July 01, 2021

How to Avoid Turbulence When Moving Operations to the Cloud

By Alexis Kennedy, CPA, CISA, CISSP, CCSFP

In Texas, heavy clouds can bring much-needed rain, but they can also build into thunderstorms and tornadoes, creating havoc in their path.

In the same way, doing business in the cloud offers enormous benefits, including cost savings, increased information security and scalability. At the same time, there are also risks, including mishandling of private company data, lack of availability of key business functions and challenges in controlling levels of spend.

In the simplest terms, cloud computing means storing and accessing data and programs over the internet instead of on a computer’s hard drive. When information is stored in the cloud, it means it is stored on a server managed by someone else rather than on a server managed within your walls. Cloud service providers are third-party companies that offer a cloud-based platform, infrastructure, application or storage.

For many organizations, transferring certain computer-based operations to the cloud by engaging a cloud service provider offers operational and cost efficiencies. Outsourcing an area that may not be an internal core competency may actually reduce information security and privacy risks.

As with any third-party relationship, the devil is in the details. Organizations need to perform proper due diligence, negotiate contracts that specify explicit responsibility matrices over ownership and ultimate responsibility for data that resides within the cloud platform and make sure they have a process in place for ensuring that service providers are meeting their contractual obligations.

For organizations that are considering transferring some aspects of their operations to the cloud, the key is understanding that engaging a cloud service provider does not mean 100% of the organization’s risk is transferred to that provider. Organizations that do business in the cloud are still responsible for assessing and addressing these risks. That’s why they need to adopt and follow comprehensive internal cloud management procedures, as well as procedures for monitoring their service providers.

Making the Move

Moving business to the cloud is not as easy as just flipping a switch. Before any decision is made, there must be ample research and consensus within the organization. The cost implications, including the shift from capital intensive outlays to recurring operating expenses, must be modeled out with the chief financial officer.

Alignment of the organization’s customer service levels with the service levels provided by the cloud service provider must be reached with legal, sales and customer success departments.

In instances of internally developed applications, software architects must be engaged to determine whether the architecture of the application will perform as expected in the cloud. Cybersecurity and risk management functions must also be engaged to address changes in the risk landscape.

Selecting the Right Type of Service

The first step is to evaluate and select the type of service that best meets the needs of the organization. Of many different options currently available, these are the three most common kinds of cloud service providers on the market today.

Infrastructure as a Service (IaaS). IaaS provides access to networking features, computers (virtual or on dedicated hardware) and data storage space. Flexibility and scalability are its major benefits. In a sense, this is a form of outsourcing an organization’s IT asset management.

With a third party owning and managing the infrastructure, it can be easier to add capacity and grow quickly with a smaller capital investment. IaaS is typically very accessible and can support an organization’s disaster recovery and business continuity objectives.

Platform as a Service (PaaS). This level of service provides organizations with full management of the infrastructure supporting the applications, which allows the organization to focus on developing and deploying applications for its business.

In a PaaS environment, the organization only needs to provide its code. The service provider manages the underlying infrastructure, including patching, software management and capacity planning.

Software as a Service (SaaS). SaaS provides a fully developed and deployed application or product. Once deployed in the cloud, this application is usually managed entirely by the service provider. Maintenance of the underlying infrastructure, as well as the development and maintenance of the application, are typically all part of the outsourcing agreement.

A SaaS platform can help reduce the number of application developers an organization needs to employ while increasing the availability and scalability of the application.

Selecting a Provider

Once an organization has determined the appropriate type of cloud service, the next step will likely be selecting an outside service provider. The main goal is for the organization to understand potential risks of engaging with a service provider and to have an understanding of how the service provider manages its business risks. In this way, the organization will be able to better anticipate the impact to the organization of outsourcing certain risks.

Assessing and managing risk can be challenging since significant portions of the service environments are under the control of the provider and may likely be beyond the purview of the acquiring organization.

However, it is important for the organization to perform due diligence up front to assess the risks associated with engaging a service provider. The organization must be able to answer these questions:

•  What services are being outsourced? 

•  What business processes will be supported by the service?

•  What data will be stored, processed or accessible via the cloud service?

•  Where will the data be stored and processed? (This is important when dealing with contracts that restrict where customer data can be stored or processed.)

•  Who will have access to systems, applications and data related to the cloud service?

A service provider pre-assessment form can be used to gather preliminary information from a potential service provider. Common questions in a supplier pre-assessment form include:

•  Has your company ever declared bankruptcy?

•  Does your company’s insurance policy include errors and omission (or general liability) claims? If yes, what are the limits of the policy?

•  Is your company involved in pending litigation?

•  Has your company ever been a party to a regulatory investigation?

•  Does your company have a privacy policy?

•  Does your company have a documented information security program in place?

•  Will your company agree to complete a questionnaire regarding your information security and privacy programs?

•  Will your company allow for the audit of your organization’s security controls?

•  Does your company have a Service Organization Controls (SOC) report or other third-party security attestation such as ISO 27001, HITRUST, PCI?

•  Does your company have a comprehensive business continuity plan to address continuance of operations in the event of incidents disrupting normal operations?

These assessment forms should provide sufficient information to determine whether additional diligence is needed. Based on the level of potential risk, this additional diligence could include requiring the service provider to respond to a more detailed questionnaire, reviewing the service provider’s SOC report in detail or engaging with the organization’s internal audit function or a qualified external audit firm to conduct a vendor assessment.

Engaging a Provider

Once due diligence is complete, the organization is ready to engage a service provider and begin implementing its services. Before doing so, however, both parties must have a clear understanding of the security responsibilities of both the organization and the cloud service provider.

Typically, the service provider is responsible for security of the cloud (the network, computer and storage layers) while the organization is responsible for security inside of the cloud (the applications and data). Ideally, a responsibility matrix that specifies these responsibilities should be embedded in the contract with the provider.

In the Cloud, Now What?

Due diligence should not end with the signing of the contract. The organization must continue to monitor its outside service provider for overall performance and adherence to contractual obligations.

This monitoring should include regular reviews of invoices to understand the expense characteristics of the solutions moved to the cloud, ongoing assessment of service availability and recurring assessment of the security profile of the migrated solutions.

One of the most efficient ways to perform an annual review of the provider’s adherence to committed operational processes and procedures is to request and review the provider’s SOC report. SOC reports include a great deal of information and can be challenging for organizations to review. But they can be useful in determining whether the outside service provider is adhering to its contractual obligations.

The contents of the SOC report should reflect the specific needs and risks of the organization. Test procedures should define the extent of testing performed to give reasonable assurance over the operating effectiveness of the controls.

In reviewing a vendor’s SOC report, the organization may identify a weakness, either through the service auditor’s identification of a deviation or through the organization’s perceived gap in the control environment. In these cases, the extent and exposure of the particular gap should be evaluated.

It’s important to keep in mind that not all SOC reports are created equally. A reputable, experienced and knowledgeable CPA firm should perform the SOC report. In addition to the results of the auditor’s testing, the organization should pay specific attention to the “complementary user entity controls” section of the SOC report. To ensure that the controls reported on in the cloud service provider’s report will operate effectively, this section specifies the organization’s responsibility within its own control environment.

These considerations should not be news with the issuance of the report, as these responsibilities should have been discussed and agreed upon during the contract negotiations. If they were not, the organization should ensure that it has the controls in place to address the applicable complementary user entity controls.

If a SOC audit or equivalent attestation is not available, organizations should pay particular attention to:

•  How the service organization/vendor provides transparency to their internal control environments to ensure expectations are being achieved, and

•  How beyond inquiry, the service organization/vendor can convey consistency and reliability on that internal control environment.

As more and more organizations move parts of their operations to the cloud, following these steps will be critical for success. The ride may be bumpy at times, but in the end organizations that put in the effort on the front end are more likely to capture the many benefits and efficiencies gained by working in the cloud.

About the Author:

Alexis Kennedy, CPA, CISA, CISSP, CCSFP, is a Senior Manager in IT advisory services for Weaver, a Texas-based national accounting firm. She has consulted with a wide range of clients on security compliance, and performed and led IT audits across multiple industries and technology platforms.

  • SECURE Act 2.0

    SECURE 2.0 and the One Big Beautiful Bill Act

    This article provides a snapshot of the key provisions of the One Big Beautiful Bill Act and retirement provisions in SECURE 2.0. Together, these laws are reshaping retirement planning through new compliance requirements and expanded advisory opportunities, with changes taking effect in 2026 and beyond that call for proactive guidance for clients and employers.
    View Article
  • CPE: Share Repurchases - Playing in the Big Leagues

    Stock buybacks have grown from a once-restricted practice into a dominant way corporations return cash to shareholders. While they return more cash to shareholders than dividends, the financial-reporting and tax risks that large buybacks create must be managed – from negative equity and distorted ratios to rising excise-tax costs.
    View Article
    Tax
  • Volunteer

    Welcoming 2026 with Purpose and Possibility

    Stepping into 2026 brings a wave of opportunity for TXCPA members. This issue of Today’s CPA covers key updates like H.R. 1, SECURE 2.0 and retirement planning, plus insights on AI-driven tax compliance and IRS technology trends. Explore ways to grow, give back, and connect through TXCPA programs and events.
    View Article
  • IRS Use of Artificial Intelligence and Data Analytics to Modernize Operations

    The IRS is rapidly expanding its use of artificial intelligence and data analytics to modernize operations, reshaping compliance, enforcement and taxpayer interactions. From AI-powered chatbots that ease service demands to advanced analytics, the agency is harnessing technology to manage massive data volumes—while walking a careful line between efficiency, fairness and taxpayer trust.
    View Article
    IRS
  • Tax Services

    AI-Powered Tax Compliance, Part 1: How Machine Learning is Revolutionizing Sales and Use Tax

    Business Problem Solved: Companies can struggle to stay on top of complex, high-volume sales and use tax obligations, and this article shows how a hybrid rules-plus-machine-learning approach enables earlier detection, reduces manual review and ensures scalable, auditable compliance.
    View Article
  • Your TXCPA Calendar: Key Dates, Leadership Opportunities and CPE Ahead

    Plan your year with this snapshot of essential events, deadlines and learning opportunities for TXCPA members.
    View Article
    Volunteer
  • fraud

    The Vicious Cycle of Cheating in Accounting: From Students to Practitioners

    Cheating among accounting students and practitioners is increasing and threatens public trust in the profession. Research shows that unethical behavior in school often carries into professional practice. Stronger penalties and dedicated ethics education are needed to break this cycle and reinforce integrity as a core professional value.
    View Article
  • What’s Happening Around Texas - January-February 2026

    TXCPA members are making a big impact! During Accounting Opportunities Month and our annual Month of Service, 68 volunteers reached over 3,000 students and supported local charities across Texas. From hosting career workshops and networking events to packing meals and donating toys, chapters showed the power of giving back.
    View Article
    volunteer for my chapter
  • Texas State Board of Public Accountancy

    Turning Challenges into Wins: How TXCPA Advocates for You

    TXCPA delivered major wins for Texas CPAs during the 2025 legislative session, strengthening the profession at a pivotal moment. New legislation expanded pathways to CPA licensure, modernized practice mobility for out-of-state CPAs and reinforced public protection. These successes highlight the growing impact of TXCPA’s advocacy and the critical role of the TXCPA PAC in safeguarding the CPA license.
    View Article
  • TXCPA Thanks Our 2025-2026 Professional Group Membership Program Participants!

    A big thank you to all the firms and organizations that joined or renewed with TXCPA’s Professional Group Membership program. To simplify renewals and maximize your team’s benefits, be sure to explore our group billing option.
    View Article
    Membership
  • TSBPA

    Steadfast Leadership: William Treacy’s 35 Years at the Texas State Board of Public Accountancy

    For three decades, William Treacy has led the Texas State Board of Public Accountancy with one guiding principle: protect the public. His tenure reflects a career defined by integrity, public service and steady leadership in a rapidly changing profession.
    View Article
  • Implications of Section 301 Tariff Actions

    Section 301 tariffs during President Trump’s first term were associated with reducing the U.S. trade deficit with China, though the overall deficit continued to grow. Data suggests tariffs shifted trade flows rather than curbing demand. For CPAs, these insights are key to assessing how renewed tariffs could impact trade patterns, costs and global tax planning.
    View Article
    Transfer pricing
  • Trusted Advisor

    Why Exit Planning Should Be on Every CPA Firm’s Radar

    Exit planning is quickly becoming a high-impact advisory opportunity for CPAs. While many business owners know they will eventually exit, few are truly prepared, and CPAs are ideally positioned to close that gap through trusted relationships and financial insight.
    View Article
  • Governance is Your Growth Engine: Build Value and Outrun Private Equity

    As private equity reshapes the accounting landscape and traditional partnership models strain under talent shortages and succession challenges, strong governance has become the real differentiator. By replacing ad hoc decision-making with clear roles, accountability, performance metrics and disciplined planning, firms can turn chaos into clarity and intention into execution.
    View Article
    Public practice
  • talent retention

    How Employee Resource Groups Can Drive Diversity in an Accounting Organization

    This article dives into how Employee Resource Groups (ERGs) help firms build cultures that attract, engage and retain people by turning inclusion into action. Firms that invest in ERGs create workplaces where employees are more engaged, loyal and likely to thrive.
    View Article
  • Take Note

    In this edition of Take Note: 2026 Midyear Leadership Council and Members Meeting; Support Through the Accountants Confidential Assistance Network (ACAN); CGMA® Designation; 2026 CPE Programs; TXCPA’s Career Center
    View Article
    TXCPA online learning
  • Classifieds

    The Classifieds section offers a centralized resource for practice sales, buyers seeking to purchase firms and specialized services. It helps members efficiently connect with opportunities tailored to their professional needs.
    View Article

CHAIR
Mohan Kuruvilla, Ph.D., CPA

PRESIDENT/CEO
Jodi Ann Ray, CAE, CCE, IOM

CHIEF OPERATING OFFICER
Melinda Bentley, CAE

EDITORIAL BOARD CHAIR
Jennifer Johnson, CPA

MANAGER, MARKETING AND COMMUNICATIONS
Peggy Foley
pfoley@tx.cpa

MANAGING EDITOR
DeLynn Deakins
ddeakins@tx.cpa

COLUMN EDITOR
Don Carpenter, MSAcc/CPA

DIGITAL MARKETING SPECIALIST
Wayne Hardin, CDMP, PCM®

CLASSIFIEDS
DeLynn Deakins

Texas Society of CPAs
14131 Midway Rd., Suite 850
Addison, TX 75001
972-687-8550
ddeakins@tx.cpa

 

Editorial Board
Derrick Bonyuet-Lee, CPA-Austin;
Aaron Borden, CPA-Dallas;
Don Carpenter, CPA-Central Texas;
Rhonda Fronk, CPA-Houston;
Aaron Harris, CPA-Dallas;
Baria Jaroudi, CPA-Houston;
Elle Kathryn Johnson, CPA-Houston;
Jennifer Johnson, CPA-Dallas;
Lucas LaChance, CPA-Dallas, CIA;
Nicholas Larson, CPA-Fort Worth;
Anne-Marie Lelkes, CPA-Corpus Christi;
Bryan Morgan, Jr, CPA-Austin;
Stephanie Morgan, CPA-East Texas;
Kamala Raghavan, CPA-Houston;
Amber Louise Rourke, CPA-Brazos Valley;
Shilpa Boggram Sathyamurthy, CPA-Houston, CA
Nikki Lee Shoemaker, CPA-East Texas, CGMA;
Natasha Winn, CPA-Houston.

CONTRIBUTORS
Melinda Bentley; Kenneth Besserman; Kristie Estrada; Holly McCauley; Craig Nauta; Kari Owen; John Ross; Lani Shepherd; April Twaddle; Patty Wyatt