According to a Pew survey in 2019, 70 percent of American adults believed at the time that their data was less secure than it had been five years prior. Now consider that a pandemic followed, along with major data breaches at the likes of Microsoft and others. One can safely assume Americans are even less confident about the security of their data today.
Safeguarding data is more vital than ever for businesses, and because of that, many of them — especially companies that offer software as a service (SaaS), cloud computing, and data management — are documenting how their internal controls meet cybersecurity standards.
Whether you’re a service organization (that is, a vendor providing services to other businesses) or user entities (that is, a corporation buying the vendor’s services), you should familiarize yourself with the terminology of System and Organizational Controls (SOC).
What Does SOC Stand For?
System and Organizational Controls (SOC) are a set of auditing standards issued and governed by the American Institute of Certified Public Accountants (AICPA).
The SOC framework is composed of five Trust Service Criteria: security, processing integrity, confidentiality, availability, and privacy. These five principles are intended to be guides for the internal controls that service organizations should use for data protection.
The SOC framework is tested through a series of SOC audits. SOC 1 reports pertain to internal control over financial reporting at the service business. SOC 2 reports relate to cybersecurity controls at the service business. SOC 3 reports are similar to SOC 2 reports in that both deal with cybersecurity, but SOC 3 reports are less exhaustive than SOC 2 reports.
To become SOC-certified, service organizations must be audited by an independent and licensed CPA auditor, who then evaluates the AICPA standards put in place at the company.
What Are the Types of SOC 2 Reports?
SOC 2 reports can be either a Type I or Type II. The difference between the two types of reports is simple.
Type I reports look at the policies and procedures of a service organization at one moment in time, and try to answer: Are these internal controls properly designed for their intended purpose?
Type II reports are more rigorous than Type I, covering a longer evaluation period. They ask: Do these internal controls actually work as intended over a fixed period of time? (Usually six to 12 months.)
Type II reports are more exhaustive than Type I reports. Indeed, many service businesses first go through a SOC 2 Type I report to prepare themselves for the more rigorous demands of a SOC 2 Type II report.
What Is a SOC 3?
User entities will request a SOC 2 report from a service organization for auditing purposes. That SOC 2 report will take an in-depth look at the vendor’s internal controls as those controls relate to the AICPA Trust Service Criteria.
SOC 3 reports cover the same subject matter, but provide a more generalized overview of how the service organization 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 are beneficial to the marketing efforts of a service organization, showing their dedication to upholding the AICPA’s valued principles.
Is SOC 3 Better Than SOC 2?
SOC 2 and SOC 3 are important for different reasons.
A SOC 2 report builds trust between service organizations and their clients. They are restricted-use reports with limited access, typically 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 that are intended for wide distribution. They are more beneficial to the service organizations than their user entities, and typically don’t describe the methodology of the report in detail. SOC 3 reports are freely posted on the compliance product page of a service organization’s website to build confidence in their products.
How to Manage SOC 2 Compliance
Managing your SOC 2 compliance is important — as is finding the right 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 ZenGRC comes in.
ZenGRC can help you stay on top of your compliance requirements with ease. Schedule a demo today to see how the platform can help your business sail through compliance reports.