What is a SOC 2 Report

Understanding SOC 2 Reports: A Comprehensive Guide

Data is the lifeblood of a business. In the modern digital age, where data breaches and security incidents seem to dominate headlines, the importance of data security and trust has never been more pronounced.

Organizations of all sizes and industries strive to safeguard their clients’ sensitive information, and one tool that plays a crucial role in demonstrating their commitment to data security is the SOC 2 report.

The American Institute of Certified Public Accountants (AICPA) developed the SOC 2 audit, along with the SOC 1 and SOC 3 audits, 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 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.

A SOC 2 report demonstrates an organization’s focus on trust and security.

The fundamental purpose of a SOC 2 report is to instill confidence in clients and customers by showcasing an organization’s dedication to safeguarding their data. 

These reports go beyond superficial compliance and instead delve deep into an organization’s internal controls, assessing its ability to protect sensitive information and provide secure services.

What Are The Trust Services Criteria?

SOC 2 reports are built around five trust services criteria (TSC): Security, Availability, Processing Integrity, Confidentiality, and Privacy. 

Each criterion addresses a specific aspect of data management and protection, collectively forming a comprehensive evaluation framework.

TSC is a framework for designing, implementing, and evaluating information system controls. 

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

The components of a SOC 2 report

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 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 necessary to accomplish their business objectives. 

It includes whether system designs and controls comply with the AICPA’s 5 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), 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, an incident response program, or any practices an organization wants to know.

Types of SOC 2 Reports

There are two main types of SOC 2 reports: Type 1 and Type 2. 

SOC 2 Type 1 Report

A SOC 2 Type 1 report evaluates the design of security controls at a specific time.

SOC 2 Type 2 Report

A SOC 2 Type 2 report assesses both the design and operational effectiveness of controls over a designated period, typically six to twelve months.

So which one is ideal for your organization? Let’s take a look at the differences in the SOC 2 type 1 vs SOC 2 type 2 report. 

Do you need a SOC 2 Type 1 or SOC 2 type 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. 

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. This is because it will secure the credibility of your infosec practices and build instant trust with customers.

How to get a SOC 2 report?

Collection of Evidence: This step involves gathering relevant documentation and information that demonstrate your organization’s implementation of controls aligned with the TSC. Documents may include policies, procedures, access logs, and more. Evidence should provide a clear picture of how your organization safeguards data, maintains availability, ensures processing integrity, protects confidentiality, and upholds privacy.

Engagement with an Auditor: Organizations seeking a SOC 2 report typically engage with a certified public accountant (CPA) or a specialized auditing firm. The auditor assesses the organization’s controls against the chosen trust services criteria, examining policies, procedures, and security measures.

Assessment and Evaluation: The assessment process involves collecting evidence, performing tests, and evaluating the organization’s controls. This comprehensive evaluation helps determine the effectiveness of the controls in place and their alignment with the trust services criteria.

Benefits of having a SOC 2 report

1. Building client trust

A SOC 2 report serves as a powerful trust-building tool. It assures clients that the organization takes data security and privacy seriously, increasing their confidence in the organization’s ability to protect their sensitive information.

2. Compliance and regulatory requirements

Many industries have data protection regulations that organizations must adhere to. A SOC 2 report helps organizations meet compliance obligations by demonstrating their commitment to industry standards and best practices.

3. Internal process improvement

The assessment process itself can drive improvements in internal controls and security practices. As organizations work to meet the trust services criteria, they often uncover areas where enhancements are needed, leading to strengthened data security measures.

4. Helps gain a competitive advantage 

Having a SOC 2 report ready gives your business an edge over your competitors. Businesses only seek to collaborate with vendors who securely protect their data in light of the numerous new businesses that are starting up. 

5. Builds brand reputation 

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

6. 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. 

7. Streamlines compliance mapping 

A SOC 2 report offers great value in facilitating various regulatory compliance across other frameworks and standards. AICPA has developed CC mapping guides to track any overlap between SOC 2 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. 

Partnering with your company will be easier for these parties if you have a SOC 2 report available:

Interpreting and Using SOC 2 Reports

Understanding the Report: SOC 2 reports are structured documents that provide detailed insights into an organization’s controls and practices. Readers can interpret the sections to understand the evaluated criteria, the effectiveness of controls, and potential areas for improvement.

Making Informed Decisions: Clients and customers can use SOC 2 reports to make informed decisions when selecting service providers. By reviewing the report’s findings, they can assess the organization’s commitment to data security and compliance, which aids in making confident choices.

Wrapping up

In the digital world, trust and data security matter a lot. SOC 2 reports are like strong signs of assurance. They show that a company takes data protection seriously and keeps things private. Using these reports shows that a company is trustworthy and cares about keeping things safe.

As professionals in compliance, we know the hassle of obtaining a SOC 2 report. That’s why we recommend organizations collaborate with compliance automation companies like Scrut to get a SOC 2 report in just 4-6 weeks. Scrut is a smart and radically simple governance, risk, and compliance automation platform for growing startups and mid-market enterprises. With Scrut, you can reduce manual effort and maintain SOC 2 compliance with ease. Schedule your demo today to see how it works.

FAQs

1. How do I meet SOC 2 requirements in the cloud?

To become SOC 2 compliant in the cloud, your security experts should evaluate the current cloud security controls to determine security gaps. Ensure to follow the below steps to achieve SOC 2 compliance in a public cloud platform:
– Establish administrative policies and procedures
– Set security controls to meet policy standards
– Enforce and maintain security controls across your cloud

2. Is my business required to address all Trust Services Criteria (TSC) in the SOC 2 audit?

Frankly speaking, it depends on your organization’s services. Few organizations choose confidentiality and privacy TSC, while others choose confidentiality and availability or all the 4 TSCs.
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.

3. How do I maintain SOC 2 compliance?

To ensure SOC 2 compliance, your organization must perform a SOC 2 audit before the current report is past its effective coverage period. Typically, organizations go through a SOC 2 audit once a year.

4. What are SOC reports, and what is their purpose?

SOC reports are auditing standards developed by the AICPA to assess the internal controls of service organizations handling sensitive data for their clients. Their main purpose is to provide assurance to clients and stakeholders regarding the effectiveness and adequacy of the controls implemented by the service organization.

5.  What are the different types of SOC reports?

There are three main types of SOC reports: SOC 1, SOC 2, and SOC 3. SOC 1 reports focus on controls impacting financial reporting, SOC 2 reports center around the Trust Services Criteria (security, availability, processing integrity, confidentiality, and privacy), and SOC 3 reports provide a summarized version of SOC 2 and are intended for public distribution.

6. How can SOC reports help with regulatory compliance?

SOC reports can assist CISOs in achieving and demonstrating regulatory compliance by providing evidence of meeting specific security and data protection requirements, demonstrating due diligence in vendor selection, supporting auditing requirements, and verifying vendor compliance with relevant industry regulations.

7. What is a SOC-2 report? 

A SOC 2 report is a document that assesses an organization’s controls over its data-related services. It evaluates how well the organization safeguards data, ensures availability, maintains processing integrity, protects confidentiality, and upholds privacy standards. To ensure SOC 2 compliance, your organization must perform a SOC 2 audit before the current report is past its effective coverage period. Typically, organizations go through a SOC 2 audit once a year.

8. Why is a SOC 2 report important? 

A SOC 2 report is important because it demonstrates to clients and customers that an organization takes data security seriously. It assures them that their sensitive information is in safe hands and that the organization follows strict standards to protect their data.

9. What are Trust Services Criteria (TSC) and should my organization address all of them? 

Trust Services Criteria (TSC) are the five key principles that form the foundation of a SOC 2 report: Security, Availability, Processing Integrity, Confidentiality, and Privacy. These criteria define how well an organization’s controls align with data protection and privacy standards. 
Some organizations choose the confidentiality and privacy TSC, while others choose confidentiality and availability TSC. 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.

10. What’s the difference between SOC 2 Type 1 and SOC 2 Type 2 reports?

A Type I report assesses the design of controls at a specific point in time, while a Type II report goes a step further by evaluating both the design and operational effectiveness of controls over a period of time, usually six to twelve months.

11. How can a SOC 2 report benefit my business?

A SOC 2 report benefits your business by instilling trust in clients and customers, helping you meet industry compliance requirements, and improving your internal data protection measures. It can be a competitive advantage, showcasing your commitment to data security and privacy.

12. How do I meet SOC 2 requirements in the cloud?

To become SOC 2 compliant in the cloud, your security experts should evaluate the current cloud security controls to determine security gaps. Follow the below steps to achieve SOC 2 compliance on a public cloud platform:
– Establish administrative policies and procedures
– Set security controls to meet policy standards
– Enforce and maintain security controls across your cloud

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