What is SOC 2 Compliance?
To better guide organizations to be resilient against vulnerable attacks, SOC 2 Compliance came into effect in April 2010. Service Organization Control Type 2, or SOC 2, is a cybersecurity compliance framework developed by the American Institute of Certified Public Accountants (AICPA). It outlines voluntary compliance standards for any service organization that stores, processes, or transmits any kind of customer data.
What is a SOC 2 Audit?
A SOC 2 audit refers to an independent auditing process that ensures a company's systems and processes meet the five trust service criteria of security, availability, processing integrity, confidentiality, and privacy. It is often used to assess the security of a company's data management and storage processes.
Differences Between SOC 1 and SOC 2
The main difference between SOC 1 and SOC 2 reports is their focus. SOC 1 reports are designed for organizations that provide services to other companies, while SOC 2 reports are for organizations that handle sensitive data. Additionally, SOC 1 reports only assess internal controls related to financial reporting, while SOC 2 reports evaluate controls related to security, availability, processing integrity, confidentiality, and privacy.
Why is SOC 2 Important?
SOC 2 demonstrates to clients and stakeholders that an organization has implemented appropriate controls to protect their data and ensure the integrity and availability of their systems. It can also help an organization meet regulatory and legal requirements, build trust with customers, and mitigate the risk of data breaches and other security incidents.
However, it is important to note that SOC 2 compliance does not guarantee complete security and should be viewed as one part of an overall security strategy. It is important to regularly review and update security protocols and processes to ensure ongoing compliance and protection of sensitive information.
The Five Trust Service Principles of SOC 2
The five trust service criteria (TSC) are security, availability, processing integrity, confidentiality, and privacy. These criteria are centered around safeguarding against unauthorized access and use of assets and data managed by the organization. This means implementing access controls to prevent malicious attacks, unauthorized deletion, misuse, and unauthorized changes or disclosures of company information. Additionally, conducting risk assessments, establishing data backup and recovery processes, and properly handling sensitive information are essential actions that adhere to the critieria. They may also include specific requirements for the company's industry or the type of data being managed.
- Security: Security focuses on protecting data from unauthorized access, use, alteration, and destruction. This could include implementing security controls such as firewalls, encryption, and access controls, conducting regular risk assessments and audits, and training employees on security protocols. Another requirement is that organizations must have a documented security management program established.
- Availability: Availability focuses on ensuring that systems and information are available and usable when needed. This could include implementing redundancies and disaster recovery plans, monitoring system uptime and performance, and regularly conducting backups and tests. Procedures addressing and responding to system outages or disruptions should be documented.
- Process Integrity: Process integrity focuses on ensuring that data is processed accurately, completely, and promptly. This could include conducting regular data integrity checks, implementing controls to prevent unauthorized changes, and properly documenting and controlling changes to systems and processes. Organizations must have a documented change management process in place.
- Confidentiality: Confidentiality focuses on protecting sensitive data from unauthorized access, use, or disclosure. This could include implementing access controls, encryption, and confidentiality agreements, as well as conducting regular audits and training employees on data privacy protocols. SOC 2 also requires organizations to have a documented data privacy and protection program in place.
The Two Types of SOC 2 Reports
There are two types of SOC 2 reports. Both types serve different purposes.
SOC 2 Type 1 Reports
SOC 2 Type 1 reports provide a snapshot of an organization's systems and processes at a specific point in time. They evaluate the design and implementation of controls related to the five trust service criteria (security, availability, processing integrity, confidentiality, and privacy) and provide an opinion on their effectiveness. This type of report is often used by organizations to demonstrate their commitment to security and compliance to clients and stakeholders.
SOC 2 Type 2 Reports
As opposed to Type 1 reports, Type 2 reports evaluate an organization's systems and processes over a period of time, typically 6 to 12 months. They not only assess the design and implementation of controls but also their effectiveness and adherence to the trust service criteria. Organizations often use this type of report to demonstrate their commitment to security and compliance to clients and stakeholders.
9-Step SOC 2 Compliance Checklist
Having gained a deeper understanding of SOC 2, here is a 9-step checklist to help with your efforts toward SOC2 compliance.
- Step 1: Choosing Objectives. The first step in achieving SOC 2 compliance is to determine the purpose of the report. This can include meeting customer requests, expanding into new markets, or improving overall security posture. It is important to be proactive about compliance rather than waiting for customer demand.
- Step 2: Identifying the Type of SOC 2 Report. Decide which type of report your company needs. Type 1 reports are generally used to demonstrate commitment to security for clients, while Type 2 reports aim to analyze the effectiveness of the five trust service criteria.
- Step 3: Defining the Scope. By determining the purpose of the report, the process is streamlined as criteria that do not apply to the organization are eliminated. In this step, choose the relevant trust service criteria. Then identify the specific systems and assets that will be subject to the audit.
- Step 4: Conducting an Internal Risk Assessment. This step identifies risks associated with growth, location, and information security best practices while documenting the scope of these identified risks. This step involves identifying potential threats, assessing their significance, and implementing mitigation strategies.
- Step 5: Performing Gap Analysis and Remediation. Examine your procedures and check if they meet the checklist requirements and best practices. This also enables organizations to assess the effectiveness of their current policies, procedures, and controls in meeting the compliance requirements set by SOC 2.
- Step 6: Implementing Stage Appropriate Controls. Implement controls that showcase how your organization fulfills the criteria of SOC 2. These controls should be tailored to your organization's size and needs and should cover all of the individual criteria under your selected TSC.
- Step 7: Undergoing Readiness Assessment. Before you take the SOC 2 audit, check if you meet the minimum requirements to undergo a full audit. A SOC 2 readiness assessment is a pre-audit evaluation of an organization's processes and controls to identify any gaps or non-compliances before the final SOC2 audit. The assessment provides feedback to improve preparation for the audit and increases the chances of a successful audit.
- Step 8: The SOC 2 Audit. This step is where the audit takes place, where the auditor completes the SOC 2 audit checklist and generates a report. In this step, organizations will need to provide answers to various questions and provide evidence to support their answers. The length of the audit will vary.
- Step 9: Establishing Continuous Monitoring Practices. It should be noted that the SOC 2 report is merely a start, and the practices established must be maintained to ensure that there are no gaps in security. For some organizations, SOC 2 audits are conducted annually to ensure compliance.
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Frequently Asked Questions
Only independent CPAs (Certified Public Accountants) and accounting firms can perform an SOC 2 audit. These auditors must have the necessary skills and experience to assess an organization's systems and processes against the five trust service criteria and provide an opinion on their compliance.
The American Institute of Certified Public Accountants (AICPA) provides guidelines and requirements for SOC 2 auditors and their firms. Certified Public Accountant (CPA) firms may enlist the help of non-CPA experts with IT and security expertise in preparing for SOC audits. However, the ultimate responsibility for providing and disclosing the final audit report lies with the CPA.
No, not all organizations are required to conduct SOC 2 compliance audits. A SOC 2 audit can assist organizations that have sensitive data or wish to gain the trust of clients and stakeholders. Additionally, some industries or regulatory bodies may have specific requirements for SOC 2 compliance.
If the CPA-led SOC audit is deemed successful, the service organization will be permitted to add the AICPA logo to its website.
The cost of a SOC 2 audit can vary depending on the size and complexity of the organization, the scope of the audit, and the chosen auditor. It is best to consult with a qualified auditor for an accurate estimate.
The duration of a SOC 2 audit may vary based on the company's size and complexity, the audit's scope, and the selected auditor. On average, the audit process can take anywhere from a few weeks to a few months to complete.
Organizations should conduct SOC 2 audits regularly, with the frequency depending on the type of audit chosen. A Type 1 audit is typically conducted once a year, while a Type 2 audit is conducted every 12 to 18 months.
The goal of SOC 2 audits is not to determine which organizations pass or fail but rather an evaluation how your security program is meeting SOC 2 guidelines within your business context. The SOC 2 criteria for each company may vary based on their specific business context and the services they offer. This is because the SOC 2 standards are designed to be flexible and tailored to each organization. Therefore, the controls and practices put in place to satisfy SOC 2 guidelines may differ between companies. As a result, the questions asked in the audit have no “correct” or “incorrect” answer.