Organizations today handle more data than ever before, and your clients, investors, and other stakeholders demand assurance that this information remains safe and secure. They need confidence that data won’t be leaked or compromised through cyberattacks.
Organizations address this challenge by implementing compliance and security frameworks that establish the policies, procedures, controls, and monitoring needed to secure networks and data. These frameworks provide documented evidence of trustworthiness that satisfies clients and stakeholders.
Among the most commonly adopted of these frameworks is Systems and Organization Controls 2, or SOC 2. Demonstrating SOC 2 compliance allows organizations to bolster their overall cybersecurity posture and provide assurance to stakeholders, customers, and prospective clients.
This article covers what goes into SOC 2 compliance and certification, how achieving it improves your organization’s security posture, and how modern GRC technology streamlines the compliance process.
Key Takeaways
- What it is: SOC 2 is a voluntary cybersecurity framework developed by the AICPA to ensure service organizations manage customer data securely.
- Trust Services Criteria: Compliance is measured against five pillars: Security, Availability, Processing Integrity, Confidentiality, and Privacy.
- Report Types: Type I evaluates the design of controls at a specific point in time; Type II evaluates the operational effectiveness of those controls over a period (usually 6-12 months).
- Business Benefits: Achieving SOC 2 compliance improves security posture, provides operational visibility, and creates a competitive advantage during sales cycles.
- The Audit Process: Audits must be performed by an independent CPA firm and result in one of four status levels: Unqualified, Qualified, Adverse, or Disclaimer.
What Is SOC 2 Compliance?
SOC 2 is a voluntary cybersecurity compliance framework developed by the American Institute of CPAs (AICPA) for service organizations that specifies how organizations should handle customer data. Unlike more prescriptive standards, SOC 2 lets each organization create its own set of controls to satisfy the five Trust Services Criteria and document them for an auditor’s review. The standard covers five pillars, called Trust Services Criteria (TSC): security, availability, processing integrity, confidentiality, and privacy.
SOC 2 compliance is part of the American Institute of CPAs ‘ Service Organization Control reporting platform. Its intent is to ensure the safety and privacy of your customers’ data, that the company will comply with regulations, and that it has the processes in place to mitigate risk.
SOC 2 doesn’t prescribe specific controls, tools, or processes. Instead, it defines criteria for robust information security, letting you adopt practices relevant to your organization’s objectives and operations.
Understanding each Trust Services Criterion helps you determine which areas your organization needs to address for SOC 2 compliance. Here’s what each criterion covers:
What Is Security in SOC 2?
Security refers to protecting information and systems from unauthorized access. Organizations typically implement IT security infrastructure like firewalls and two-factor authentication to prevent unauthorized access and keep data safe.
What Is Availability in SOC 2?
Availability ensures that infrastructure, software, and information remain accessible and operational through proper maintenance, monitoring, and control processes. This criteria also gauges whether your company maintains minimal acceptable network performance levels and assesses and mitigates potential external threats.
What Is Processing Integrity in SOC 2?
Processing integrity ensures that systems perform their functions as intended and are free from error, delay, omission, and unauthorized or inadvertent manipulation. This means that data processing operations work as they should and are authorized, complete, and accurate.
What Is Confidentiality in SOC 2?
Confidentiality addresses the company’s ability to protect data that should be restricted to a specified set of persons or organizations. This includes client data intended only for company personnel, confidential company information such as business plans or intellectual property, or any other information required to be protected by law, regulations, contracts, or agreements.
What Is Privacy in SOC 2?
Privacy speaks to an organization’s ability to safeguard personally identifiable information from unauthorized access. This information generally takes the form of name, social security, or address information or other identifiers such as race, ethnicity, or health information.
The Two SOC 2 Report Types
SOC 2 compliance is part of the American Institute of CPAs’ Service Organization Control reporting platform, and it’s evaluated for each organization using two reports: SOC 2 Type I and SOC 2 Type II.
- Type I reports contain descriptions of the service organization’s system(s) and the suitability of the design of controls.
- Type II reports cover everything in Type I plus descriptions of the operating effectiveness of those controls.
These reports are intended to ensure the safety and privacy of your customers’ data, that the company will comply with the standard’s requirements, and that it has sufficient processes and controls in place to mitigate risk.
If you need to demonstrate SOC 2 compliance on an ongoing basis, pursue a SOC 2 Type II report. The Type II report is considered the stronger of the two because it demonstrates that the security processes and procedures are in place and effective over a period of time, not a single point in time.
However, if you need to demonstrate SOC 2 compliance immediately—such as when facing a contractual deadline—Type I reports can be generated faster and more easily. You can use a Type I report later on as a good starting point for moving to a Type II report.
Who needs SOC2 compliance?
SOC 2 is designed for any technology service provider or SaaS company that handles or stores customer data. Third-party vendors, other partners, or support organizations that those firms work with should also consider achieving and maintaining SOC 2 compliance to ensure the integrity of their data systems and safeguards. Again, SOC 2 is a voluntary framework, so there’s no official regulatory requirement to comply with it.
5 benefits of SOC2 compliance
SOC 2 compliance assures your customers and clients that you have the infrastructure, tools, and processes to protect their information from unauthorized access—whether from internal or external threats.
Beyond stakeholder assurance, SOC 2 compliance delivers several operational and strategic advantages:
- Operational visibility: SOC 2 compliance means your firm will know what normal operations look like and is regularly monitoring for malicious or unrecognized activity, documenting system configuration changes, and monitoring user access levels. If there are security incidents, you have the visibility and processes to identify, assess, and mitigate the threat through tight security controls. It’s key to maintaining strong operational risk management.
- Improved security posture: Implementing SOC 2 security and compliance processes reveals gaps and opportunities across your business operations. Pursuing SOC 2 compliance provides valuable insights into where you can improve operations and reduce security breach risk — especially as data breaches are becoming increasingly common, with the average cost of a data breach approaching $9.44 million in the U.S. By going through the SOC 2 certification process, your organization can understand where your sensitive data lives and implement controls, risk assessment processes, and policies to protect this data and, ultimately, your organization and customers. Complying with SOC 2 means you’ll have tools in place to recognize threats and alert the appropriate parties so they can evaluate the threat and take necessary action to protect data and systems from unauthorized access or use. For SaaS companies, maintaining SOC 2 compliance is essential to your risk management and compliance framework.
- Increased third-party appeal, competitive advantage, and trust: SOC 2 is the most sought-after report for companies dealing with third parties storing customer data in the cloud in the US market. When a potential customer, auditor, or third party requests a report, you can provide it immediately if you maintain SOC 2 certification, documented processes, and a GRC platform that centralizes evidence. With all three of those in place, you can easily distribute SOC 2 reports in no time to ensure you have adequate protection controls to protect them from third-party risk. This accelerates sales cycles and provides a competitive advantage when prospects evaluate your security posture against competitors.
What is a SOC2 audit and how do you prepare?
SOC 2 compliance mandates that organizations establish and adhere to specified information security policies and procedures, in line with their objectives. An organization’s compliance status is determined through a technical audit from an outside CPA or accounting firm.
Typically, these audits involve filling out a security questionnaire, providing evidence to back your answers up, commissioning an AICPA-qualified independent auditor to review how your controls map to the chosen Trust Services Criteria, and generation of a SOC 2 report.
SOC 2 compliance can cover a six to 12-month timeframe, to ensure that a company’s information security measures are in line with the evolving requirements of data protection in the cloud. There are a few ways to prepare for an independent SOC 2 audit.
Keep Your Policies, Controls, and Procedures Up to Date
Achieving or maintaining SOC 2 compliance depends on the quality and effectiveness of the controls, policies, and processes you put in place to keep your organization’s data secure. Conducting regular reviews to ensure they remain effective and updating them as needed can help make sure you’re in the best possible position come audit time.
Automate SOC 2 Evidence Collection
Collecting all of the evidence you’ll need to present to auditors for each and every individual audit is a tedious, time consuming process. Using technology to automate that process and collect all the evidence you’ll need in real time, all the time, can drastically streamline things. Having visibility into controls evidence at all times can also help you spot compliance gaps that can be corrected before the auditors find them.
SOC 2 Compliance Audit Checklist
While SOC 2 audits require significant preparation, the process follows a consistent pattern across organizations. Follow this checklist to prepare thoroughly and increase your likelihood of achieving certification.
1. Choose the Type of Report You’ll Pursue
The first step in preparing for a SOC 2 compliance audit is to determine whether your organization needs to prove compliance at a point in time with a Type I report, or whether you’ll need to show compliance over a period of time with a Type II report. See above for the reasons you might choose one over the other.
2. Define the Scope and Goals of Your Audit
Now, you’ll want to take a look at the five Trust Services Criteria and decide which of them your organization wants to pursue. The Security TSC is always required, but the other four are optional. Because of this, many first-time SOC 2 programs start with Security only and then add Availability, Confidentiality, Processing Integrity, or Privacy as the business matures. The more TSCs your organization complies with, the higher the level of assurance you can offer partners, customers, investors, and other stakeholders — but meeting the requirements of each new TSC will require additional investment of time and resources.
3. Make Necessary Upgrades or Modifications to Your Controls
Take the findings from the regular reviews of your internal controls, policies, and procedures that you’ve been conducting and fix, improve, or modify any areas as necessary to meet SOC 2 requirements.
4. Develop Your System Description
Your SOC 2 auditor will require your organization to submit a written system description covering all of the controls, policies, and processes relevant to the TSCs you’re trying to satisfy. It includes details like how your company’s data is processed, what third parties it works with, who handles data and information and how they handle it, and what safeguards are in place to secure data and assets.
This report should be both comprehensive and clearly written, covering all relevant details without unnecessary complexity.
5. Perform an Internal SOC 2 Audit
It’s a good idea to conduct an in-house audit of your SOC 2 compliance as sort of a practice run before inviting an external auditor in for the real deal. Doing this can help you identify and address gaps in your compliance before the official audit begins, which increases the odds you’ll achieve certification.
6. Find an Experienced, Trustworthy Auditor for the Official Audit
Select an auditor with experience in your industry and familiarity with your organization’s security methods and systems.
When the audit is complete, the auditor will provide you with a final report and determine your compliance status. These statuses can fall into one of four categories:
- Unqualified: Your organization is in full compliance with SOC 2 requirements.
- Qualified: The auditor identified issues, but they were not severe enough to result in noncompliance.
- Adverse: Significant issues were uncovered, and the organization is deemed noncompliant.
- Disclaimer: The auditor could not make a determination due to insufficient evidence.
Are There Alternatives to SOC 2?
You might see SOC 2 and ISO 27001 compared when researching security certifications. While each is well-regarded, they are different in simple ways.
The main focus of SOC 2 is to show that you have the internal security controls in place to protect customer data. ISO 27001 ensures organizations have Information Security Management Systems implemented to manage information security.
SOC 2 is also more widely accepted in the U.S., while customers in other parts of the world will be more familiar with ISO 27001 since it is primarily an international standard. These security frameworks both work toward the end-goal of consumer and third-party protection.
If you want to get into more nuance, we’ve written about the differences between SOC 2 and ISO 27001 in the past.
What Are the Differences Between SOC 1 and SOC 2?
Despite the similarity in their names, SOC 1 and SOC 2 are completely different standards with different purposes. While SOC 2 is aimed at helping technology service organizations and SaaS companies protect sensitive systems and data, SOC 1 is designed to help organizations ensure the effectiveness of their internal controls around your handling of customer financial information. A third report, SOC 3, covers much of the same information as SOC 2 but is designed to be presented publicly to a more general audience.
How Are SOC and SOX Compliance Different?
We compared these two in detail in our post on SOC vs SOX compliance, but the high-level distinction is that SOX, short for the Sarbanes-Oxley Act of 2002, is a federal law that organizations must demonstrate compliance with, while SOC 2 is not a legal requirement and is completely voluntary.
For example, SOC 1 compliance allows service providers to show customers they have the appropriate internal controls. SOC 2 compliance is specific to SaaS companies and technology service providers.
SOX compliance is mandated by federal law and necessary for any publicly-traded company in the U.S. to protect investors from fraudulent financial reporting.
How to Streamline SOC 2 Compliance With LogicGate Risk Cloud
If you are a company that handles or stores customer data — which, in all honesty, is just about every company these days — complying with SOC 2 will ensure your firm complies with industry standards, giving your customers the confidence that you have the right processes and practices to safeguard their data.
A modern GRC platform like LogicGate Risk Cloud can help your organization automate SOC 2 compliance by helping you map your business processes, audit your infrastructure and security practices, and identify and correct any gaps or vulnerabilities.
Learn more about LogicGate’s SOC 2 Compliance Application to see how it can help your organization prepare for and achieve a SOC 2 attestation report.
Ready to simplify your SOC 2 compliance journey? Book a demo today to see how LogicGate Risk Cloud can automate your compliance processes and help you achieve certification faster.
SOC 1®, SOC 2® and SOC 3® are registered trademarks of the American Institute of Certified Public Accountants in the United States. The AICPA Trust Services Criteria for Security, Availability, Processing Integrity, Confidentiality, and Privacy is copyrighted by the Association of International Certified Professional Accountants. All rights reserved.
