If your company provides technology, fund administration, payroll, custody, cloud hosting, SaaS, data processing, or other outsourced services to a DFSA-regulated firm in the Dubai International Financial Centre (DIFC) or an FSRA-regulated firm in the Abu Dhabi Global Market (ADGM), you may already have faced a question from a prospective or existing client:
“Do you have a SOC report?”
Neither the Dubai Financial Services Authority (DFSA) nor the Financial Services Regulatory Authority (FSRA) imposes a blanket requirement for every service provider to obtain a SOC 1 or SOC 2 report.
What both regulatory frameworks do require, however, is meaningful due diligence, oversight, monitoring and, where relevant, verification of third-party service providers.
For service organizations working with regulated financial institutions, independent control assurance is therefore increasingly becoming an important part of vendor due diligence. A SOC report can provide clients with independent evidence about a service provider’s control environment without requiring them to conduct extensive direct testing of the provider’s internal systems.
This guide explains what a SOC audit is, why DIFC and ADGM-regulated firms may request one, how SOC 1 differs from SOC 2, and how organizations can prepare for an assurance engagement.
What is a SOC Audit?
SOC stands for System and Organization Controls. SOC reports are independent assurance reports designed to provide users with information about the controls operated by a service organization.
Depending on the nature of the service, those controls may relate to:
- Financial reporting
- Information security
- Availability
- Processing integrity
- Confidentiality
- Privacy
SOC reporting originates from the framework developed by the American Institute of Certified Public Accountants (AICPA).
International assurance engagements may instead be performed under standards issued by the International Auditing and Assurance Standards Board (IAASB), particularly ISAE 3402 for controls at service organizations relevant to financial reporting and, depending on the engagement, ISAE 3000 (Revised) for other assurance engagements.
ISAE 3000 is a broader assurance standard and should not automatically be treated as an international equivalent of SOC 2.
In practical terms, if your organization processes transactions, operates systems, hosts information or performs activities on which your clients depend, an independent assurance report can help those clients understand whether relevant controls are appropriately designed and, in a Type II engagement, whether they have operated effectively over a specified period.
SOC 1, SOC 2 and SOC 3: What Is the Difference?
| Report Type | Framework/Standard | What it Covers | Who it’s for |
| SOC 1 | AICPA attestation standards, including AT-C 320; ISAE 3402 is broadly comparable internationally | Controls relevant to a client’s internal control over financial reporting | Payroll processors, fund administrators, loan servicers, payment processors, outsourced finance functions |
| SOC 2 | AICPA attestation standards + AICPA Trust Services Criteria | Security, Availability, Processing Integrity, Confidentiality and/or Privacy | SaaS platforms, cloud hosting providers, fintechs, data centres, IT service providers |
| SOC 3 | AICPA Trust Services Criteria | General-use assurance covering relevant Trust Services categories without the detailed system description, tests and results contained in SOC 2 | Organizations seeking a general-use assurance report |
SOC Type I vs Type II
The SOC 1 and SOC 2 reports may generally be issued as either Type I or Type II engagements.
Type I assesses whether the relevant controls are appropriately designed and implemented as of a specified date. Type II assesses both the design of the controls and their operating effectiveness over a defined review period.
For this reason, enterprise clients and regulated financial institutions often prefer a Type II report when evaluating established service providers. It provides evidence of how controls operated over time rather than only at a single point in time.
Why Do DIFC Firms Ask Service Providers for SOC Reports?
The DFSA does not prescribe SOC certification as a mandatory requirement for service providers.
Instead, the regulatory framework places responsibility on the regulated firm to understand and manage the risks created by outsourcing and third-party technology arrangements.
Outsourcing Under the DFSA Framework
Under the DFSA General Module, an Authorised Person remains responsible for meeting its regulatory obligations even where an activity has been outsourced. This means outsourcing does not transfer the regulated firm’s responsibility to the service provider.
The Authorised Person is therefore expected to perform appropriate due diligence before entering into outsourcing arrangements and maintain effective oversight of outsourced activities.
For service providers, this creates a practical requirement to demonstrate that their systems, processes and controls can withstand a regulated client’s due-diligence process.
Additional Requirements for ICT Providers
The DFSA’s GEN 5.5 framework contains additional requirements relating to information and communication technology risks.
These become particularly relevant where a third-party provider:
- Accesses an Authorised Person’s IT systems or networks
- Accesses or processes the firm’s data
- Provides cloud, hosting, SaaS or other material ICT services
The framework requires regulated firms to conduct appropriate due diligence, establish contractual safeguards, supervise ICT providers and regularly verify that relevant security requirements continue to be met.
Importantly, DFSA guidance recognises that verification may be achieved through methods including reviews of a third party’s control environment or independent audit reports.
This is where reports such as SOC 2 can become commercially valuable.
A SOC 2 report is not mandated by the DFSA, but it can provide structured independent assurance that supports a regulated firm’s third-party risk assessment.
Why Do ADGM Firms Ask Service Providers for SOC Reports?
The underlying principle in ADGM is similar.
An FSRA-regulated firm remains responsible for managing the risks associated with functions, systems and services provided by third parties.
Outsourcing an activity therefore does not remove the regulated firm’s responsibility for ensuring that the associated risks are appropriately managed.
This creates expectations around:
- Due diligence before engaging service providers
- Assessment of third-party operational and technology risks
- Appropriate contractual safeguards
- Ongoing monitoring and oversight
- Verification that relevant controls continue to operate appropriately
For ICT and technology service providers in particular, independent assurance reports can form part of the evidence a regulated firm uses when assessing the effectiveness of a vendor’s control environment.
As with the DFSA, the FSRA does not impose a blanket requirement on service providers to obtain SOC 1 or SOC 2 reports.
However, where regulated clients require independent assurance over financial reporting controls, cybersecurity, data handling or operational resilience, SOC reports can provide a recognised and structured way of demonstrating those controls.
SOC 1 vs SOC 2: Which Report Does Your Organization Need?
The right report depends primarily on what your service does for the client and what risk the client is trying to assess.
Choose SOC 1 When Financial Reporting is the Primary Concern
SOC 1 is relevant where the services you provide could affect your client’s financial statements or its internal controls over financial reporting.
Common examples include:
- Payroll processing
- Fund administration
- Loan servicing
- Transaction processing
- Accounting outsourcing
- Certain payment-processing activities
Choose SOC 2 When Technology and Information Risk Are the Primary Concern
SOC 2 is generally more relevant where clients want assurance around the security and reliability of technology environments.
Typical organizations include:
- SaaS platforms
- Cloud service providers
- Fintech companies
- Data centres
- Managed IT providers
- Technology outsourcing companies
- Platforms processing sensitive customer information
SOC 2 engagement is assessed against relevant AICPA Trust Services Criteria, which may include:
- Security
- Availability
- Processing Integrity
- Confidentiality
- Privacy
Not every SOC 2 engagement must necessarily cover all five categories. The appropriate scope depends on the nature of the organization, its services and its clients’ requirements.
How KGRN Supports SOC Readiness for DIFC & ADGM Service Organizations
KGRN Chartered Accountants supports organizations in preparing for SOC and related assurance engagements by connecting the assurance scope with the practical requirements faced by businesses operating in DIFC, ADGM and the wider UAE.
Our support may include:
- SOC scoping and readiness assessments to determine the appropriate assurance path and identify relevant systems and controls
- Gap assessments against applicable control criteria and regulatory expectations
- Remediation planning across access management, information security, business continuity, vendor management and supporting documentation
- Evidence readiness so policies, records and control evidence are organised before formal fieldwork
- Coordination of formal assurance engagements under the appropriate professional framework
- Ongoing readiness support to help organizations maintain controls and evidence for subsequent reporting periods
The objective is not simply to prepare for an audit. It is to create a control environment that can withstand the scrutiny of regulated clients, enterprise procurement teams and independent assurance providers.
Planning a SOC or Controls Assurance Engagement?
If a DIFC or ADGM client has requested independent control assurance, determine the correct scope and reporting framework before committing to an audit timetable.
A readiness assessment can help identify whether you need SOC 1, SOC 2, ISAE 3402 or another assurance engagement, while identifying control and documentation gaps before formal testing begins.
Speak with KGRN Chartered Accountants about your SOC readiness and assurance requirements.