Blog  SOC 2 Type 1 Compliance

SOC 2 Type 1 Compliance

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In this era of digital technology and services, clients want to be certain that their personal data remains safe. Businesses that fail safeguard client data, results in clients losing their trust and loyalty. With the SOC 2 certification, businesses can provide proof that they’ve taken the necessary measures to implement data protection from a breach or other threats.

SOC 2 Type 1 Definition

Standing for “system and organization controls, SOC is an agreed upon procedure of standards set forth by the American Institute of Certified Public Accountants. These standards are designed to measure how well a service organization conducts and regulates data. They provide peace of mind and confidence for companies that use third-party vendors to perform data-sensitive elements of their operations.

In order for service organizations to obtain any SOC certification, they must have sufficient strategies and policies in place to protect data sufficiently. SOC 2 reports attest to their financial reporting and standard procedures for risk and vendor management and for organizational and regulatory oversight. Service organizations that become certified are appropriate for businesses that require documented standards.

There are two types of SOC 2 audits. SOC 2 Type 1 certification involves the performance of procedures and policies that are in place at a specified point in time. Basically, it’s a snapshot of a service organization’s practices.

How Is SOC 2 Type 1 Different From Type 2?

The SOC 2 Type 2 report is different from the Type 1 report in that it covers a period of time that’s no shorter than six months. Because of that, it provides a more comprehensive audit of vendor practices.

How Have SOC Audits Changed?

The standards that the AICPA set forth for auditing have evolved since they were first put into place. Before 2011, it applied the SAS 70 standard, which became very popular but started to lose its focus. Because of that, the AICPA replaced this standard with the Statement on Standards for Attestation Engagements No. 16. As of May 2017, it was updated to SSAE 18. These statements are likely to continue evolving as new security risks arise.

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Are SOC 2 Audits Required?

No, pursuing SOC 2 compliance and certification is voluntary. However, it’s important for service organizations that want to show that they properly protect the data in their systems.

Who Requests SOC 2 Type 1 Compliance Reports?

It’s common for user entities or customers to request auditor results. In fact, any company that contracts a service organization can request a report if it’s concerned about security. For instance, any entity that uses Amazon Web Services can request the results of an audit.

Who Conducts a SOC 2 Type 1 Report?

SOC 2 Type 1 attestation can only be issued after an independent CPA determines whether a service organization uses the appropriate procedures and safeguards for data protection. The organization must outsource to a CPA for quality assurance purposes. In the case of AWS, independent third-party reports are available on its website.

What Does the SOC 2 Type 1 Audit Examine?

Service organizations can be evaluated on one or more of the five trust services criteria depending on the services that they provide. These include availability, confidentiality, privacy, processing integrity and security. However, all SOC audits review a set of common principles:

  • Communication and information.
    Control environment.
    Control activities.
    Monitoring activities.
    Risk assessment.

The control activities are further broken into physical and logical access, risk mitigation, system operational effectiveness and change management. Despite that, there could be more criteria that auditors must evaluate depending on the services that organizations provide.

It’s clear that complying with AICPA standards and attaining SOC 2 certification is essential to business operations and cybersecurity. The reports provide reassurance to clients that service companies exhibit readiness to protect their data correctly.

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