Are you looking to safeguard and elevate customer confidence? When you consider how fast companies are moving to and expanding in the cloud and the proliferation of cloud-based security threats, compliance can be a little "muddy." PolicyCo is here to fully prepare you for the puddles and complexities to meet SOC 2 compliance requirements.

Why Splashing in Mud Puddles is Beneficial for SOC 2: The Advantages

SOC 2 Certification shows that the organization has taken all necessary measures to provide secure and reliable service. This, in turn, helps build good credibility and enhances the brand's reputation in the market. Notably, some benefits include:

Credibility — At a fundamental level, SOC reports show potential customers that you're serious about integrity, ethics, and security throughout your operations. Demonstrating that you have the proper people, policies, and procedures to handle a security incident and respond accordingly places you firmly on the candidate list — which is the first step towards being selected as the preferred provider.

Faster Sales Cycles — Showing compliance can also speed up your sales cycle. Pitching new businesses can be easier on your sales team because they will very likely be spared the burden of completing endless RFIs during the sales process. Instead, they can submit the company's SOC 2 reports.

Long-Term Business Success — Perhaps the most crucial benefit arises from the work required to prepare for the SOC 2 Type II assessment. This is covered in more detail below, but it essentially requires you to install long-term, ongoing internal practices that will ensure the security of customer information. By their very nature, these practices will ensure the long-term success of your business.

The Differences Between SOC 2: Type 2 vs. Type 1

The most apparent or glaring difference is the period of coverage of the report. In a Type 1 audit, the report covers the design effectiveness of internal controls as of a specific point in time, like September 30, for example. The report only covers the effectiveness of the internal controls designed to meet the service provider's objectives. It also affirms the suitability of the said controls to the accomplishment or attainment of the goals.

In a Type 2 audit, the report covers a more extended period. This can range from six to 12 months, although the most common period is 12 months. It tackles the design of internal controls and their operating effectiveness over time to achieve set objectives. Because of the coverage of a SOC 2 Type 2 report, it also follows that it takes more time and effort for service providers to prepare. There is no need to wait for full controls to be in place.

Deciding on Type 1: It doesn't take as much time to complete. It also provides a solid foundation to build your InfoSec program (if you aren't already implementing controls). If you're rushing to provide security assurance to customers (or prospects), it will probably fulfill their requirements, although you still might have to get SOC 2 Type 2. While deciding on Type 2, it has a more extended observation period than type I. It is far more comprehensive, and the attestation will always prove compliance as long as you continue to maintain it. As a result, it provides excellent security assurance. Lastly, questions to ask during the decision-making process could be as follows:

Is the company's SOC 2 compliance urgent?

What level of reporting strength are we seeking to demonstrate?

Will we eventually need a Type 2 report?

Once you've committed to a SOC 2 report, you're ready to choose your Trust Service Criteria (TSC) categories. Let's dig deeper, shall we?

The Birth of SOC2: Brief History 101

To understand the purpose of a Service Organization Control (SOC) 2 Report, it's essential to be fully aware of the background and history of how SOC 2 came into existence as a way for service organizations to manage the risks associated with outsourcing services.

Before SOC2, the standard for auditors was the Statement of Auditing Standards №70 (SAS 70), which certified public accountants performed. Introduced in the early 90s, the SAS 70 was to report on the effectiveness of different internal function controls. In the 2010s, the AICPA introduced SOC 1 and SOC 2 reports to address the growing requirement of firms to prove and announce their state of security.

Service organization control SOC 2 standard is based on the criteria outlined in the Description Criteria authored by the AICPA, the American Institute of Certified Public Accountants. SOC 2 is an auditing procedure designed to ensure that third-party service providers or service organizations can securely manage data to protect the interests and privacy of their clients. SOC 2 compliance is a mandatory requirement for security-conscious businesses when considering a service provider.

Overview of the Trust Service Criteria (TSC) Categories

A SOC 2 report essentially verifies whether an organization complies with the requirements relevant to Security, Availability, Confidentiality, Processing Integrity, and Privacy.

This audit report guarantees the organization and its clients that the reporting controls are suitably designed, well in place, and appropriately secure the client's sensitive data. Additionally, the SOC 2 certification is issued by external auditors who examine the level to which a vendor has complied with one or more of the five trust principles based on the processes and systems in place, which are further broken down as follows:

Security — The vendor's system is protected against physical and logical unauthorized access.

Availability — The vendor's system is available for operation and use as committed or agreed.

Confidentiality — The vendor's system protects client information designated as confidential as committed or agreed.

Processing Integrity — The vendor's system processing is complete, accurate, timely, and authorized.

Privacy — The vendor's system collects, retains, discloses, and destroys personal information according to the vendor's privacy notice commitments and the criteria outlined in Generally Accepted Privacy Principles (GAPP).

SOC 2 Audit Reports: Variations

There are two SOC 2 audit reports types: SOC 2 Type 1 and SOC 2 Type 2. SOC 2 Type 1 report is an attestation of controls at a service organization at a specific point in time and focuses on internal controls related to financial reporting. SOC 2 focuses on information and IT security controls. At the same time, SOC 2 Type 2 report is an attestation of controls at a service organization over a minimum six-month period. SOC 2 compliance is the relevant requirement for organizations choosing a software partner to help them manage customer data.

Out of the Mud: Closing Thoughts

In a nutshell, both SOC 2 Type 1 and Type 2 report on controls and processes of a service organization concerning the trust services criteria. There are other similarities between the two, but the main difference is that Type 1 tackles the controls at a specific point in time while a SOC 2 Type 2 report attests to the effectiveness of the controls over a more extended period, usually 6 to 12 months.

The most critical requirement of SOC 2 is that software vendors need to develop data security policies and procedures written out and followed by everyone in the vendor's organization. To achieve SOC 2 compliance, a software vendor must document these policies and procedures for an independent auditor and demonstrate that everyone follows them. The auditor reviews this information following the SOC guidelines and only certifies software vendors that meet the stringent requirements set out by the SOC standard.

Service entities should strive to achieve SOC 2 compliance because of its many benefits. Being SOC 2 compliant increases customer trust and enhances an organization's reputation, and it also increases data protection and promotes organizational vulnerability awareness.