With the rising number of cyber threats, many enterprises are receiving requests to demonstrate that they have proper measures in place to protect their client’s data. The best way to do so is to showcase a SOC 2 Type 2 compliance report. However, there are many steps that one needs to undertake before achieving that.
As a beginner in the enterprise field, you may have figured out the critical role compliance plays. But to figure out the methods to achieve compliance is a different thing altogether.
The SOC 2 Type 2 report is not a simple, standardised set of connecting line A to line B. There are many courses and paths you’ll need to test. So before divulging those, let’s start with the very basics.
SOC compliance: Types of SOC reports
In today’s enterprise landscape, an enterprise is hardly successful if it doesn’t have data to back up its customers’ demand for transparency. Even partners and collaborative companies come knocking on your door regarding audit validities, ad hoc, and security questionnaires to determine how solid and secure it is to work with your organisation.
Now, as a means of simplifying the process of showcasing security controls that a company has in place, the System and Organisations Control devised SOC compliance.
Types of SOC 2 reports: Type I and Type II
Now that you’ve learned the major points of difference between the three types of SOC compliance, you should be able to differentiate between SOC 2 Type I and SOC 2 Type II.
When a potential client asks you for the SOC report, the first step is to determine which type of report they are looking for. Both, Type I and Type II are good examples to demonstrate security controls, but here is how they both differ:
The SOC Type I audit takes shorter than the SOC 2 Type II audit. The latter requires heavy documentation and analysis to compare the operative effectiveness of control systems against trust service principles, while the former is much more quickly and requires minimal data. These timelines greatly differ because of the subject matter in both the audits.
- Subject matter
The subject matter is of key importance as this is where both the audit types go their separate ways. The SOC 2 Type I audit includes minimal information and only covers if the designs are suitable for effective security in your organisation. The Type II audit, on the other hand, is a detailed documentation consisting of huge investments in terms of both time and money. Type I is generated much more quickly and easily than Type II.
Why should you go for SOC 2 Type II compliance?
Even though many of you reading this would be thinking about the time and investment that a SOC 2 Type II compliance would take, trust us when we say it has good benefits in the long run.
It brings an appeal of security that many bigger firms and partner companies like collaborating with. A lot of your clients will also trust you with their information, given you have SOC 2 compliance. Here are a few things you should keep in mind if you are going for the Type II audit.
Objectives of SOC 2 Type II compliance
The objective of this type of SOC compliance is based on the trust service principles defined by the American Institute of certified public accountants. Type II is responsible for examining the internal controls of a service provider and comparing it with the detailed description of security, availability, processing integrity, privacy, and confidentiality.
The major objective of SOC 2 Type II is to focus on the following areas in an organisation:
- Infrastructure: Analysing all the hardware components that support the IT department in delivering the services to customers
- Software: This includes monitoring all the programs your company uses to facilitate information security and data processing
- People: This involves measuring the processes used to handle the delivery of services. Management, security, governance, all these are included under people.
- Procedures: This includes the analysis of procedures that keep all the processes bound together and align the delivery of services
- Data: the act of handling private information along with files and databases is studied under Type II as well.
What all businesses can apply for SOC 2 Type II compliance?
All businesses involved in handling sensitive information about clients and partners must seek to apply for SOC 2 Type II compliance. Not only will it prove useful for their business in attracting clients, but it will also add a layer of protection to their data. Cloud computing vendors, IT service providers, Data centers, as well as SaaS companies should apply for SOC 2 certification.
The reason why these businesses should go for a Type II report rather than a Type I is because the latter is able to only impress companies with a small database. If you are in the running to break some barriers between you and your customers, a Type II report will serve as the shield.
Many large companies deal with databases that can be the prime target for hackers, which is why the first thing they look for is company-wide security. If your company engages in SaaS contract lifecycle management, then you’d understand the need to have firm security controls in place to prevent leakage of confidential information.
Benefits of using SOC 2 Type II compliance
These days many businesses are taking their operations from on-premise software to cloud-based software. This cloud-based infrastructure instils a boost in processing efficiency while cutting unnecessary expenses. However, this move to cloud software also means losing the tight control organizations used to have over the security of data and system resources. This is where a SOC 2 report comes in; it assures your customers that your security program and controls are firmly in place and have been designed to safeguard data effectively and efficiently.
Stages of a SOC 2 Type II audit
After covering the details of the importance and benefit, we’re getting to the real deal: the SOC 2 Type II audit. This document follows the standard SOC 2 examination process and includes the following stages:
First step: Scoping process
This step is critical in determining which trust principles are applicable for your firm and requires the presence of a certified CPA.
Second step: Gap analysis/ readiness assessment
The second step consists of the auditor painting out the relevant gaps in your security practices and controls. This also includes the hired CPA firm constructing a remedial plan to help you actualize the issues.
Third step: Attestation
For this step, the auditor will set up a list of deliverables based on the standards set by the AICPA attestation. Following this, they will perform the examination to decide if the design controls are sustainable and are operating effectively to match the relevant trust principles.
Fourth step: Report writing and delivery
This includes the auditor delivering the SOC report that has all the areas described above covered in it.
Sections under a SOC 2 report
But this isn’t where we end; the SOC 2 Type II report is pretty detailed and includes four main sections. To help you assess everything you will be going through if you go for SOC 2 Type II compliance, we have described them in detail below.
- Management assertion
The first part is management assertion which includes the auditor providing a thorough description of infrastructure systems established throughout your organisation during a specified period of time. The focus of this section is to determine if the controls were developed with a sustainable design and worked effectively throughout the assessment period.
- Independent auditor’s report
The second part of the report includes a description of the auditor’s assessment as compared to the AICPA’s standards. It is an honest opinion that includes his/her understanding of your description criteria and if that description matches the applicable standards in your firm.
- Infrastructure services and systems
This section provides a detailed overview of all the services provided by you and components of the systems you use to deliver those same services. These components consist of people, software, procedures, data, and infrastructure. It also lists out the relevant aspects of the internal control environment, monitoring, and risk assessment processes. Once you get the audit, you can undertake the required processes to make the necessary impactful changes for your security. You would want to ensure that you have SOC 2 audit compliance renewal because your customers are watching how serious you are about compliance and information security.
Both Type I and Type II soc reports are valid till 1 year from the date of issue. Beyond that, any report is considered ‘stale’ and is of limited validity. It is, therefore, suggested to schedule an audit renewal every 12 months.
It generally takes 6 months to get your program compliance-ready and another 6 months of continuous day-to-day monitoring of systems to receive the SOC 2 Type II audit. The auditor will schedule regular visits and timely study of operations to analyse effectiveness against the set compliance standards.
Active management of company-wide security controls and continuous monitoring to analyse the operating effectiveness of security channels are two of the most important best practices you must go through to achieve SOC 2 compliance.
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