What is SOC 2? 8 Common SOC 2 Questions Answered
8 Common SOC 2 Questions
If you are new to a SOC 2 audit, you must be wondering what information will be audited, what employees are involved in the audit, and what is included in the overall audit process.
Considering the complexity of undergoing a SOC 2 audit, we have provided answers to eight common SOC 2 questions on auditing and reporting.
Whether you have just started your business or you’re running an established organization, you know that handling the data of your client is a serious undertaking. A SOC 2 report provides information about how effectively you are managing the security, privacy, and integrity of a client’s sensitive information.
1. Why is it important to be SOC 2 compliant?
Data privacy and security has never been more important. It is likely that if your business wants to work with large customers or those in regulated industries, you will be asked to provide proof of your security controls, especially if you operate a cloud or services business. Here is a list of common risks related to putting off compliance assessments:
- Less competitive position: Many organizations are required by law to ensure the security of their data—or their customers’ data—and will therefore only work with partners and vendors who can demonstrate secure practices and compliance with regulations.
- Drawn out sales process: At some point, a prospect may ask for your SOC 2 report before moving any further. Since SOC 2 is a rigorous framework, it is not something that can be completed overnight from one business call to the next. It requires planning, thought, ongoing cybersecurity controls, and the help of an external auditing partner.
- Lack of consumer trust: A SOC 2 report sends a signal to customers that your organization takes security—and the protection of their information—seriously. Obtaining a SOC 2 report indicates a level of maturity around technology and business. Without a SOC 2 report from a licensed CPA, customers have no way of verifying that their trust is being well-placed. And without trust, it is very difficult to do business.
- Vulnerability to security threats: One of the most valuable outcomes of pursuing a SOC 2 attestation is improving and maintaining the strength of your own organization’s cybersecurity posture. SOC 2 is comprehensive and covers a wide range of controls.
2. What are the Trust Services Criteria?
The scope of your SOC 2 audit report is entirely dependent on how many of the Trust Services Criteria (TSCs) your organization needs to focus on to fulfill your client requirements. The Trust Service Criteria that can be selected include:
- Security (Common Criteria) – The Security Category refers to the protection of information throughout its lifecycle. Security controls are put in place to protect against unauthorized access, unauthorized disclosure, or damage to systems that could affect other criteria beyond the Security Category. Security controls are designed to include a wide array of risk-mitigating solutions, such as endpoint protection and network monitoring tools that prevent or detect unauthorized activity. Entity-level and control environment topics are also considered to provide that the necessary controls are in place to govern organization wide security.
- Availability –The Availability Category considers controls that demonstrate systems maintain operational uptime and performance to meet stated business objectives and service level agreements. Availability does not set a minimum acceptable performance level, but it does address whether systems include controls to support and maintain system operation, such as performance monitoring, sufficient data backups and disaster recovery plans.
- Processing Integrity – The Processing Integrity Category focuses on ensuring that data is processed in a predictable manner, free of accidental or unexplained errors. In other words, the information produced or manipulated by your systems needs to be accurate and reliable. Because of the number of systems used by an entity, processing integrity is usually only addressed at the system or functional level of an entity.
- Confidentiality – The Confidentiality Category requires companies to demonstrate the ability to protect confidential information throughout its lifecycle, including collection, processing and disposal. The specific requirements for Confidentiality related controls may be defined by laws and regulations, as well as internal management or external partner agreements. Confidential information may include personal information, as well as other information, such as trade secrets and intellectual property. Controls for Confidentiality include encryption and identity and access management.
- Privacy – The Privacy Category is similar to Confidentiality, but specifically refers to Personally Identifiable Information (PII), especially that which your organization captures from customers. The Privacy Category covers communication, consent, and collection of personal information, and verifies appropriate parties have access to that information and what can be done with it. Controls for Privacy include privacy policies and consent management mechanisms.
3. What is the difference between SOC 1 and SOC 2?
A SOC 1 audit is the ideal audit for Managed Service Providers (MSPs) that handle, process, store or transmit financial information. These industries may include payroll processors, collections organizations, data centers and SaaS MSPs.
A SOC 2 report highlights the controls in place that protect and secure an organization’s system or services used by its customers. Unlike a SOC 1, the scope of a SOC 2 assessment extends beyond the systems that have a financial impact, reaching all systems and tools used in support of the organization’s system or services. Organizations of all sizes and industries can benefit from a SOC 2 assessment, as the audit can be performed for any organization that provides a variety of services to its customers.
4. What are the different types of SOC 2 reports?
When it comes to SOC 2 reports, two options are available: Type I and Type II. The best fit for your origination depends on your specific requirements.
- SOC 2, Type I – With this report, the service provider can validate the presence of the organization’s description of their system and the sustainability of the design. The auditor reviews and reports how well the service provider has designed the system and its controls considering the selected Trust Service Criteria (TSCs) at a specific date in time.
- SOC 2, Type II – With this report, the service provider will receive a more comprehensive report as compared to Type I. The report focuses on the description of your organization’s systems along with the results of the auditors’ tests, as related to the Trust Service Criteria scoped over a period of time. In addition, a Type II report gives a historical view of an organization’s environment to determine if the organization’s internal controls are designed and operating effectively.
5. What does a SOC 2 report focus on?
A SOC report includes overall processes and controls as described by your organization and the auditor’s assessment of the controls either at a point in time (Type 1 Report), or over a period of time (Type 2 Report). This report will include a description of your system and the suitability of the design and operating effectiveness of its controls relative to your security posture.
When you receive your SOC 2 report, you can share a version of the report with your customers, vendors, and stakeholders, when appropriate. This demonstrates your organization has the appropriate policies, procedures, and controls in place to manage and mitigate the key threats and vulnerabilities that pose a risk to their environment.
There are typically four sections to a SOC 2 report:
- Section 1: Independent Service Auditor’s Report – A summary of the details regarding the SOC 2 assessment
- Section 2: Management of Client’s Assertion Regarding Its System Throughout a Specific Time Period – A description of the organization’s system, based on specific criteria during a specific time period
- Section 3: Description of Client’s System Throughout the Period Review – Includes a number of descriptions about various organizational details associated with the system being reviewed, including but not limited to, company background, services provided, infrastructure, processes, policies and more.
- Section 4: Information Provided by the Service Auditor – Includes details of the control activities specified by the service organization and the assessment results.
6. What areas are commonly reviewed during a SOC 2 assessment?
During a SOC 2 assessment, there is a rather lengthy list of items and areas within your organization that will need to be reviewed. This basic list demonstrates the importance of starting your assessment preparation early as many different areas of your company will be involved and held accountable for providing their information. For the requirements listed below, you will need to involve your human resources department:
- Organizational charts
- New hire processes
- Employee handbook
- Background checks
- Reporting relationships
- Service-level agreements (SLAs)
For other areas of the SOC 2 audit, the requirements will be the responsibility of your IT team, such as:
- Shared network drives
- Change approvals
- Master list of system components
- User access
- VPN authentication
- Anti-virus software
- Network authentication and configuration
Many of your organization’s cybersecurity standards, settings and processes will also be evaluated, including:
- Information security policies
- The security of your company website
- Monitoring tools
- Incident response policy
- Risk assessment policy
- Network diagram and firewalls
- Encryption settings
7. What are some tips for companies as they prepare for an audit?
Before beginning the SOC 2 audit, it is important that your organization is well-prepared to avoid any delays in assessment and incur additional costs. To ensure you earn the SOC 2 report in a timely manner, it is important that you consider following a few basic guidelines:
- Stay up-to-date on standards
- Review recent changes in organizational activity
- Create a timeline and delegate tasks
- Review prior audits (if applicable)
- Organize data/gather evidence ahead of fieldwork
- Review requests and ask questions
- Evaluate results
8. How do I select the right audit partner?
Ensure your audit partner has the right qualities and they:
- Are licensed
- Undergo audits themselves
- Are properly staffed
- Respond within 24 hours
- Offer premium audit software
- Provide a comprehensive suite of services
Next Steps
When beginning the SOC 2 compliance journey it is important to engage a professional and certified auditing firm to work with you.
Do you still have questions regarding a SOC 2 audit and report? Let our SOC 2 experts guide you through the process.
As a licensed CPA firm and one of the top issuers of SOC 2 reports in the world,
To learn more about how
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