SOC 2 Compliance: A Guide For IT Managers

What is SOC Compliance?

Service Organization Control (SOC) Compliance is a set of standards developed by the American Institute of Certified Public Accountants (AICPA) to help organizations manage and protect customer data. SOC compliance provides a standardized method to ensure data security, privacy, and integrity and is essential for businesses that handle sensitive information.

While SOC compliance is voluntary, it has become a standard expectation for service organizations, especially cloud service and SaaS providers, to demonstrate to customers they can securely manage sensitive data.

Types of SOC Compliance

There are three primary categories of SOC reports. SOC 1 focuses on internal controls over financial reporting and is intended for auditors and users who need to understand the impact of a service organization's controls on their financial statements. SOC 2 centers on the Trust Services Criteria, which include security, availability, processing integrity, confidentiality, and privacy. SOC 3 is similar to SOC 2 but is designed for general use.

For this article, we’ll focus exclusively on SOC 2.

What is SOC 2?

SOC 2, or System and Organization Controls 2, is a cybersecurity and compliance framework developed by the AICPA. It is essential for service organizations, especially those that store, process, or transmit customer data. 

While ISO 27001 is another international standard for Information Security Management Systems that focuses on a risk management approach, SOC 2 is more prevalent in the US and focuses on the specific control criteria related to the five TSCs.

SOC 2 is based on five Trust Service Criteria (TSCs), which are the foundation of the compliance framework. These TSCs offer a comprehensive framework for evaluating an organization's controls and security measures:

1. Security: Protects information from unauthorized access, use, or disclosure

2. Availability: Ensures that systems and data are accessible and usable when needed

3. Confidentiality: Protects sensitive information from unauthorized access or disclosure

4. Processing Integrity: Ensures that data is processed accurately, completely, and promptly

5. Privacy: Protects personally identifiable information (PII) from unauthorized access, use, or disclosure

Must read: The Complete Guide To ISO 27000 Series (Includes How To Get Certified)

Why Do Organizations Need SOC 2 Compliance?

SOC 2 audits have been established to essentially assure customers of a service provider’s data security and protection structure. For organizations, SOC 2 compliance demonstrates to customers and stakeholders that the organization is committed to rigorous data protection standards. SOC 2 compliance is also necessary to obtain many other regulatory requirements, such as GDPR, HIPAA, and PCI DSS. 

Emily Bonnie, in an interview with K.C. Fikes, Data Analytics Practice Lead from The Cadence Group, highlights the importance of SOC 2:

“SOC 2 examinations help service-based organizations ensure they have the best controls in place to protect a client’s confidential data. When you are SOC 2 compliant, you can protect one of your most valuable assets: data.”

SOC 2 as a differentiator

In today’s highly competitive and saturated industry, SOC 2 compliance is a key differentiator between companies that take client data security seriously and those that don’t.

Moreover, data breaches and cyberattacks are becoming increasingly common, with the average data breach cost reaching $4.45 million in 2023. Achieving SOC 2 compliance also strengthens defenses against outside attacks and reduces the likelihood of data breaches. This not only lessens the possibility of financial damage from such situations, but it also preserves the company's image by averting negative press regarding data disclosure or compromised client information.

A study by TrustCloud found that organizations with leadership buy-in and support for SOC 2 compliance are more likely to achieve and maintain compliance over time. Leadership involvement is also needed for effective governance and resource allocation. Their support builds stakeholder trust and aligns compliance efforts with organizational goals.

Benefits of SOC Compliance

A SOC 2-compliant organization implies that it has the infrastructure, tools, and processes to safeguard its data from unauthorized access both within and outside the firm.

Some other benefits include:

• Improved stance on security

With a SOC 2 framework, you enhance your company's security posture and get insights to optimize processes and eliminate risks. Companies that undergo the SOC 2 certification process gain a clear understanding of their data landscape and can implement strong controls to protect it. With a proactive approach to potential threats, you are better prepared to respond effectively and protect your organization and customers.

• Better operational visibility

SOC 2 compliance establishes a baseline of normal operations and enables continuous monitoring for malicious activity, system changes, and unauthorized access. With this heightened visibility, your organization can swiftly identify, assess, and neutralize security threats through fail-proof controls. SOC 2 is a must to maintain a robust operational risk management posture.

• Enhanced trust and added competitive advantage

SOC 2 certification is highly sought after as the industry standard for third-party risk management in the US cloud market. SOC 2 also simplifies how you demonstrate your commitment to security to external stakeholders. You can readily provide proof of security measures, be it a potential client, auditor, or partner. With a proper SOC 2 compliance process, you also quickly share reports, accelerate sales cycles, and gain a competitive advantage.

• Improves departmental collaboration

SOC 2 compliance needs input and cooperation from various departments, including legal branches, for guidance on compliance with relevant laws and regulations and HR teams to educate employees on the importance of data security. Operations teams also assist in implementing and maintaining controls and security measures. 

Types of SOC reports

There are two main types of SOC 2 reports: Type 1 and Type 2. Below is a detailed explanation of each type.

SOC 2 Type 1

A SOC 2 Type 1 report evaluates the design and implementation of an organization's controls at a specific time. This type of report focuses on:

Type 1 reports are typically quicker to complete since they only assess the controls simultaneously. They are suited for organizations that need to demonstrate compliance quickly or have recently implemented new controls.

SOC 2 Type 2

A SOC 2 Type 2 report provides a more comprehensive evaluation by assessing the controls' design and operating effectiveness over a specified period (typically 3-12 months). 

Type 2 reports are more detailed and provide greater assurance to customers and stakeholders.

Keep in mind that we recommend a SOC 2 Type 2 report. Unlike the SOC 2 Type 1 report, the SOC 2 Type 2 report assesses controls’ design and operating effectiveness over a specified period.

Moreover, customers and partners often demand the SOC 2 Type 2 report as it signifies a higher level of commitment to security and compliance.

How to get SOC 2 Certified?

Now that you know how your organization can benefit from SOC 2 compliance, we’ll tell you exactly how you can prepare and propel your organization to achieve SOC 2 accreditation.

Step 1: Understand SOC 2 Requirements

Given the broad nature of SOC 2 criteria, you must tailor the SOC 2 controls according to your organizational needs. As we’ve already stated, the foundation of SOC 2 compliance is the five Trust Services Criteria. During an audit, your auditor will evaluate your infrastructure and security practices against these criteria.

The Security or common criteria is mandatory for all SOC 2 reports. The other four categories should be included only if relevant to your organization's operations. For example, if your company does not process data on behalf of customers, the Processing Integrity criteria won’t be part of your SOC 2 report.

Security

The security criteria form the core of SOC 2. This category includes over 30 required controls and aims to protect organizational and customer data from unauthorized access.

Standards of security criteria include:

• CC2.2: The entity communicates with external parties regarding matters affecting the functioning of internal control

• CC3.2: The entity identifies risks to achieving its objectives across the entity and analyzes risks to determine how they should be managed.

• CC6.2: The entity restricts physical access to protected information assets to authorized personnel to protect them from security events

Availability

This principle ensures that data is accessible when needed for its intended function and can be recovered in case of a technical failure or data breach.

Some standards of availability criteria include:

• A1.1: The entity maintains, monitors, and evaluates current processing capacity and use of system components (infrastructure, data, and software) to manage capacity demand and to enable the implementation of additional capacity to help meet its objectives

• A1.2: The entity authorizes, designs, develops or acquires, implements, operates, approves, maintains, and monitors environmental protections, software, data backup processes, and recovery infrastructure to meet its objectives

Confidentiality

If your organization handles confidential data, such as customer business secrets, intellectual property, or personal information, you will likely need to include confidentiality in your SOC 2 scope. This category ensures that confidential data is accessible only to authorized individuals.

Some standards of confidentiality criteria include:

• C1.1: The entity identifies and maintains confidential information to meet the entity’s objectives related to confidentiality.

• C1.2: The entity disposes of confidential information to meet the entity’s objectives related to confidentiality.

Processing Integrity

If your organization processes data on behalf of customers, you need to include processing integrity controls in your SOC 2 scope. These controls ensure that data processing operations like analytics and calculations are accurate and reliable.

Standards of processing integrity criteria include:

• PI1.6: The entity ensures that any modification of data, other than routine transaction processing, is authorized and processed to meet the entity’s processing integrity commitments and system requirements

• PI1.3: The entity implements policies and procedures over system processing to result in products, services, and reporting to meet the entity’s objectives.

Privacy

The privacy criteria protect consumer rights and their data and enforce control over data collection and use. This includes providing notice about data collection, obtaining consent, and handling data deletion requests.

Some standards of privacy criteria include:

• P7.1: The entity maintains accurate, complete, and relevant personal information for the purposes identified in the notice. The entity allows data subjects to update their personal information and performs due diligence on third-party sources.

• P2.1: The entity communicates to the data subjects the choices available regarding the collection, use, retention, disclosure, and disposal of personal information and the consequences, if any, of each choice.

Step 2: Define the scope of your SOC 2 audit

Having a well-defined scope begins with determining which systems and processes are relevant to your services. This includes:

• Information systems: Servers, databases, applications, and network infrastructure

• Business processes: Processes that handle data processing, storage, and transmission

• Support processes: IT support, customer service, and other ancillary processes that affect service delivery

Next, identify the specific services covered in the SOC 2 audit. Clearly define the services' boundaries, including what is and isn’t included in the audit. Identify all physical locations where services are provided, such as data centers and offices. Additionally, determine the extent to which third-party services and vendors are involved and how their controls will be assessed.

After deciding which of the five TSCs apply to your organization, identify the control objectives and specific controls to be evaluated during the audit. 

Control objectives are high-level goals that your controls are designed to achieve, while the controls are specific implementations and practices that support the control objectives.

For instance, a security control objective might be to protect data from unauthorized access with specific controls such as firewalls, encryption, and access management policies.

Step 3: Assess your audit readiness

To assess your readiness for SOC 2 compliance, you must evaluate your current security posture and identify gaps that must be addressed before the formal audit. 

Here are some steps to take to ensure your organization is prepared:

• Compare your existing controls and practices against the SOC 2 Trust Services Criteria (TSC). Identify areas where your current practices fall short.

• Consider hiring a third-party auditor to perform a readiness assessment for an external perspective on your compliance status. 

• Determine who will be responsible for each aspect of SOC 2 compliance within your organization. This includes IT, security, compliance, and management teams.

• Ensure a comprehensive risk assessment has been conducted, identifying potential threats and vulnerabilities that could impact your systems and data.

• Assess the security practices of third-party vendors and service providers to ensure they meet SOC 2 requirements.

Step 4: Implement the necessary controls

The phase involves developing and deploying technical and administrative controls to address the gaps identified during the readiness assessment.

First, you must develop comprehensive policies and procedures that align with the SOC 2 criteria. These documents should outline your organization’s specific practices and protocols to safeguard data and systems. Policies include guidelines on data encryption, user access management, incident response, and data retention. Procedures should provide step-by-step instructions for implementing these policies.

Next, move on to the technical controls. Deploy solutions like firewalls, encryption, intrusion detection systems, and access controls. Set up monitoring and logging mechanisms to track access and activities within your systems. In addition, access management controls like multi-factor authentication and role-based access systems should be implemented so that only authorized personnel have access to sensitive data and systems. 

Ensure backup and recovery processes are in place and regularly tested to guarantee data availability and integrity. We also recommend having an incident response plan; it should outline the steps to take in case of a security breach or other incidents.

Step 5: Provide necessary training

Training is essential so everyone understands their role in maintaining SOC 2 compliance. Plus, effective training helps to build a security-conscious culture. Follow these steps to create a training program that covers all aspects of SOC 2 compliance:

• Customize training content based on the roles and responsibilities of employees. For example, IT staff may need more technical training, while general staff may need training on data handling and security best practices

• Schedule regular training sessions to inform employees about the latest security practices and compliance requirements. This includes workshops, webinars, and e-learning modules

• Conduct simulated security incidents (e.g., phishing exercises) to test employees' responses and reinforce training concepts

• Assess the effectiveness of training programs through quizzes, surveys, and participant feedback. Use this information to improve future training sessions

• Keep detailed records of all training activities, including attendance, content covered, and feedback received. This documentation is needed during the audit

Step 6: Get audited

In this step, an independent auditor evaluates your controls to ensure they meet the SOC 2 criteria. But before the auditor's intervention, ensure you’ve conducted internal audits. They help you identify and close gaps in your controls before the external audit, and they even reduce the stress and overhead of the external audit.

Once internal audits are complete, gather all necessary documentation and evidence, including policies, procedures, logs, and records of control activities, that shows compliance with the SOC 2 criteria.

Next, select an auditor from an AICPA-accredited firm with experience conducting SOC 2 audits. The auditor should understand your industry and your organization's specific requirements.

Be prepared to provide the auditor with all required information and documentation, answer questions, and provide additional evidence when required. 

The audit process varies depending on whether you are undergoing a SOC 2 Type I or Type II audit. During the audit, the auditor raises questions or identifies areas that need clarification. Work closely with the auditor to address these queries promptly.

Once the audit is complete, the auditor will provide preliminary findings. Review these findings carefully and discuss any discrepancies or concerns with the auditor.

Step 7: Address the findings

Once the audit is complete, the auditor will provide a detailed report outlining their findings. Carefully review the auditor's report, including any identified deficiencies or areas for improvement. Understand the nature and severity of each finding.

Create a plan to address the identified deficiencies. This plan should include specific actions, responsible parties, and timelines for remediation. Prioritize the most critical issues that could impact your compliance status.

Conduct follow-up assessments after implementing the remediation actions to ensure the issues are resolved effectively. This involves internal audits or reviews by a third-party consultant.

Step 8: Maintain ongoing compliance

SOC 2 compliance is not a one-time event but an ongoing commitment to maintaining effective controls and processes. A continuous monitoring and compliance program is the key to sustaining your SOC 2 compliance.

To maintain ongoing compliance, you’ll need to implement continuous monitoring tools and processes to keep an eye out for system activities, access controls, and security incidents. 

Ensure your policies and procedures are up-to-date and reflect changes in your organization or the regulatory environment. Regularly review and update these documents to maintain compliance.

Lastly, we recommend planning annual SOC 2 audits to maintain compliance. Regular audits indicate your ongoing commitment to security and compliance and create a positive impression on customers, partners, and regulators.