potential risks for customers or partners that are considering working with the service provider.<\/p>\n

      SOC compliance allows companies to feel confident that their service providers are operating in an ethical manner, and establishes credibility and trustworthiness. For the service provider, SOC compliance provides a competitive advantage and conveys a proactive and accountable approach to data management.<\/p>\n

      There are several different SOC audits that a service provider may choose to undergo, with subtypes of each. Next, we\u2019ll explore the most commonly issued reports: SOC 1 and SOC 2.<\/p>\n

      SOC 1 vs. SOC 2<\/b><\/h3>\n

      SOC 1 compliance is an independent validation of a service provider\u2019s controls that relate specifically to financial planning. In short, if the service provider has any bearing on the financial reporting of their customers, they can be audited to ensure financial information is adequately secure. Rather than undergoing individual audits from each customer, a service provider can go through a SOC 1 compliance review and present the results as validation of their data security processes and controls.<\/p>\n

      SOC 2 defines criteria for managing customer data based on five \u201ctrust service principles\u201d \u2014 security, availability, processing integrity, confidentiality and privacy. The SOC 2 audit focuses on the organization\u2019s technological systems, operations and regulatory compliance, and is used when a company outsources technological and data-related services, such as data hosting, colocation, data processing and Software-as-a-Service (SaaS). The SOC 2 report is particularly helpful in areas that include organizational oversight, vendor management programs and regulatory oversight.<\/p>\n

      Type 1 vs. Type 2: What\u2019s the Difference?<\/b><\/h3>\n

      For both SOC 1 and SOC 2, service providers can undergo either a Type 1 or Type 2 audit. The primary difference between the two audits is in their scope and duration.<\/p>\n

        \n
      • Type 1<\/b>: provides a brief snapshot of an organization\u2019s compliance status. The auditor tests one of the service provider\u2019s controls against the company\u2019s description and design. As long as the control meets the required criteria, the company is granted Type 1 compliance.<\/li>\n
      • Type 2<\/b>: verifies that a company can maintain compliance across all controls over time. The organization\u2019s controls are assessed and audited over a period of time \u2014 usually six months or a year \u2014 and if the company passes these ongoing assessments, they are granted Type 2 compliance.<\/li>\n<\/ul>\n

        The Type 2 report is far more rigorous and intensive than Type 1, as it covers a greater timespan and requires a more thorough investigation of a system\u2019s design and processes. Most often, customers looking for SOC 1 or SOC 2 compliance will want to see a Type 2 compliance report, which demonstrates that the service provider has the ability to maintain control standards over time.<\/p>\n

        Why SOC Compliance Matters for SOX Compliance<\/b><\/h3>\n

        While SOC reports are not required, they can be useful for publicly traded companies that are bound by SOX regulations. SOC reports help organizations maintain oversight over their financial data (SOC 1), as well as IT systems, processes and vendors (SOC 2). An independently audited SOC report reinforces SOX compliance through a strict review of how outside vendors handle sensitive information and data, so companies should prioritize service providers that are SOC-compliant.<\/p>\n

        PODCAST: SOC 2 Compliance for Logistics with Julius Tubbs<\/h2>\n