Safeguarding data is more vital than ever for corporate organizations. Responding to that desire for stronger cybersecurity, many technology vendors to those corporations – especially vendors that offer software as a service (SaaS), cloud computing, and data management – are documenting how their internal controls meet SOC 2 cybersecurity standards.
Whether you’re a service organization (that is, a vendor providing services to other businesses) or a user entity (that is, a corporation buying the vendor’s services), in this guide to SOC 2, you can learn the details and nuance of System and Organizational Control (SOC) audits.
What Does SOC Stand For?
System and Organizational Controls (SOC) are auditing standards issued and governed by the American Institute of Certified Public Accountants (AICPA).
The SOC framework consists of five Trust Service Criteria:
- Processing integrity
These five principles are intended to help service organizations understand which controls they should use for data protection.
The SOC framework is tested through a series of SOC audits. SOC 1 audits assess a vendor’s internal control over financial reporting. SOC 2 assesses the vendor’s cybersecurity controls. SOC 3 reports are similar to SOC 2 in that both deal with cybersecurity, but SOC 3 reports are less exhaustive than SOC 2 reports.
To achieve compliance with SOC 2 standards, service organizations must be audited by an independent and licensed CPA auditor, who evaluates the vendor’s controls against the SOC standards developed by the AICPA. The final result is not a certification, but rather an audit report.
SOC 2 Reports: What is the Difference Between Type I and Type II?
SOC 2 audits fall into two categories: Type I and Type II.
A Type I audit assesses whether the vendor’s controls are appropriately designed and implemented based on the description of controls supplied by the service organization’s management. That is, a Type I audit provides a snapshot of the vendor’s cybersecurity controls at one specific point in time.
A Type II audit goes further, to assess whether those controls actually work as intended over a period of time (usually six months). The auditor will perform field work during a SOC 2 Type II audit on a sample of days during the testing period to see how controls are applied and how effective they are.
One standard practice is for a vendor to undergo a Type I audit first, and then make improvements to its security controls as necessary. After that, the vendor might move up to a Type II audit at some point in the future.
What Is a SOC 3 Audit?
A SOC 3 audit addresses the same cybersecurity issues as a SOC 2 audit, but the resulting SOC 3 report provides a more generalized overview of how the vendor approaches security. Moreover, a vendor can commission its own SOC 3 audit for marketing purposes to show that the vendor takes security seriously and has a “Good Housekeeping Seal of Approval” for its cybersecurity efforts.
What are the Benefits of SOC 3?
SOC 3 reports are often showcased as “proof of concept” documents. They help the marketing efforts of the vendor, showing its dedication to upholding the AICPA’s valued principles.
SOC 2 vs. SOC 3 Audits
SOC 2 and SOC 3 are necessary for different reasons.
A SOC 2 report builds trust between a vendor and its clients. The SOC 2 report typically has limited circulation, available only to senior leaders at the vendor and the requesting user entities. The methodology behind the SOC 2 audit is covered in the reports, along with detailed explanations of the AICPA’s trust services criteria.
SOC 3 reports are general-use reports intended for wide distribution. They’re often posted on the compliance product page of a service organization’s website to build confidence in its products.
How Are SOC 2 and SOC 3 Audits Similar?
The auditing process for SOC 2 and SOC 3 is essentially the same. The five Trust Service Criteria (TSC), as specified by the AICPA, are used as the foundation for both reporting frameworks:
Information and systems are shielded against unwanted access and disclosure. In addition, the plans are protected from any harm that would jeopardize the information’s availability, availability, privacy, and integrity and hinder the entity’s ability to achieve its goals.
Systems and information must be accessible to function and be used in line with the critical goals of the business.
The system’s processing is legitimate, accurate, quick, thorough, and authorized to achieve goals.
To achieve organizational goals, all sensitive information is safeguarded.
All personal data is gathered, used, disclosed, kept, and destroyed in line with entity goals.
SOC 3 and SOC 2 frequently work together since SOC 3 reports can only be produced by performing the procedures necessary for a SOC 2 audit.
How Are SOC 2 and SOC 3 Audits Different?
Although SOC 3 and SOC 2 examinations have many similarities, the final report is the crucial distinction. Each report’s intended distribution, degree of content, and target audience are different.
SOC 2 reports are restricted-use reports since they are only meant for a particular audience. Examples of parties that might view a SOC 2 report include user entities, the vendor’s management, or other parties who have been expressly mentioned.
SOC 3 reports are meant for everyone. They are written in a manner that is intended for readers with a general interest in the vendor, such as a prospective customer visiting the vendor’s website for the first time. SOC 3 reports may be made available to the general public and used for marketing reasons.
SOC 2 reports are increasingly frequently used by service businesses to give precise information to other entities about the controls in place to safeguard their clients’ needs.
Who Needs to be SOC 2 Compliant?
SOC 2 audits aren’t required by law, but as a practical matter many vendors will want to achieve SOC 2 compliance so they can demonstrate their commitment to cybersecurity to business partners. Those with the strongest incentives to undergo a SOC 2 audit include:
- Software-as-a-Service (SaaS) businesses that offer software, apps, and websites
- Businesses that provide management, analytics, and business intelligence services
- Organizations that manage, support, or offer advice on accounting or financial procedures
- Organizations that provide client-facing services like customer service management
- Service providers for managed IT and security, including those that assist with SOC 2
You should comply with SOC if your business fits into any of these categories or broadly corresponds to one of these service organizations.
Who can Perform a SOC 2 Audit?
You cannot engage a typical accountant to carry out your SOC 2 audit, because while all CPAs are accountants, not all accountants are CPAs. Only audit firms certified by the AICPA and Certified Public Accountants (CPAs) are authorized to conduct SOC 2 compliance audits.
Additionally, to conduct SOC 2 audits, a CPA must be an expert in information security audits. SOC 2 audits cannot be carried out by CPAs who primarily focus on corporate finance and have little or no competence in information security.
The auditor must be impartial and independent. This means that the auditor should not be related to any of the crucial decision-makers on the board of the vendor, and cannot have any direct or indirect financial interest in your organization’s operations.
What is the Cost of a SOC 2 Report?
The cost of a SOC 2 audit varies depending upon several criteria, but in general SOC 2 audits are not cheap. Among the factors influencing cost are the report’s service scope, the TSCs involved, the organization’s size, the geographic market where you are, and the number of in-scope systems and processes.
Who Needs to be SOC 3 Compliant?
Nobody needs to be SOC 3 compliant, but it’s a worthwhile investment for many companies anyway. A SOC 3 audit demonstrates your dedication to cybersecurity and to protection of customer data. Additionally, a SOC 3 report provides your marketing staff with another tool to draw in new clients familiar with the seal of approval from a reputable third-party auditor.
Who can Perform a SOC 3 Audit?
Only an independent Certified Public Accountant (CPA) may conduct SOC audits. The AICPA has mandated that the CPA adhere to all of the most recent standards for each type of SOC audit. The CPA or auditor must possess the technical know-how, education, and certification to carry out such assignments.
Simplify Your SOC 2 Compliance With ZenComply
Managing your SOC 2 audit process is essential, and you’ll need the right SOC compliance software to help you do it. It’s crucial to use a platform with a user-friendly design and quick, easy deployment. That’s where ZenComply comes in.