Information security is more important than ever, and part of that includes conducting SOC 2 audits. SOC 2 stands for System and Organization Control 2 report.
Simply put, an SOC 2 report is designed to instill confidence in business owners and stakeholders by proving that all operations are happening in a secure manner. However, there’s more to SOC 2 audits than that. Below we will cover this topic in more detail and explore why an SOC 2 audit is beneficial for your business.
What is it?
As mentioned, an SOC 2 audit is an examination that’s carried out by a CPA firm to determine if the service provided by your business or organization has enough security measures in place. The investigation is performed according to the general criteria set by the American Institute of Certified Public Accountants (AICPA).
When you hire an auditor from a CPA firm, they will first look at the controls you already have in place to minimize risks to your business’ services. If there are any areas for improvement, the auditor will bring them up during this exercise. For instance, you may have to implement new controls or revamp existing controls to meet the applicable criteria.
Once everything is in place, a CPA firm will perform the examination and prepare a report that describes your organization’s system and the controls that support that system. In addition, depending on whether the report is a Type I or Type II, will include an opinion on certain aspects of your organization’s control environment. A Type I SOC 2 indicates that these controls are designed effectively as of a point in time. In contrast, a Type II SOC 2 indicates that the controls not only have the correct design but have been shown to operate effectively within a specified period.
What criteria is used?
SOC 2 reports are guided by common criteria. More specifically, your service organization can choose from five SOC 2 Trust Services Criteria (TSC). Keep in mind that some TSCs may not apply to your business, so there’s no point in including them. In a nutshell, here are the five TSCs.
The security criteria look at whether your business system and infrastructure are adequately protected against physical and logical access from unauthorized persons. It checks security controls like physical security measures, firewalls, password protection and others to determine the level of protection. This security criteria is required; however, the other criteria are optional.
This criteria analyzes your system for availability. Meeting this criterion involves showing your plan and procedures for maintaining the flow of business operations in the event of unforeseen disruptions. Therefore, it’s necessary to back up your business system regularly as well as have a robust recovery plan.
If your business has an agreement with another business to limit access to confidential and sensitive information, then this criteria might apply to you.
The privacy criteria differ from the confidentiality criteria in that it concerns service organizations that gather confidential information and interact with data subjects directly.
Processing integrity verifies that your system is whole, and that there are measures in place to recognize and rectify errors. This TSC is usually applicable to businesses that deal with a lot of transactions.
An SOC 2 report includes the following information:
- Opinion letter. This confirms that the description of the system and the controls you have in place are in line with the applicable criteria.
- Assertion by management. Management will also assert that your description of the system and test matches the applicable criteria.
- System description. The report will outline the details of your business system that are relevant to the applicable criteria.
- Test description. The report will also provide details about the controls you have in place and their effectiveness in terms of design and operation.
- Other information. The SOC 2 report will also include any other information related to your business system and its controls.
What are the benefits for your business?
There are many benefits associated with SOC 2 reports. For starters, it’s important that you provide evidence to key stakeholders that they can rely on the security and reliability of your services. Your stakeholders need to know about the controls you have put in place and whether they are effective.
SOC 2 audits enable you to reassure your stakeholders with one audit. In addition, the resulting SOC 2 report is one that everyone can trust. Otherwise, things can get expensive and hectic if all clients demand multiple audits on their own terms.
It’s important for your business to be SOC 2 compliant, especially in a time where data breaches and hacks are the norm. Fortunately, SOC 2 audits are rarely complicated and will assure you and your clients of the effectiveness of your security controls.