What Is SOC 2?

SOC 2 is the abbreviation of System and Organizational Control 2. It is an auditing procedure designed to ensure that third-party service providers are securely managing data to protect the privacy and the interests of their clients. SOC 2 is based on the AICPA’s (American Institute of Certified Public Accountants) TSC (Trust Services Criteria) and focuses on system-level controls of the organization.

The AICPA specifies three types of reporting:

1. SOC 1, which deals with the Internal Control over Financial Reporting (ICFR)

2. SOC 2, which deals with the protection and privacy of data based on the Trust Services Criteria

3. SOC 3, which deals with the same information as a SOC 2 report but is intended for a general audience, i.e. they are shorter and do not include the same details as SOC 2 reports.

SOC 2 compliance plays an important role in demonstrating your company’s commitment to securing customers’ data by demonstrating how your vendor management programs, regulatory oversight, internal governance, and risk management policies and practices meet the security, availability, processing integrity, confidentiality, and/or privacy controls criteria.

What’s The Difference Between SOC 2 Type 1 And SOC 2 Type 2?

SOC 2 Type 1 and SOC 2 Type 2 reports are similar as they both report on the non-financial reporting controls and processes at an organization as they relate to the TSC. But they have one key difference pertaining to the time or period of the report. SOC 2 Type I report is a verification of the controls at an organization at a specific point in time, while a SOC 2 Type II report is a verification of the controls at a service organization over a period of time (minimum three months).

The Type 1 report demonstrates whether the description of the controls as provided by the management of the organization are appropriately designed and implemented. The Type 2 report, in addition to the attestations of the Type 1 report, also attests to the operating effectiveness of those controls. In other words, SOC 2 Type 1 describes your controls and attests to their adequacy while the type 2 report attests that you are actually implementing the controls you say you have. That’s why, for the type 2 audit, you need extra evidence to prove that you’re actually enforcing your policies.

If you are engaging in a SOC 2 compliance audit for the first time, you would ideally begin with a Type 1 audit, then move on to a Type 2 audit in the following period. This gives you a good foundation and sufficient time to focus on the descriptions of your systems.

Who Needs To Be SOC 2 Compliant?

SOC 2 applies to those service organizations that store customer data in the cloud. This means that most companies that provide SaaS are required to comply with SOC 2 since they invariably store their clients’ data in the cloud.

SOC 2 was developed primarily to prevent misuse, whether intentionally or inadvertently, of the data sent to service organizations. Therefore, companies use this compliance to assure their business partners and service organizations that proper security procedures are in place to safeguard their data.

What Are The Requirements For SOC 2?

SOC 2 requires your organization to have security policies and procedures in place and to ensure that they are followed by everyone. Your policies and procedures form the basis of the review, which will be carried out by the auditors.

However, it is important to note that SOC 2 is fundamentally a reporting framework and not a security framework. SOC 2 demands reports on your policies and procedures that are established to give you effective control over your infrastructure but doesn't dictate what those controls should be or how they ought to be implemented.

The policies and procedures should cover the controls grouped into the following five categories called Trust Service Principles:

1. Security

Security is the foundational principle of your SOC 2 audit. It refers to the protection of your system against unauthorized access.

2. Availability

The principle of availability requires you to ensure that your system and data will be available to the customer as stipulated by a contract or service level agreement (SLA).

3. Processing Integrity

The processing integrity principle requires you to protect your systems and data against unauthorized changes. Your system must ensure that data processing is complete, valid, accurate, timely, and authorized.

4. Confidentiality

The confidentiality principle requires you to ensure the protection of sensitive data from unauthorized disclosure.

5. Privacy

The privacy principle deals with how your system collects, retains, discloses, and disposes of personal information and whether it conforms to your privacy policy as well as with AICPA’s generally accepted privacy principles (GAPP).

How To Get Started With SOC 2 Compliance?

To get started with SOC 2, you need to accurately and fairly describe the systems you have designed and implemented, ensure that these systems operate effectively and that they provide reasonable assurance that the applicable trust services criteria are met. In other words, you need to deploy controls through your policies and define procedures to put those policies into practice. 

In simple terms, here’s what you are required to do to become SOC 2 compliant:

• Establish data management policies and procedures based on the five trust service principles,

• Demonstrate that these policies are applied and followed religiously by everyone, and

• Demonstrate control over the systems and operations.

Alright, now that we have some understanding of the requirements, let’s see how you can begin implementing it in practice… 

First, Get Your Documentation In Order

The very first thing required is to get all your documentation in order. You need to create a set of formal policies and procedures that describe all the operations and control systems in place in your organization. Ensure that each of the following components of your system, utilized in providing the service, is accurately captured.

1. Infrastructure

Demonstrate that you maintain effective control over the acquisition, development, and maintenance of your infrastructure.

• Hardware such as servers, storage area networks, networking equipment, etc., and

• Software such as operating systems, backups, firewalls, load balancing, etc.

2. People

Demonstrate that policies and procedures exist for recruiting and managing the personnel (developers, users, managers, etc.) involved in the operation of the system used to provide the service.

3. Procedures

Demonstrate the formal IT policies and procedures including incident response, network security, encryption, and system security standards, as well as the policies and procedures that define how services should be delivered.

4. Data

Show that the data protection and other regulations are followed and cover how data is managed, processed, and stored, what data-related specific requirements are formally established in customer contracts, and what database technologies are used.

5. Customer Responsibilities

What are the responsibilities of the customer with respect to passwords, settings, maintenance, etc.?

Second, Implement Basic Control Measures

Your SOC 2 compliance needs to address the following controls:

1. Logical and physical access controls

Consider how you are going to restrict and manage physical security as well as logical access to the data? Physical security implies the security of the physical premises where the data is stored as well as of the devices including servers, workstations, etc. In addition, you need to ensure that only authorized users have access to data, which may be achieved by using multi-factor authentication, device identity, etc.

You may limit system access by restricting permissions, employing passwords and other safety, and security and administrative rules, which can be done by using an Identity and Access Management solution. Some other companies may employ role-specific user onboarding and two-factor authentication to control user access. There’s no mandatory or specific requirement and companies are free to employ one or more control measures such that the desired conditions of the trust criteria are met.

2. System Operations

Consider how you manage your system operations, detect, and mitigate deviations from set procedures. You need to ensure that your systems function as designed and include constant monitoring to detect deviation from normal operation as well as incident reporting for mitigation of the reported deviations. Audits also require evidence that business continuity and disaster recovery plans are in place and operational.

If you use cloud infrastructure systems such as Amazon Web Services (AWS), Microsoft Azure, or Google Cloud, many of the control measures will already be in place.

3. Change management

The goal of change management is to ensure that all technical infrastructure changes are approved and tested before being implemented. Think about how you will implement a controlled change management process and prevent unauthorized changes. You need to establish clear controls for technical infrastructure changes and document evidence that the changes were approved and tested before going live.

You will require documented workflows for authorizing, engineering, designing, developing, configuring, testing, approval, and implementation of changes.

4. Risk mitigation

The goal of risk mitigation is to identify and develop risk mitigation activities when dealing with business disruptions and the use of any vendor services. Risk mitigation activities include vendor due diligence and management, business insurance, and business continuity plans. For example, you can look only for those vendors that are fully compliant, as it minimizes your business risk.

Next Steps Towards SOC 2 Compliance

The SOC 2 criteria are policy-driven and rather broad. Hence, they don’t tell you exactly what you need to do. Consequently, SOC 2 criteria are fairly open to interpretation. You can implement any set of controls or their combination as long as the goal of each criterion is achieved. The Trust Services Criteria provide you with a general direction and areas of focus that lead your business towards compliance.

What’s important to remember is that it isn’t sufficient to establish controls. For each system control that you implement, you also need to be able to provide evidence to the auditor that the system is working as designed and demonstrate that the controls are working effectively.

Your journey towards getting SOC 2 compliance or maintaining your compliance depends extensively on technology, with cybersecurity and data management playing crucial roles. In order to be successful in achieving and maintaining your SOC 2 compliance, you will, therefore, need the support of a trusted IT partner. Get in touch with us today to learn how we can help you with your SOC 2 compliance needs.

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