What does the "carve out" method refer to in SOC reports?

The "carve out" method in SOC reports specifically involves excluding subservice organization controls. When an organization utilizes a third-party vendor or subservice organization to provide services that may impact the internal controls over financial reporting, the primary organization can choose to carve out these controls from the scope of their SOC report.

This allows the primary organization to focus solely on the controls they have in place while not taking responsibility for the controls implemented by the subservice organization. By excluding these controls, the primary organization can provide a clearer picture of their own control environment without being burdened by the additional complexities that the subservice organization’s controls might introduce. This method is helpful for an organization to communicate the efficacy of its own controls without the potential dilution that could arise from including those of its vendors.

In contrast, the other options pertain to different aspects of control reporting that do not accurately represent the "carve out" methodology, which is specifically about the exclusion of third-party controls from the primary organization's reporting scope.