Blogs

Can you imagine that over 6 million data records were stolen in the first three months of 2023 globally?

With organizations shifting to the use of cloud services and handling large volumes of data, information security, and compliance have never been more critical. To contain such confidential consumer data, there is a growing need to have better security features. Customers trust businesses and organizations to secure their data actively, so SOC 2 Type 2 compliance is crucial.

This article will delve into SOC 2 Type 2 – what it is, why it matters, and how you can attain and sustain this compliance level in your organization. So, let us first become familiar with what it truly means to be SOC 2 Type 2 compliant.

What is SOC 2 Type 2 Compliance?

SOC for service organizations is a popular existing technique that is the product of AICPA for measuring the controls and processes of organizations that deal with essential data. Specifically, SOC 2 compliance is considered a relevant standard in cloud computing, data hosting, and various tech industry services today.

SOC 2 Type 2 report examines a service organization’s controls over an extended period, usually between 6 and 12 months. This evaluation is based on the Trust Service Criteria (TSC), which covers five key principles:

• Security:

  Equipment and facilities are physically and logically protected from odd accesses.

• Availability:

  Systems are available for operation and use as planned and decided.

• Processing Integrity:

  System processing is accurate, has no omission, is valid, within time, and done by authorized personnel.

• Confidentiality:

  Data security is ensured in accordance with the agreements concerning sensitive information.

• Privacy:

  Collection, use, retention, disclosure, and disposal of personal data is done in compliance with the organization’s privacy policies and the Generally Accepted Privacy Principles (GAPP).

Service organizations can undergo audits for one or more of these criteria based on their specific needs and the nature of their services.

What are the prime differences between SOC 2 Type 1 and SOC 2 Type 2 reports?

Both SOC 2 Type 1 and Type 2 reports assess an organization’s internal controls and security measures, but they differ significantly in their scope and approach:

1. Point-in-Time vs. Period-of-Time Assessment

• SOC 2 Type 1 Report:

  The result presented in this report will help describe the state of an organization’s controls and the relevance of control activities at a particular time. It focuses on whether the controls are effectively implemented to ensure they meet the TSC in a given period.

• SOC 2 Type 2 Report:

  In comparison, the SOC 2 Type 2 report assesses the design of a control together with the operating efficiency of the control for a more extensive period, generally ranging from three to twelve months.

2. Depth of Evaluation

• SOC 2 Type 1 Report:

  This type of report evaluates the extent to which controls are sufficiently implemented and can recognize if controls are adequately designed but cannot evaluate the efficiency with which they will continue to be implemented.

• SOC 2 Type 2 Report:

  This work entails an even more profound assessment by examining the effectiveness of implemented controls during the audit period as well as the viability of the controls upon implementation.

3. Audit Rigor and Duration

• SOC 2 Type 1 Report:

  The audit for a Type 1 report is usually shorter and less resource-intensive, as it focuses only on the design of controls.

• SOC 2 Type 2 Report:

  The audit process for a Type 2 report is more detailed and time-consuming, involving extensive fieldwork, control testing, and ongoing monitoring over a prolonged period.

4. Level of Assurance

• SOC 2 Type 1 Report:

  However, This report offers a lower level of assurance since the assessment is made on compliance with the design of controls at a given period.

• SOC 2 Type 2 Report:

  It provides more assurance by assessing the operation of controls designed and implemented over a more extended period to add confidence in the safety of an organization’s sensitive data.

What Can You Expect to Find in SOC 2 Type 2 Report?

SOC 2 Type 2 report offers a much more comprehensive assessment of the effectiveness of controls in use and their sustainment regarding the secured information. Here’s an overview of what it covers:

• Overview of the organization’s systems and controls:

  An explanation of how the organization’s systems, processes, and controls support the selected Trust Service Criteria.

• Independent auditor’s opinion:

  A review undertaken by an independent person to ascertain the efficiency and adequacy of the control activities for the specified period.

• Test results and findings:

  The auditor conducts a check process to get specific details on the weaknesses and recommendations for change.

• Complementary user entity controls:

  A list of other controls that the client organizations should implement to complement the existing controls in the service provider’s firm.

For clients, regulators, and stakeholders, the SOC 2 Type 2 report serves as credible proof of the service organization’s reliability in managing risks in a suitable manner, and it also assists clients, regulators, and other stakeholders in determining whether or not to engage the service organization or invest in it.

Why is it Important to undertake SOC 2 Type 2 Audit?

Achieving SOC 2 Type 2 compliance provides numerous advantages for service organizations and their clients, including:

1. Building Trust and Confidence:

   SOC 2 Type 2 audit report assures that an organization has taken the proper steps in handling customer data. This, in turn, creates trust in the protection of the company’s information technologies and confidence in the company’s protection, particularly on cyber risks.

2. Facilitating Regulatory Compliance:

   SOC 2 Type 2 reports help an organization to show that it meets compliance requirements such as HIPAA, PCI DSS, and GDPR. This is especially helpful to organizations that are established in industries that are known to be highly regulated.

3. Identifying Areas for Improvement:

   SOC 2 Type 2 audits help an organization determine whether they are weak in security controls or which security controls are possibly problematic, enhancing the organization’s security stance.

4. Promoting Continuous Improvement:

   The SOC 2 Type 2 compliance audit is still in progress and allows organizations to review the existing controls from time to time, thus ensuring that security measures in place are effective and meet the set standards.

Due to increasing threat levels and more frequent cyber-attacks, both the policies and guidelines focus on protective measures for data and business operations continuity. Thus, by implementing SOC 2 Type 2 requirements, an organization proves its compliance with such a high level and treats or safeguards such valuable data. Organizations can start their journey towards SOC 2 Type 2 by having a SOC 2 Type 2 report.

How to Prepare for a SOC 2 Type 2 Audit?

SOC 2 Type 2 audit preparation requires great care by the following processes: planning, resources, and understanding of TSC & their associated controls.

Step 1: Defining Scope and Relevant Trust Service Criteria (TSC)

• Identifying critical systems and data:

  This involves identifying the essential infrastructure, software, people, and position that is central to the delivery of the service and is under audit.

• Selecting relevant TSCs:

  Depending on the services offered and the data processed, the organization has to select the proper TSCs for assessment. Where the security criterion is mandatory, the availability, processing integrity, confidentiality, and privacy may be chosen based on the organization’s requirements.

• Engaging stakeholders:

  Stakeholders that should be involved in this process are the representatives of the top management, IT department, and the representatives of the business having the subject matter expertise to understand the specifics of the business and define the audit scope accurately.

Step 2: Implementing and Testing Security Controls

• Reviewing current controls:

  It is also essential that the organization audit the current security status and evaluate the current security measures, policies, and procedures before they are implemented.

• Implementing new controls:

  Where there are identified risks, the new controls, including access, management, encryption, and incident response, should be implemented.

• Testing and documenting controls:

  All must be ascertained to be adequate to maintain effective control mechanisms. Sufficient evidence, as well as documentation of the control and testing, should be documented and made available for the auditors.

• Training and awareness:

  Proper staff training and awareness of staff concerning the responsibilities of implementing the new controls is essential to maintain consistency and security of the organization.

The Process of SOC 2 Type 2 Audit

Once the organization has completed its preparation, it can begin the formal SOC 2 Type 2 audit by engaging an independent auditor.

Step 1: Auditor’s Fieldwork and Control Testing

During the audit, the auditor will conduct thorough fieldwork and control testing to assess how well the organization’s controls are designed and functioning. This process usually includes:

• Documentation review:

  The auditor will examine the organization’s policies, procedures, and control documentation to ensure they align with the relevant Trust Service Criteria (TSCs).

• Personnel interviews:

  Key staff responsible for implementing and managing controls will be interviewed to understand the organization’s security practices and control environment.

• Process observation:

  The auditor may observe the execution of specific processes and procedures to verify their effectiveness and compliance with documented controls.

• Sampling and testing:

  A sample of control activities will be selected for detailed testing to assess their design and operational effectiveness throughout the audit period.

Step 2: Assessing Control Design and Operational Effectiveness

Throughout the audit, the auditor will evaluate the design and operational effectiveness of the organization’s controls against the applicable TSCs. This evaluation typically includes:

• Design effectiveness:

  The auditor will assess whether the controls are appropriately designed and documented to meet the requirements of the relevant TSCs.

• Operational effectiveness:

  The auditor will verify if the controls function as intended and consistently meet their objectives during the audit period.

Step 3: Reporting and Documenting Findings

Once the audit fieldwork and testing are completed, the auditor will compile their findings and issue the final SOC 2 Type 2 report. This report generally includes:

• An opinion on the design and operational effectiveness of the organization’s controls about the applicable TSCs.
• A comprehensive description of the organization’s systems, processes, and control environment.
• A summary of the controls tested, the testing methods used, and the results.
• Any deficiencies or areas for improvement, along with recommendations for remediation.

Final Thoughts

Therefore, SOC 2 Type 2 compliance is essential to any organization that operates within customer data-sensitive environments. When undergoing the stringent access measures and processes characteristic of SOC 2 Type 2, you demonstrate a good commitment to preserving sensitive data and providing stellar service.

With the help of iSpectra’s automated access review platform, the proposed security criteria, constant review of all risks, and quick identification and elimination of access problems can be applied. Auditing becomes faster and delivers real-time access reviews plus overall users, roles, access profiles, and entitlement across applications.