Protecting sensitive data has become essential for gaining customer trust in today’s technology-driven world. To demonstrate their commitment to information security, businesses use several security frameworks, of which SOC 2 is one of the most rigorous and widely recognized.
What is SOC 2?
SOC 2 is a security and auditing framework that specifies how organizations should protect data across five core criteria: security, availability, processing integrity, confidentiality, and privacy. Developed and maintained by the American Institute of Certified Public Accountants (AICPA), SOC 2 helps businesses build trust with their customers and third-party entities.
Why is SOC 2 important?
SOC 2 compliance is crucial for three reasons: it helps protect sensitive information, verifies a company’s controls are adequate, and is typically required in many industries. SOC 2 has become a non-negotiable benchmark and best practice for organizations.
What is the difference between SOC 2 and SOC 1?
SOC 1 focuses on an organization’s internal controls over financial reporting, while SOC 2 focuses on protecting sensitive data from unauthorized access, theft, exposure, and other risks. Both are attestation procedures that verify a company’s claims of adequate security measures and controls.
Overall, SOC 2 helps businesses demonstrate their commitment to protecting sensitive data, building trust with customers, partners, and regulators, and staying on par with industry standards.
What are the key principles of SOC2?
AICPA developed the SOC 2 framework around five key principles or Trust Services Criteria (TSC). A SOC audit evaluates an organization’s controls against TSC standards.
The following are the Trust Services Criteria defined in the SOC 2 framework:
- Security: сriteria for validating whether controls are in place to protect systems and data from unauthorized access and vulnerabilities. It includes logical access controls such as multifactor authentication and network security such as firewalls and intrusion detection systems.
- Availability: criterion for validating whether controls are in place to ensure authorized staff and customers can access systems and data as expected. It includes backup plans, disaster recovery and incident management, and business continuity.
- Processing Integrity: criterion for validating whether controls are in place to ensure systems operate as intended and data are processed accurately and completely. Covers access controls, data encryption, error handling, quality assurance, and data validation protocols.
- Confidentiality: criterion for validating whether controls are in place to protect the confidentiality of sensitive information. It includes access controls, data encryption, confidentiality agreements, and process monitoring.
- Privacy: criterion for validating whether controls are in place to protect personal information handled by the company in some way or form. It includes private policies, response plans for data breach incidents, data encryption, and access controls.
AICPA’s TSC constitutes the fundamental aspects of cyber security and is very similar to the CIA triad of information security (confidentiality, integrity, availability), which is also a widely used risk assessment framework.
Only the security criterion is required for a SOC 2 report, but a company can include other criteria in the audit scope. Since the resources needed to comply with each and every TSC can be very prohibitive for many organizations, it is best to focus on TSCs that are highly relevant to your industry and line of business.
What are the benefits of obtaining a SOC2 report?
There are several compelling benefits to undergoing and passing a SOC 2 audit:
- Improve security posture. A SOC 2 audit will uncover and identify system weaknesses and vulnerabilities. Many SOC 2 service providers also recommend remedial actions that can help your organization close those security gaps and address system weaknesses. When you properly and promptly implement remediation, your company will emerge with a stronger posture on cybersecurity.
- Demonstrate commitment to data protection. Undergoing a rigorous SOC2 audit shows that a company is serious about the security of its customers’ information. For many potential clients, partners, and investors, a positive SOC 2 audit report guarantees due diligence over the secure and responsible handling of their data.
- Provide competitive advantage. A SOC 2 attestation of compliance can help differentiate a company from competitors that have yet to undergo and pass a daunting SOC audit. Affirming a company’s diligence and adherence to best practices when it comes to security, a SOC 2 badge or seal can be a valuable marketing tool that attracts business entities that place a high value on the confidentiality, privacy, and protection of their data.
- Drive compliance with regulatory requirements. Many regulatory frameworks overlap with the standards of SOC 2. That makes SOC 2 compliance almost like hitting multiple birds with one stone. While there is no one-to-one correspondence, the volume of similarities makes it easier for companies to identify common security gaps and meet the requirements of other frameworks.
- Expand the market, generate new funding, and grow revenue. Many potential customers, partners, and investors set SOC 2 compliance as a mandatory requirement for doing business. Meeting SOC 2 standards can facilitate business with a new class of customers and attract security-focused partners and investors.
Who needs to comply with SOC2?
Any organization that handles sensitive information such as personal, financial, or health data would do well to comply with SOC 2 standards. While governing bodies do not expressly mandate SOC 2 compliance, it has become an industry standard as well as a due-diligence requirement or precondition for doing business with many organizations. Some of these entities are prospective customers, partners, or investors that can provide significant value to your company.
How do you become SOC 2 compliant?
Technically, SOC 2 compliance can be achieved when a qualified auditor or auditing firm attests to the adequacy of your security controls after a thorough examination of your systems and processes. In a practical sense, however, SOC 2 compliance is an ongoing process involving gap assessments, remediation, formal audits, and SOC 2 reports attesting to compliance.
To acquire a SOC 2 report, you must first determine which Trust Services Criteria — in addition to security — to include in a formal audit. Based on a prior assessment, you’ll then need to set controls to ensure that all your systems meet all the SOC requirements for each service criteria included in the formal audit.
How is a SOC 2 audit conducted?
A SOC 2 audit thoroughly examines a company’s systems, processes, and controls as these relate to data security, accessibility, integrity, confidentiality, and privacy. Only an independent and qualified auditor/auditing firm can perform a SOC 2 audit.
An integral part of the audit is the review of policies and procedures and their compliance with the relevant SOC 2 criteria. The auditor will also conduct tests to verify whether the controls set in place by the company work as intended. If compliance gaps are detected, the auditor will recommend a remediation plan.
At the end of the audit, the qualified assessor will submit a SOC 2 report that contains their professional opinion on whether the audited company fully complies with SOC 2 standards.
What are the different types of SOC 2 reports? Which is better?
There are two types of SOC 2 reports:
- SOC 2 Type 1 reports present the auditor’s assessment of an organization’s systems and controls at a single point in time. The primary focus is on whether controls are in place.
- SOC 2 Type 2 reports present the auditor’s assessment of an organization’s systems and control over a period of time. The reports focus on two issues: whether controls are in place and whether they are effective.
Choosing between the two report types depends on your goals, budget, and schedule. While Type 1 reports may be faster and cost less to complete, Type 2 reports provide a more compelling assurance to your customers and partners. All things considered, Type 2 reports are much more preferable and valuable than Type 1.
The standard process for achieving SOC 2 compliance includes the following steps:
- Determine which of the five principles or TSC is most relevant to your business. (Security is a mandatory SOC audit component, so you would need to choose one or more criteria from availability, privacy, confidentiality, and processing integrity). Your choices will help determine the scope of the audit and the final cost of compliance.
- Work with a qualified assessor (typically a CPA firm) to perform a readiness assessment/gap analysis. At the end of the process, the assessor will provide a SOC 2 roadmap that includes a remediation plan based on the findings.
- Implement the recommended controls and remediation measures for identified gaps and weaknesses.
- Work with the same or a different accounting firm to conduct a SOC 2 audit and generate a SOC 2 report. A SOC 2 audit will include policy reviews, onsite visits, system tests, and rigorous documentation of the entire process. To conclude the audit, the auditor will present a SOC 2 report that includes their professional opinion on whether your system and organizational controls meet SOC standards.
How long does it take to obtain a SOC 2 report?
This depends on many factors, including the type of report (Type 1 or Type 2) and the scope of assessment. Typically, preparing for a SOC 2 Type 1 report can take up to six months, while a Type 2 audit will take at least six months to more than a year. With TrustNet’s SOC AcceleratorTM platform, the process can be streamlined and expedited to just four to six weeks for Type 1 SOC reports and to just around seven months for Type 2.
What are some challenges in achieving SOC2 compliance?
SOC 2 compliance is an ongoing process that involves assessments, audits, system tests, remediation, and other tasks. All these require significant time and resources that might be difficult to bankroll and carry out, especially for smaller organizations without an in-house security or compliance team. SOC audits require specialist skills that will help make the process smoother and cost-efficient for companies. The best way to address these challenges is to partner with a trusted compliance services provider that can guide you through the process from start to finish.
How much does SOC 2 compliance cost?
The cost of SOC 2 compliance will depend on many factors, including the following:
- Scope of the SOC assessment (this depends primarily on the number of trust criteria your company needs to include in the audit)
- The size and physical locations of your organization
- The scale and complexity of your business environment
- The current state of your security infrastructure
- The total cost of closing compliance gaps
- The frequency of onsite visits required for auditors
Can an organization fail a SOC2 audit?
The short answer is YES. This happens when a company’s controls fail to meet the standards set by AICPA, prompting the auditor to give an “adverse” opinion at the end of a rigorous audit. In contrast, an “unqualified” opinion is the most favorable outcome for your organization, entitling your company to display a SOC 2 attestation badge on your website or press release article.
Here are the standard opinion categories used in a SOC 2 audit and what they mean:
- Unqualified: The auditor thinks your controls are appropriately designed and function as expected within the designated time period. While there might be some identified exceptions, your company still passed the audit because you have likely established backup controls in case other controls fail.
- Qualified: The auditor found at least one control that needs to be designed properly or functioning as intended. While a qualified opinion does not equate to full SOC 2 compliance, some business entities might consider the grade acceptable.
- Adverse: The auditor found that your systems are unreliable and lack acceptable data security. Equivalent to an audit failure, this is the worst possible outcome for any company under SOC 2 audit.
- Disclaimer of Opinion: The auditor lacks adequate information to objectively assess how well your controls protect your systems, processes, and data.
Note that the broader goal of a SOC 2 audit goes beyond just “passing.” Any opinion — especially unfavorable ones —should be seen as a jump point towards sustained security improvements across your organization.
How often do you need to get a SOC 2 report?
SOC 2 reports generally remain valid for a year. However, you may need to conduct additional audits when regulators and prospective customers, and partners so require them.
Is SOC 2 relevant in all locations?
Although the suite of SOC frameworks and reports has been developed by an American institution for the voluntary compliance of US-based companies, SOC 2 reports are recognized worldwide. In fact, many European companies undergo SOC 2 assessments to improve their security posture further and facilitate business with American organizations that require compliance.
SOC 2 delivers valuable benefits to organizations that meet its strident security standards. From building a best-practice-driven culture to enhancing a company’s brand, SOC 2 compliance demonstrates a solid commitment to information security and data protection.
However, the journey toward SOC 2 compliance can be costly, complicated, and time-consuming.
It doesn’t need to be. To ensure that all the efforts and resources you invest will be well-spent, partner with a qualified auditing firm with the experience and expertise to guide you from start to finish. Choose one with a track record of getting many organizations to full compliance faster and more cost-efficiently than industry norms.