Businesses all around the world are starting to prioritize cyber security in light of the rising cyberattacks. Tech companies, in specific, are more concerned about information and data security. Rightfully so, because the cyberattacks make them lose not only their competitive edge but their reputation, as well. And to stay both reputed and competitive in this market, most tech companies are now seeking SOC 2 Type 2 compliance.
The questions, however, that are still open are what is SOC 2 Type 2 compliance and why do businesses need them? Before you start your SOC 2 preparation, you must know the forms and functions for successful auditing. And this is exactly what we are going to cover in this definitive guide.
What Is SOC 2 Report and Certification?
SOC stands for Service & Organization Controls and refers to the system of service organization controls. It is a series of standards developed to assess how well a certain service business manages and controls its information. It also provides businesses assurance and peace of mind when they work with third-party service providers.
SOC refers to the third-party service organization’s internal controls. A business has to have enough policies and procedures in place to adequately secure the data of its customers to achieve SOC certification (SOC 1, SOC 2, and SOC 3)
- SOC 1 Report: The report evaluates service organization controls that apply to the financial reporting of its clients’.
- SOC 2 Report: The report provides in-depth details and assurance about the controls on a service organization’s security, availability, confidentiality, processing integrity,and privacy.
- SOC 3 Report: The report outlines information related to a service organization’s internal controls for security, availability, confidentiality, and processing integrity.
What is SOC 2 Compliance?
SOC 2, in a nutshell, is an auditing procedure that assures your service providers (IaaS, PaaS,SaaS) securely manage your data in order to safeguard the interests of an organization and the privacy of its clients. A SOC 2 audit report gives assurance that a service organization’s reporting controls are properly planned and implemented to protect classified client data.The audit report also examines non-financial reporting controls of a service organization with the Trust Services Criteria (TSC). The two types of SOC 2 audit reports are as follows:
- SOC 2 Type 1: It certifies that the controls are appropriately created and implemented based on the description of controls supplied by the management of the service organization. It includes attestation of a specific point in time
- SOC 2 Type 2: SOC 2 Type II report certifies that the controls are appropriately developed, implemented, and operationally effective. It includes attestation over a minimum of a six-month period.
What is SOC 2 Type 2 Compliance?
SOC 2 Type 2 is a thorough assessment of your organization’s security procedures and controls in comparison to the framework’s specifications over a minimum of a six-months time frame. SOC 2 Type 2 evaluates the design of your internal controls. It also tests their operating effectiveness.
5 Trust Service Criteria of a SOC 2 Type 2 Audit
Outside AICPA-accredited auditors are the ones who grant SOC 2 certification. For certification, businesses are required to submit an audit by the same auditors. Based on the systems and processes in place, they evaluate how closely a service provider adheres to one or more of the five trust criteria. They are as follows:
01. Privacy
The privacy principle focuses on how the system collects, uses, retains, discloses, and discards personal data in accordance with the organization’s privacy notice and standards outlined in the AICPA’s generally recognized privacy principles (GAPP)
Information used to identify an individual is known as personally identifiable information (PII). It includes name, address, social security number, and more. Health, racial, sexual, and religious information about an individual is also deemed sensitive and, therefore, needs additional security. Controls must be put in place to prevent unauthorized access to all PII.
02. Security
The Security principle refers to the protection of information collected, created, used, processed, transferred, and stored. It deals with preventing unwanted access to all these system resources and information. Access controls help in preventing possible system abuse, data theft or unauthorized removal, software misuse, and incorrect information manipulation or disclosure.
Intrusion detection, two-factor authentication, network & web application firewalls, and other IT security solutions are helpful in preventing security breaches that might result in unauthorized access to systems and data.
03. Confidentiality
The Confidentiality principle refers to protecting information designated as confidential. It includes information that is shared only with a certain group of people to ensure the utmost security. The principle prevents access and disclosure of this data. The best examples include sensitive and exclusive information only meant for corporate employees, business strategies, intellectual property, internal price lists, and other kinds of sensitive financial data.
04. Processing Integrity
The Processing Integrity Principle refers to complete, valid, accurate, timely, and authorized system processing. It examines whether a system succeeds in achieving its goals which include delivering the right data at the right price at the right time.
TProcessing integrity, however, does not automatically indicate data integrity. It is often not the processing entity’s job to identify faults in data if they exist before being entered into the system. Processing integrity may be ensured by monitoring data processing in conjunction with quality assurance methods.
05. Availability
The Availability principle refers to information and systems being available for operation. As a result, both parties agree on the minimum acceptable performance level for system availability. This principle includes availability and security-related requirements but does not address system operation and usability. Monitoring network availability and performance, managing site failover, and responding to security incidents are crucial in this situation.
What Falls Under the Trust Services Criteria?
Every SOC report includes a section on security by default. The management may decide to include additional trust service categories in the evaluation. The following system parts are primarily covered by the Trust Service Criteria:
- People: Developers, operators, entity users, vendor staff, managers, and every other personnel involved in the governance, utilization, and use of a system.
- Procedures: These include both manual and automated.
- Data: Transaction streams, databases, tables, files, and output used or processed by a system.
- Software: Application programs and supporting IT system software, such as operating systems, middleware, and utilities.
- Infrastructure: It includes physical structures, IT, and other hardware, including equipment, facilities, computers, mobile devices, and telecommunications networks
What Is the Benefit of a SOC 2 Audit?
There is an extensive list of benefits that SOC 2 audit offers. It includes everything from security to competitive edge. SOC 2 audits measure the effectiveness of internal controls related to five trust services categories. These reports can play an important role in:
- Allows you to forgo the 500-question security questionnaire
- Shows dedication to good corporate governance
- ISO27001 is achievable as SOC 2 requirements are very similar to ISO27001 certification
- Ensures your partners and clients that your systems are secure.
- Fulfills organizational and regulatory supervision requirements
- Helps win enterprise deals, provides a competitive edge, and safeguards reputation
- Valuable insights and practices for better internal controls, governance, and more
- Preference over competitors as businesses often seek SOC 2-certified vendors
- Long-Term cost savings with data-breach prevention
How to Get SOC 2 Compliance?
Businesses and organizations are evaluated on one or more of the AICPA Trust Services Criteria (TSC) to receive the SOC 2 certification. Long before the audit date, the SOC 2 compliance procedure gets underway. Beginning with a risk environment analysis and gap analysis, they go on to remediation and readiness testing, followed by auditing, certification, and beginning again the following year. Here are the five checklists that you must prepare to get your SOC 2 audit:
01. Select SOC 2 Report Type that Best Suits Your Client’s Demands
SOC 2 Type 1 and Type 2 guarantee their own sets of benefits. Choosing between two also ensures you receive the most value out of the procedure. The best report will rely on the products and services offered by your business or the demands of the client who requested the audit. Also, define the objective and scope as the auditor examines the infrastructure, data, personnel, risk management guidelines, and software of a service business.
02. Select Your Trust Services Criteria
SOC 2 audits match your controls to the trust services benchmarks set forth by the AICPA within the previously mentioned audit scope. Thankfully, you won’t need to undergo an audit for each of the five at once. Between security, accessibility, processing integrity,confidentiality, and privacy, you must make a decision.
03. Put Together A Strong Compliance Team
Although obtaining SOC 2 certification might be a lengthy process, you can speed up the procedure by following the right procedures. Building a solid compliance team in advance isone of the best methods to guarantee that your certification procedure goes without a hitch.This entails determining all pertinent positions and the team members in your business who are most qualified to perform them. The SOC 2 team includes a project manager, IT & security personnel, executive sponsor, primary author, legal team, and external consultants.
04. Prepare Documents and Policies
Gathering documents is one of the most important steps of the SOC 2 audit’s preparation. This helps you to provide the auditor with the required documentation for the audit process.Typically, auditors begin by requesting a “Common Population” of records and information.The auditor will next go at the following records during the audit: policies, procedures,implementation, and operations.
05. Run a Readiness Assessment both Internally and Externally
The summary of the auditor’s anticipated findings is provided in the initial readiness assessment. It helps in identifying any possible improvement areas. Even when all previous steps of preparation are finished, the service organization’s controls must be checked to make sure they work as intended. Various mistakes, faults, and other problems might manifestthemselves during a SOC 2 readiness evaluation.
06. Gap Analysis and Remediation
Gap analysis identifies and validates issues before beginning an audit. It comprises analyzing your degree of compliance with your SOC 2 trust criteria, evaluating where you are in relation to your initial readiness assessment, and fixing any issues to bring you up to SOC 2 standards before the real audit. After locating the holes, you may give yourself plenty of time to fix them. For gap analysis and repair assistance, you can speak with an experienced auditor.
07. Pick an Auditor
It’s crucial to select an auditor you can rely on and who is educated about the specific needs of your business and industry. Find an auditor with a strong background in your industry and a lot of experience performing audits there. Even after choosing a business, you may still choose the specific employees and CPAs you wish to work with. While you are at it, ensure that your auditor is aware of the objectives and standards for compliance at your business.
08. Final Readiness Assessment
Conduct one final readiness evaluation after resolving any outstanding concerns. Fix those issues as soon as possible. When you are confident that all problems pertaining to your scope and trust services needs have been handled, you can request a formal SOC 2 audit. Once you are ready, prepare for the audit. You will surely pass your SOC 2 audit if your efforts are successful
Strengthen Your SOC 2 Compliance
Preparing for SOC 2 Type 2 audit or certification is a daunting task, especially for SMEs. At Compliance Logic, we are dedicated to making the process a lot easier and more effective. Compliance Logic helps you in effective readiness while also keeping the cost low, considering business objectives and priorities. We work hard towards setting you up in the successful SOC 2 audit process. To help you get more with less, Compliance Logic works in parallel on Common requirements between SOC2 Type 2 and ISO 27001 compliance.