AICPA releases new SOC for Supply Chain reporting framework

The American Institute of Certified Public Accountants (AICPA) recently released new guidance for the System and Organization Controls (SOC) for Supply Chain assurance examination and report. This supply chain examination is part of the AICPA’s suite of SOC services. The report is intended to provide information about an organization’s manufacturing, production or distribution system, and the effectiveness of controls that mitigate supply chain risks.

Benefits of the new reporting framework

Benefits to the manufacturing organization issuing the report

• SOC for Supply Chain can serve as a way for suppliers to demonstrate to their customers that they are adequately managing their risks. Serving as an increased assessment of risk, the examination can not only help management assess and manage their risks, but potentially save the organization money, and allow for a focus on business growth and more informed decision-making.
• The examination could provide a competitive edge within the supply chain and increase market demand.
• The report also has the potential to reduce the communication and compliance burden on organizations by decreasing the number of information requests or on-site visits.

Benefits to organizations receiving the report from their supply chain partners

The SOC for Supply Chain report demonstrates good business governance for the intended users. The report provides a set of common criteria for disclosures about an organization’s system for assessing control effectiveness, and as a result, can be used as a tool for organizations to monitor the controls of their supply chain partners to make more informed decisions about the potential risks associated with their supply chain partners.

New developments in supply chain

Recently, supply chain risk management has become a significant issue for many organizations and their stakeholders. As COVID-19 continues to cause disruption across the globe, the threats to and vulnerabilities of suppliers in the chain have increased dramatically. Failure to successfully manage these supply chain risks can result in reputational damage, disruption of business or potential litigation.

Steps to take now

Consider requesting key supply chain partners provide you with a SOC for Supply Chain report.  Proactive suppliers should consider undergoing a SOC for Supply Chain examination to be ready to respond to these requests. To help position organizations for a successful examination, we strongly recommend performing a readiness assessment prior to starting the examination period.

For more information on SOC for Supply Chain or a readiness assessment, contact our team.