SOC 2 Compliance

While SOC 2 audits are not mandatory, many companies now expect SOC 2 compliance from vendors and providers. There are other benefits as well:

1. Compliance: SOC 2 is built on trust principles that work with other regulatory frameworks, such as Health Insurance Portability and Accountability Act (HIPAA) and ISO 27001. Obtaining certification can accelerate overall compliance, particularly if you use Software-as-a-Service (SaaS) or (governance, risk, and compliance) GRC software.  
2. Customer satisfaction: Data privacy and confidentiality are increasingly becoming a priority for customers, and SOC 2 compliance provides them peace of mind, improving the customer experience.
3. Efficiency and cost-effectiveness: The cost of data breaches has risen to almost $4.5 million per year recently, so although auditing and compliance will cost you, they can help save much more because they prevent operational downtime and data loss.
4. Valuable insights: It is hard to place a value on the insights your organization will gain from SOC 2 audits, particularly regarding governance, regulatory compliance, risk management, security strategies, and vendor management.

Why is SOC 2 important? According to a recent report, third-party incidents were the reason behind some of the costliest enterprise data breaches in recent years. The average cost of each incident was almost $1.5 million. So aside from the SOC 2 benefits discussed so far, consider the following:

1. SOC 2 compliance improves data security best practices: By adhering to SOC 2 compliance guidelines, organizations can improve their security posture and better defend themselves against malicious attacks, thereby reducing or even eliminating data leaks and breaches.
2. SOC 2 compliance maintains your competitive advantage: Customers and other invested parties now consider data privacy and security paramount concerns, and they prefer service providers who comply with regulations and religiously adhere to cloud, IT, and cybersecurity best practices. This results in customer satisfaction, enhancing your bottom line.

The five Trust Services Principles or Criteria outlined below can be included in a SOC 2 report, but only one is mandatory: security. The other four are optional, which you can add to the audit depending on the overall goals of your organization.

The goal of the security audit is to verify that unauthorized access is denied. The audit will assess solutions in place, such as firewalls, intrusion detection, user authentication measures, and so forth. Based on the results, recommendations will be made to close any gaps and patch any vulnerabilities.

The availability audit will look at a couple of things. For example, availability of services, which includes determining whether service-level agreements (SLAs) with vendors are being honored. Availability also has to do with the performance of the network itself. Is it consistently available, with minimal downtime, to service providers and clients alike?

The processing integrity audit verifies that there are no resulting errors in system processing. If errors do occur, it investigates whether they are detected and corrected promptly without compromising services and operations. It will also examine if data is presented in the right format and on time. This principle is especially important for financial services organizations.

This audit checks if data is only visible to those with proper permissions. It also examines aspects such as privileged access, data classification, encryption, IT mapping, and data retention and disposal.

The privacy audit is similar to confidentiality, but it focuses more on how sensitive user data is stored and used. It examines if, when, how, and why an organization shares such data.

SOC 1 and SOC 2 both come from the AICPA, but they have different goals. SOC 2 is not necessarily an upgrade or newer version of SOC 1. Rather, they are two different compliance reports, used for different purposes. 

Who needs SOC 2 compliance? In general, SOC 1 is for financial organizations, while SOC 2 is for nonfinancial entities. But the differences go beyond that.

SOC 1: Reports on internal controls that protect customers’ financial statements.

SOC 2: Reports on internal controls that protect sensitive customer data.

SOC 1: Audit processing and security for sensitive customer data across the organization.

SOC 2: Audits based on any or all of the five Trust Services Principles for nonfinancial service providers.

SOC 1: Certified public accounts (CPAs) of the audited organization, internal and external financial auditors, CPAs of other user entities.

SOC 2: Compliance managers, executives, internal and external auditors, partners.

SOC 1: Verifies if existing controls protect financial statements.

SOC 2: Ensures regulatory compliance of service providers, internal governance, risk management, vendor management, and more.

Before you perform a SOC 2 compliance audit, ensure your organization is ready. A SOC compliance checklist can help you prepare for the audit to get good results. The checklist is based on the five principles, so it helps to know which of the five principles your audit will address. 

1. Availability: Ensure customer access is in harmony with the terms of the SLA and that the network is consistently available.

2. Security: Verify that your organization’s security posture is effective on multiple levels.

• Access: Physical and logical restrictions on network resources prevent unauthorized access.
• Operations: Controls are in place to monitor operations and detect and correct any procedural deviations.
• Change management: Controls are in place to prevent unauthorized changes and manage any IT system changes.
• Risk mitigation: Proper monitoring helps identify—and respond to—risk and manage recovery.

3. Processing integrity: Make sure processes and transactions are adequately protected. This includes encryption, transmission, hosting, and storage.

4. Confidentiality: Ensure there are restrictions on data access. There should be clear procedures for handling personally identifiable information (PII) and protected health information (PHI) where applicable.

5. Privacy: Verify there are clear terms and procedures for collecting, storing, using, and sharing customer data.