The A-to-Z Guide to SOC 2 Audits

What is SOC 2 Type 2 Compliance?

• 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).

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

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?

• 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.

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

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.

How to Prepare for a SOC 2 Type 2 Audit?

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

Step 1: Auditor's Fieldwork and Control Testing

• 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

• 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

• 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