Compliance Process: Outlined SOC 2 Compliance

In an economy where businesses have become more interconnected, risks and vulnerabilities can easily spread from one point of the supply chain to another. That is why today’s organizations increasingly demand assurance from their providers, partners, and other stakeholders.

To thrive in this environment, you need to demonstrate good governance, a strong commitment to information security, and compliance with industry standards. SOC 2 is among the most widely recognized assurance frameworks that can help you achieve that.

Here’s a walkthrough of the process.

Key Concepts

• SOC 2 (Systems and Organization Controls 2) is a highly regarded auditing framework that evaluates an organization’s internal controls for its information systems. It is founded on five Trust Services Criteria: security, availability, processing integrity, confidentiality, and privacy. This framework is widely recognized and serves as a benchmark for assessing the effectiveness and reliability of an organization’s controls.
• Many organizations require SOC 2 reports as a precondition for doing business, compelling companies that handle sensitive data to demonstrate SOC 2 compliance.
• SOC 2 compliance helps build customer trust, improve regulatory and security posture, and uncover market opportunities.

• You achieve SOC 2 compliance when the internal controls over your information systems meet the standards set by the framework. These standards are specified in the Trust Services Criteria (TSC) developed by the American Institute of Certified Public Accountants (AICPA). Only a qualified auditor or auditing firm can attest to your compliance by issuing a SOC report after closely examining your systems and processes.
• Acquiring SOC reports involves a journey of many stages (e.g., scoping, gap analysis, remediation, testing, reporting).  It typically takes nine to twelve months, but the timeline can be shorter depending on certain criteria.
• The SOC 2 framework requires continuous monitoring of processes and activities related to your information systems. This is necessary for maintaining compliance over time and promptly responding to any changes in the environment or risk profile.

The SOC 2 Compliance Process

In a nutshell, SOC 2 compliance boils down to earning a favorable SOC 2 report after a formal, independent audit. However, the process of acquiring such a report involves many milestones and activities, including these four main stages:

1. Scoping — determine which SOC 2 report type and trust services criteria (in addition to security) to include in the SOC 2 report based on your line of business and/or the specific requirement of a customer or partner.

2. Readiness Assessment — detect gaps in policies, procedures, configurations, documentation, and other aspects of your information system.

3. Remediation — address gaps by building and executing a remediation roadmap.

4. Reporting — undergo a SOC 2 audit with a qualified third-party assessor to evaluate your organization’s internal controls and produce a report on their findings.

What are the different types of SOC 2 reports?

There are two types of SOC 2 reports:

1. SOC 2 Type 1: provides a snapshot (i.e., design and implementation) of your organizational controls at a specific point in time. This report type is straightforward and takes less time to complete (typically around six months).

2. SOC 2 Type 2: provides a long-term assessment (i.e., design, implementation, and effectiveness) of your organizational controls over a given period. This report type offers greater assurance to internal and external stakeholders but comes at a higher cost and with a longer timeline (around six to 12 months or more).

The report type your business needs depends primarily on your goals for acquiring a SOC 2 report. Often, those goals align with what your customers demand or expect from your organization.

Please note that although Type 1 reports may offer expedited completion and lower costs, Type 2 reports provide a more compelling level of assurance to your customers and partners. All factors considered, Type 2 reports are vastly superior and hold greater value compared to Type 1 reports.

How do you obtain a SOC 2 report?

To achieve SOC 2 compliance, your company needs to take the following steps:

1. Determine which report type to acquire and which trust services criteria to include in the audit scope.

2. Engage a qualified assessor (i.e., CPA firm or professional) to conduct a SOC 2 readiness assessment, gap analysis, and remediation planning.

3. Implement the corrective measures recommended by the assessor to close compliance gaps.

4. Have the assessor conduct a formal SOC 2 audit to evaluate your internal controls and produce a favorable SOC 2 report.

How is a SOC 2 audit conducted?

A SOC 2 audit is a rigorous evaluation of your company’s internal controls over your information systems. Only qualified professionals and auditing firms may conduct a SOC 2 audit.

The audit process will include a thorough review of your policies and procedures, system tests, onsite visits, and staff interviews. At the end of the audit, the auditing firm will summarize their findings in a SOC 2 report, which will include a section about their opinion on whether your organizational controls meet the standards of the SOC 2 framework.

The following process is typical for a SOC 2 audit:

1. The auditor will meet your compliance team to discuss the scope of the audit.

2. The auditor will review your policies, procedures, and system documentation.

3. The auditor will interview officers, staff, and other stakeholders relevant to the internal controls being assessed.

4. The auditor will test your internal controls to validate their effectiveness.

5. The auditor will produce a report that details the audit process and includes the auditor’s opinion about their findings.

Main Challenges in Achieving SOC2 Compliance

SOC 2 compliance requires significant time, money, and effort to achieve. It involves assessments, system tests, strident documentation, remediation, and third-party audits.

Moreover, merely conducting an audit does not guarantee a positive SOC 2 report.

Yes, an organization can flunk a SOC 2 audit. This happens when an independent auditor provides an “adverse” opinion in a SOC 2 report because a company’s internal controls are inadequate after a rigorous evaluation. In SOC 2, there are four possible types of auditor’s opinion (unqualified, qualified, adverse, disclaimer of opinion) and only one — unqualified — provides a clear attestation of compliance.

These challenges can be addressed through diligent planning and by partnering with an experienced and trusted auditor. In addition to providing guidance that ensures favorable audit results, competent auditors can also assist in building a cost-effective compliance plan that helps keep the entire process within budget and on schedule.

SOC 2 Best Practices

Over the years, we have closely analyzed the compliance process and have found the following practices to have a positive impact on audit outcomes for many of our clients:

1. Make an actionable compliance plan. Without one, runaway costs and prolonged timelines will more than likely occur. An audit checklist can also help organize and streamline the entire process.

2. Start early. The road to full SOC 2 compliance can take many months to traverse. The sooner you discover and remediate gaps, the higher your chances of keeping everything on schedule and within budget.

3. Familiarize yourself with the framework. A basic understanding of the trust services criteria relevant to your business will go a long way.

4. Establish a strong commitment from the C-suite. A buy-in from top leadership helps ensure adequate resources are allocated for your compliance efforts.

5. Leverage technology. Use GRC (Governance, Risk Management, and Compliance) solutions that can centralize, accelerate, and automate regulatory workflows.

6. Partner with trusted experts. Finding a reliable compliance partner is essential and can be a game-changer. Choose a partner that is accredited to conduct all manner of SOC engagements while also being familiar with your industry or line of business.

Conclusion

SOC 2 compliance delivers many compelling benefits. It is a widely recognized method for building trust, improving an organization’s security posture, and uncovering market opportunities. SOC 2 can also help with vendor management and regulatory oversight.

But like most assets that deliver value, SOC 2 compliance requires significant resources to acquire. As a rigorous auditing framework, SOC 2 can also seem complicated.

Fortunately, you can simplify the SOC 2 compliance process by planning, proactively taking remedial steps, and partnering with a trusted SOC 2 advisor. Call one now for a free demo