In general, service organizations will undergo annual SOC 2 (Service Organization Controls 2) audit reports. The SOC reports typically begin with a SOC Type 1 report in the first year followed by SOC Type 2 reports in subsequent years.
For How Long are SOC 2 Reports Valid?
In terms of reporting, a SOC 2 report that’s older than a year is often known as a “stale” report. That means that the assessment of an organization’s internal controls is dated, so the report has only limited value to the user-if any at all.
Developed by the American Institute of Certified Public Accountants (AICPA), SOC 2 defines criteria for managing customer data based on five trust services criteria: security, availability, processing integrity, confidentiality, and privacy.
SOC 2 audit is completely voluntary and not mandated by any governing body or regulatory agency. However, every service organization that handles customer or client data, from scrappy startups to multinational corporations, should be compliant with this increasingly important framework. But SOC 2 audit is no quick-and-easy deal. It requires teamwork, advanced planning, coordination, internal audits, and more. And, chances are, your competitors are already SOC 2 certified.
A successful SOC audit establishes trust and confidence in a service provider by ensuring that its internal controls are designed correctly and are operating properly.
Two of the most common compliance standards are ISO 27001 and SOC 2 reports. However, although both compliance standards specifically address security, they focus on different areas. ISO 27001 evaluates risk to information assets, i.e., IT systems, processes, and intellectual property.
SOC 2, on the other hand, establishes the core controls and principles of a service organization’s business model as it pertains to data management. In addition, only ISO 27001 involves a certificate of compliance.
What is the Difference Between SOC 1 SOC 2 and SOC 3?
There are four main types of SOC reports:
- SOC 1
- SOC 2
- SOC 3
- SOC for Cybersecurity
SOC 1
The main difference between a SOC 1 and a SOC 2 report is that the SOC 1 report focuses on the organizational controls that affect an enterprise’s financial statements. A SOC 2 report doesn’t deal with financial reporting but rather focuses on the controls that affect the organization’s information security, availability, and processing integrity, as well as data confidentiality and privacy.
SOC 2
A SOC 2 report is also an attestation report issued by an independent CPA firm that provides information about your organization for an informed, knowledgeable audience whose members often have a vested interest in the audit findings. SOC 2 provides two options for auditing service providers, Type 1 and Type 2.
- During a Type 1 audit, the auditor reviews and reports on the service provider’s system and the design of its controls at a point in time, relating to one or all of the five trust services criteria.
- A Type 2 audit includes all the same information as Type 1. However, it also includes the auditor’s assessment that a service organization’s controls have been tested for operational effectiveness over a period of time, since your last SOC 2 audit.
SOC 3
Although a SOC 3 report covers similar reporting areas as the SOC 2 report, it’s not as comprehensive. And unlike SOC 2 reports, SOC 3 reports are certified and can be widely shared. They’re considered “general use” reports and offer a less detailed summary of the information. A common use case for SOC 3 reports is for marketing purposes.
SOC for Cybersecurity
Responding to the increase in cybersecurity attacks, the AICPA has published the Cybersecurity Risk Management Reporting Framework, also known as the SOC for Cybersecurity. In a SOC for Cybersecurity report, an auditor reports on an organization’s enterprise-wide cybersecurity risk management program.