Auditing: Isolated Exception vs Control Deficiency Explained
Organizations undergo audits for a variety of reasons: complying with regulatory requirements, meeting industry standards, and building trust with customers and stakeholders are the most common. Whether adhering to the SOX regulation, pursuing SOC 2 compliance, or achieving ISO 27001 certification, audits play a critical role in not only verifying compliance, but also gaining actionable insights into improving your organization’s security posture.
One way audits do this is by revealing discrepancies, such as audit exceptions or control deficiencies, that need attention and remediation. By finding and correcting them, you can mitigate risks and vulnerabilities before they become serious security incidents.
Understanding these two findings is important for organizations striving to achieve and maintain continuous compliance and safeguard their data and reputation. In this blog, we’ll break down the differences between an audit exception and a control deficiency and offer actionable insights on how to address them effectively.
What is an auditing isolated exception?
An isolated audit exception refers to a specific instance where the result deviates from the established policy or control the organization has in place when assessed by an auditor. This is typically an isolated occurrence rather than a systemic issue.
For example, an isolated audit exception might occur when one employee fails to follow a mandatory review and approval process for gaining access to a production system. This one single instance of non-compliance with access control procedures may be identified in an audit sample of 25 instances. While these exceptions may seem minor, they can still pose risks if left unaddressed.
Audit exceptions typically require targeted corrective actions, such as retraining employees or reinforcing compliance protocols. The key is to determine the impact of the exception.
Let’s look at the two major types of audit exceptions below.
Types of audit exceptions
There are two types of audit exceptions based on the number and severity.
- Minor exceptions do not have a material effect and therefore might not significantly affect your compliance status, but they should still be addressed.
- Major exceptions do have a material effect and are therefore more serious. They might imply that the control doesn’t meet compliance requirements and affect your compliance report.
If the auditor finds several exceptions, rather than an isolated incident, this suggests broader vulnerabilities within the organization and may be the result of a breakdown in an internal control, also known as a control deficiency.
Recommended reading
Common SOC 2 Audit Exceptions and How to Avoid Them
What is a control deficiency?
A control deficiency arises when an organization’s internal controls fail to deter, detect, prevent, or correct issues in a manner that is designed, implemented, and operating effectively, which may affect the organization’s ability to mitigate risks and/or adhere to the compliance requirements it is pursuing. Unlike isolated exceptions, control deficiencies are indicative of gaps in the organization’s overall control environment.
Control deficiencies can be classified into three categories:
- A deficiency in design: These occur when the control is not properly created to address the intended risk, or it lacks the necessary components to operate effectively. For example, an organization implements role-based access control to a critical system but fails to define roles properly, allowing excessive access to sensitive data for unauthorized employees.
- A deficiency in implementation: These occur when a control is designed but not put into place correctly or the control itself is missing. For example, a role-based access control is designed but not implemented in a critical system, allowing all users of the system to have full access privileges.
- A deficiency in operation: These occur when a well-designed control is not executed effectively. For instance, an organization has a control for quarterly user access reviews, but reviews are not performed consistently or are incomplete. This operational deficiency increases the risk of unauthorized access to systems or data.
Recommended reading
Audit Management 101: How the Right Process and Tool Can Streamline Compliance
Auditing isolated exception vs. control deficiency: What are key differences?
When reviewing audit results, it’s important to distinguish between isolated exceptions and control deficiencies to determine the scope and urgency of corrective actions.
| Isolated audit exception | Control deficiency | |
| Scope | Typically refers to specific instances limited within a control | Typically indicate that a control is not designed, implemented, or operating effectively that could lead to broader systemic issues |
| Impact | May represent a one-off event with minimal impact | Could have far-reaching consequences for the organization’s compliance |
| Resolution | Usually involves quick fixes, such as employee training or updating specific processes | Requires more comprehensive solutions, such as redesigning controls or implementing new ones |
| Reporting requirements | May be resolved internally without formal escalation | Usually must be reported to senior management and/or external stakeholders |
Secureframe simplifies compliance and audit preparation by providing automated tools to identify and address potential issues before they escalate into audit exceptions or a breakdown in your internal controls.
Secureframe provides:
- Monitoring dashboards: With Secureframe, you understand exactly what you need to do to meet requirements and track your progress towards being compliant (and audit-ready if the framework requires it). With our dashboards, you’ll get a real-time view of what’s in place and operating effectively and what you can do to improve before bringing in your auditor or communicating the program status to customers or other key stakeholders.
- Continuous monitoring: Our platform offers real-time monitoring of your controls, ensuring that potential exceptions or deficiencies are addressed promptly.
- AI-powered remediation: Over time, changes in your environment or organization may result in tests failing. Comply AI for Remediation automatically generates fixes as infrastructure-as-code, allowing users to effortlessly implement these solutions in their cloud environments. This not only makes the remediation process more efficient, it also can help enhance your organization’s security posture.
- Tasks and alerts: With Secureframe, owners of particular assets may receive alerts about detected misconfigurations directly in the platform or via Slack. Owners can also be assigned to certain tasks with due dates, and Secureframe will create corresponding tickets within your ticketing tool, such as Jira, ClickUp, Linear, and ServiceNow. When these tickets are completed, the tasks automatically resolve in Secureframe, and the linked ticket can also be found in the test in-platform, ensuring prompt resolution of misconfigurations so you avoid falling out of compliance.
- Customizable notifications: With Secureframe, you can set up notifications for required regular tasks that are key to your remediation process throughout the year, including vulnerability scanning and penetration testing. You can also set up reminders for personnel to complete security awareness training.
- Expert guidance: You can leverage Secureframe’s team of in-house compliance experts, which has decades of audit advisory and consulting experience. They can work with you to understand your company’s specific requirements, provide tailored advice for an ironclad security posture, and guide you through a successful audit.
To learn how you can proactively mitigate risks, maintain compliance, and build a stronger foundation for your organization with Secureframe, request a demo.
Recommended reading
Why Compliance Automation is a Strategic Advantage for Modern Organizations
FAQs
What’s the difference between an audit exception and a control deficiency?
An audit exception is an isolated incident of non-compliance, whereas a control deficiency may indicate systemic issues within your control environment.
How can organizations prevent audit exceptions?
Organizations can prevent audit exceptions by implementing robust compliance policies, conducting regular training, and using tools like Secureframe to continuously monitor controls over time.
Are control deficiencies always reported to external stakeholders?
Depending on the compliance framework, significant control deficiencies must be reported, but minor deficiencies can often be addressed internally.
How does Secureframe assist with audits?
Secureframe provides powerful automation and AI and expert guidance to streamline audit preparation and reduce the likelihood of exceptions or deficiencies. This helps organizations strengthen their security and compliance posture and avoid costly consequences.
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