September 27, 2022

What is SOC (System and Organization Controls) 2 and How to Become Compliant?

What is SOC (System and Organization Controls) 2 and How to Become Compliant? System Organization Controls - SOC 1, SOC 2 and SOC 3

Has a customer ever asked you to provide an assurance audit report? If confidential or private data is entrusted to you or you manage cloud computing for your customers, it’s important to provide them with proof that you are in compliance with SOC (System and Organization Controls).

SOC stands for System and Organization Controls and was developed by the American Institute of CPAs. It’s a voluntary compliance standard for service organizations, to manage how they report financial and security data to customers.

Meeting SOC compliance standards helps you build trust and confidence with customers, improve information security practices and gain a competitive advantage.

What is SOC 1 compliance?

SOC 1 compliance covers the management of financial information for customers or partners. This compliance secures the financial statements of an organization’s users as it relates to interaction, transmission and storage.

If your business outsources services that affect another company’s internal control over financial reporting, you need a SOC 1 audit report. Examples of these services are:

  • Payroll processing
  • SaaS
  • Data center
  • Network monitoring services

The SOC 1 audit report examines the design of your compliance project at a specific point in time (month/day/year). The report will look at your policies to protect customer data along with information security measures.

What is SOC 2 compliance?

SOC 2 compliance is for non-financial information, including security controls and processing integrity.

A SOC 2 Type 1 report describes a business’ systems and if the plan complies with the relevant SOC 2 trust services principles. The audit and report happen on a specified date.

A SOC 2 Type 2 (Type ii) compliance report details the operational efficiency of systems. The audit and report occur over a specific period of time (typically six months).

Pro Tip: There are only two bodies that can conduct a SOC 2 Type audit. They are independent CPAs or accounting firms such as Marcum LLP. The American Institute of CPAs has standards that regulate the work of SOC auditors. All audits must undergo a peer review.

SOC 2 Trust Services Principles

SOC 2 compliance relies on adhering to the SOC 2 trust services principles. But, based on your business practices, the auditor may not include all five principles in your report. Even if this is the case, it’s best to have an understanding of all five SOC 2 trust principles.

1. Security

Security measures how protected the system is against unauthorized access (physical and logical). Commonly reviewed security controls relate to the restriction of logical access to authorized individuals. There are also SOC 2 password requirements and branch protection rules.

2. Availability

Is the system available for operation and use as agreed? Companies must document disaster recovery and business continuity plans and procedures. This also requires the performance of backups and recovery tests.

3. Processing integrity

System processing must be complete, accurate, and authorized. Processing integrity is relevant to companies that process transactions, such as payments.

4. Confidentiality

Does the system protect confidential information according to policy? This can cover B2B relationships and the sharing of sensitive data from one business to another.

5. Privacy

The auditor will consider the privacy criteria when personal information is collected, used, retained, disclosed and/or disposed of. Keep in mind: Privacy is different from confidentiality. Privacy only pertains to personal information. Confidentiality pertains to other types of sensitive information.

How to achieve SOC 2 compliance

The backbone of SOC 2 compliance is security. You can follow these steps for SOC 2 compliance.

  • Create access controls. Place physical and logical restrictions on assets to prevent unauthorized access.
  • Set up a change management process. Establish a controlled process for managing changes to IT systems. There should also be methods for preventing authorized changes.
  • Monitor system operations. Set up controls that monitor ongoing operations. The processes should also detect and resolve deviations from the procedures.
  • Mitigate risks. Put in place methods to identify, respond to and mitigate risks.

SOC 2 Type 1 vs. SOC 2 Type 2

Similar to SOC 1 compliance, there are SOC 2 Type 1 and Type 2 reports.

A Type 1 report describes a business’s systems and if the plan complies with the relevant SOC trust principles. The audit and report happen on a specified date.

A SOC 2 Type 2 compliance report details the operational efficiency of these systems. The audit and report occur over a specific period. It’s usually at least six months.

The SOC 2 Type 2 controls list is essential for:

  • Regulatory oversite
  • Vendor management programs
  • Internal governance
  • Risk management

How To Get a SOC II Type 2 Audit?

There are only two bodies that can conduct a SOC Type 2 audit. They include independent CPAs or accounting firms, such as Marcum LLP. AICPA has standards that regulate the work of SOC auditors. Plus, all AICPA audits must undergo a peer review.

The standards allow CPAs to hire non-CPA professionals with relevant information to participate in preparing the SOC 2 compliance audit. But a CPA must provide and issue the final report. Many companies seeking to achieve SOC 2 compliance first review and improve their internal security controls prior to engaging in an SOC 2 audit. This allows them to evaluate, prioritize and plan for the spend necessary to improve systems and procedures to fully meet the controls specified in the SOC 2 audit.

Firms such as Marcum Technology can help your company determine where and how to get started through a SOC 2 readiness assessment. This can save significant effort and expense in the SOC 2 audit process and provide a greater likelihood of achieving full SOC 2 compliance.

Marcum Technology provides a full cybersecurity service offering. If you need any help, from beginning a review of your security posture to investigating a cybersecurity incident, or even if you just want to ask for advice on a situation you are facing, please contact us at hello@marcumtechnology.com #AskMarumTechnology