Data is the lifeblood of a business. Businesses that handle sensitive customer data must be equipped with controls to protect it adequately and avoid data breaches. And one of the best ways to safeguard customer data is by meeting SOC 2 compliance standards.

The SOC 2 audit, along with SOC 1 and SOC 3 audits, was developed by the American Institute of Certified Public Accountants (AICPA) to assist service organizations that operate and provide information system services to other entities.

What is a SOC 2 report?

A SOC 2 report determines whether a service organization or cloud provider can securely manage customers’ data. The organizations receive and share a SOC 2 report with stakeholders and prospective customers to demonstrate internal controls, policies, and procedures that directly relate to the security of a system at a service organization.

What are SOC 2 Trust Services Criteria (TSC)?

The SOC 2 report was designed based on 5 Trust Services Criteria (TSC): Security, Availability, Processing Integrity, Confidentiality, and Privacy. TSC is a framework for designing, implementing, and evaluating information system controls. 

Trust Services Criteria	Description
Security	Helps in protecting information from unauthorized access and unauthorized disclosure throughout its lifecycle in an organization.
Availability	Addresses whether systems include controls to support accessibility for operation, monitoring, and maintenance.
Processing Integrity	Focuses on data accuracy and the completeness of the end-to-end process of ensuring that applications function without delay, error, omission, or accidental data manipulation.
Confidentiality	Evaluates how organizations protect confidential information – limit access, storage, and use. It ensures that only authorized individuals can view sensitive information like legal documents or Personally Identifiable Information (PII).
Privacy	Evaluates how organizations protect customers’ personal information like name, address, email, other identification info, and purchase history.

Of the 5 TSCs, all the SOC 2 reports must include security trust service, while the other four are optional – added to the examination at the discretion of management.

What are the two types of SOC 2 reports?

SOC 2 Type 1 reports address the organization’s security design at a specific time, enabling the customer and partners to assess if the organization can meet specific trust principles. 

SOC 2 Type 2 report is more extensive than a Type 1 report and provides greater audit assurance. It gives an opinion on the operating effectiveness and consistency of internal controls over a period of around 6 to 12 months. 

Which report do you need: SOC 2 Type 1 or SOC 2 Type 2? 

If you are new to SOC 2, and the primary goal is to build compliance as a capability or have budget and time constraints, it is ideal to start with a SOC 2 Type 1 audit. This will help you adapt to the controls and identify information security gaps you can address over the next 6-12 months.

During this period, you can build the required processes against the failed controls and collect evidence to show the operating effectiveness of your controls and procedures, accelerating the timelines for a SOC 2 Type 2 audit. 

However, the SOC 2 report is often an essential requirement of a vendor assessment of the organization you are trying to serve. In such instances, it is worth spending the additional time and effort on a SOC 2 Type 2 report because it will secure the credibility of your infosec practices and build instant trust with the customers.

What does a SOC 2 report include?

A SOC 2 report provides all the details of a service organization’s internal controls. It typically includes:

1. Report from an auditor 

The SOC 2 final report briefly summarizes the entire SOC 2 examination, the time taken, and the auditor’s opinion on how effectively the organization’s controls are mapped with the chosen Trust Services Criteria (TSC). The report describes system design, service organization responsibilities, auditor’s responsibilities, inherent limitations, and auditor opinion.

The auditor uses terms such as unqualified, qualified, adverse, and disclaimer to describe their opinion on the SOC 2 audit. 

• An unqualified opinion is issued when an organization clears the audit. That means the controls your auditor tested were designed and operating as they should be.
• A qualified opinion is issued when an organization clears a SOC 2 audit, but some areas require attention. That means the controls your auditor tested weren’t designed or operating as needed.
• An adverse opinion is issued when an organization fails the SOC 2 audit. That means the clients cannot rely on the organization’s systems. 
• A disclaimer opinion is when the auditor doesn’t have the necessary evidence to establish an official opinion.

2. Management assertion 

Management assertion acts as a legal document between the organization and the auditor. It’s a declaration by the service organization about the system designs and operations to accomplish their business objectives. It includes whether system designs and controls comply with the AICPA’s 5 Trust Service Criteria (TSC), timeframe, and audit scope.

3. System description 

System description gives a high-level overview of the technologies used, like virtualization software, networking hardware, database types, backup configuration, and system redundancy. It also provides information about system scope and requirements, control frameworks, system incidents, system components, and complementary information.

4. Auditors’ test of controls

Test of controls describes how every test is performed during the audit. It provides information about the operating effectiveness of controls and details about the controls that may affect the organization’s operations while delivering products to its customers or providing services. 

Most of the SOC 2 test of controls reports include Common Criteria (CC), Trust Services Criteria (TSC), control number, control description from the company, the auditor’s test description, and test results on operating effectiveness.

5. Other information

Sometimes a service organization provides additional information on a business continuity program, incident response program, or any practices an organization wants to know.

Who needs a SOC 2 report? 

If you are a service organization or a service provider that stores, processes, or transmits customer data and want to be competitive in the market, you need a SOC 2 report. 

The following are the organizations SOC 2 audit applies to: 

• SaaS companies that provide applications
• Managed IT and security service providers who monitor systems and security devices
• Fintech companies that process loans, peer-to-peer lending, payment processing, crowdfunding, and asset management
• Companies that provide business intelligence, analytics, and management services
• Businesses that oversee, facilitate, or consult with finances or accounting practices

What are the benefits of a SOC 2 report?

Security being the top concern for organizations, it’s important that your organization understands the potential of a SOC 2 report. It supports various management efforts and delivers numerous benefits outlined below.

1. Gains competitive advantage 

Undoubtedly, having a SOC 2 report ready gives your business an edge over your competitors. With every new company launching, businesses only look to partner with vendors who securely protect the data. 

2. Builds brand reputation 

SOC 2 report provides evidence that the organization has taken all the critical measures to prevent a data breach. And thus, in turn, it helps build a brand reputation in the market. 

3. Enhances information security practices

One of the primary objectives of the SOC 2 report is to ensure that organizations are following industry best practices and implementing the right protocols to protect systems and data from unauthorized access by assisting organizations in improving information security practices. 

4. Streamlines compliance mapping 

A SOC 2 report offers great value in facilitating various regulatory compliance across other frameworks and standards. AICPA has developed Common Criteria (CC) mapping guides to track any overlap between SOC 2 Trust Service Criteria (TSC) requirements and other compliance frameworks. 

For example, if your organization accepts credit card details, you must comply with Payment Card Industry Data Security Standards (PCIDSS). 

Who checks a SOC 2 report?

A SOC 2 report plays a crucial role in attracting prospective clients. Having a SOC 2 report ready will help the following partner with your organization. 

• Existing and prospective customers who want to know how your organization handles sensitive information.
• Stakeholders, business partners, and vendors who want to know what internal controls your organization takes care of to protect customer data. 
• Potential investors who want to check for the credibility and reliability of your organization’s infosec posture. 

How do I get SOC 2 compliant?

As professionals in compliance, we know the hassle of obtaining a SOC 2 report. That’s why we recommend organizations to collaborate with compliance automation companies like Scrut to get a SOC 2 report in just 4-6 weeks. 

Scrut Automation is a smart and radically simple governance, risk, and compliance automation platform for growing startups and mid-market enterprises. With Scrut, compliance teams can reduce ~70% of their manual effort in continuously maintaining compliance towards SOC 2, ISO 27001, GDPR, PCI DSS, HIPAA, and CCPA. Schedule your demo today to see how it works.

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