SOC 2 Type 1: A Detailed Guide for Businesses

Short for System and Organization Control, SOC 2 is a popular cybersecurity reporting framework. The American Institute of Certified Public Accountants (AICPA) designed the framework to help SaaS providers comply with federal and industry-specific regulations. SOC 2 compliance for SaaS providers isn’t a legal requirement. However, it helps your firm provide the highest privacy and data protection to your clients. Using the SOC 2 framework, you can bolster your firm’s security controls to ensure they comply with the Trust Services Criteria set by the AICPA. But how can SOC 2 Type 1 help your business?

Due to the rampant surge and costly nature of cyber threats, most clients require SaaS providers to demonstrate their capacity to safeguard sensitive data from breach and unauthorized access. Securing a SOC 2 certification can make or break your business.

Let’s take a look at SOC 2 Type 1 compliance and why it could give your business a much-needed edge in the cutthroat market environment.

What Is SOC 2 Type 1?

SOC 2 Type 1 is an attestation report that evaluates your firm’s cybersecurity measures and controls at a given point in time. It helps determine if you’ve implemented adequate internal control to protect customer data and designed them to meet the five Trust Services Criteria.

A SOC 2 Type 1 audit is the fastest and easiest way to demonstrate cybersecurity compliance. The SOC 2 type 1 checklist covers five core aspects of your IT infrastructure—security, availability, processing integrity, confidentiality, and privacy.

An audit is the go-to option when you’re short on time and resources or need to demonstrate compliance quickly. The assessment only takes a few weeks and can help you reassure a skittish client that your systems are secure before closing a deal.

However, SOC 2 Type 1 is a short-term solution, and many clients are leaning towards the more comprehensive SOC 2 Type 2 reports.

What Is a SOC 2 Type 1 Report?

A SOC 2 Type 1 report is an attestation that your company is committed to protecting sensitive customer data. Unlike a Type 2 report, it only gives a snapshot of your compliance efforts at a given point in time. It’s an excellent and cost-effective solution when you need to quickly demonstrate your firm’s capacity to securely handle sensitive data.

You may lean toward a SOC 2 Type 1 report if you’re a startup, looking to close a deal quickly, or have recently overhauled your data security systems. Given that the report only offers a glimpse into your compliance efforts, it may not be effective when wooing enterprise clients.

Typically, a SOC 2 Type 1 report will suffice if you are servicing clients whose databases aren’t actively targeted by cybercriminals. It allows you to demonstrate that you’ve woven cybersecurity measures into your processes to prevent data leakage and unauthorized access. To avoid uncertainty, have your auditor or CPA firm furnish you with a SOC 2 Type 1 report example. That may help you make an informed choice as you move forward with the SOC 2 certification.

How Long Does SOC 2 Type 1 Take?

Typically, you’ll receive a certification after completing the SOC 2 Type 1 assessment. The timeline of a SOC 2 Type 1 certification assessment ranges from a few weeks up to six months. The exact duration will depend on various factors, including IT processes and infrastructure complexity, the number of controls to evaluate, as well as your firm’s evaluation readiness.

A Type 1 report isn’t as comprehensive as a Type 2 report. However, it comprises multiple stages and requires careful planning and execution.

Five Sections Typically Included in a SOC 2 Type 1 Report

A typical SOC 2 Type 1 report contains five core sections. These sections offer your clients and stakeholders a detailed insight into your compliance efforts, and they include:

Auditor’s Opinion

The auditor’s opinion is formatted as a letter, and describes the scope of engagement. It will cover the systems under assessment, the assessment duration, and outline the responsibility of all parties. The auditor’s opinion also seeks to determine if your system description meets the description criteria, and whether your controls are designed to meet the system requirements and service commitments of the chosen criteria.

Management Assertions

The firm under audit fills this part out. It’s a chance for you and your team to weigh in on the assessment. The assertion confirms that your team prepared the system description. It also confirms that your controls can help your firm achieve its control objectives or service commitment. Asking your auditor for a SOC 2 Type 1 controls list can help your team cover all your bases.

Description of the Systems

This is the most detailed part of the report and provides a detailed description of your security measures and controls. You can use it to provide an overview of your operations, system components, control environment, and risk assessment. It should also detail how your control measures address the trust service criteria under review.

Control Activities

The control activities section contains the “meat” of the assessment. This section lists the specific controls that your firm employs to secure sensitive information. It covers all your cybersecurity measures in detail and should not be released to the general public. Doing so could cause trouble by providing threat actors with a blueprint to defeat your security protocols.

Additional Information

This optional part of the SOC 2 report lets you address any mitigating circumstances. You may also use this section to provide additional information relevant to the assessment, such as recent mergers and acquisitions.

What Is a SOC 2 Type 1 Audit?

A SOC 2 Type 1 audit is a systematic assessment of a SaaS provider’s cybersecurity measures to help ensure compliance with federal and industry regulations. You can use it to assess the design and suitability of your security controls at specific points. An audit offers a snapshot of your security control design but doesn’t assess its long-term operating effectiveness.

You should consider a SOC 2 Type 1 audit a starting point in your compliance journey. During the audit, an independent auditor or a CPA firm will assess your control design to determine how well your security measures meet the Trust Services Criteria. You may then use the report to reassure your clients or stakeholders that your firm has taken adequate measures to safeguard sensitive data at a given moment in time.

The AICPA sets the SOC 2 Type 1 requirements based on the five Trust Services Criteria:

Security

Security is at the core of every SOC 2 audit and focuses on protecting sensitive information against unauthorized access. It covers controls related to user authentication, data encryptions, authorization, and network security measures such as intrusion detection.

Availability

The availability criterion assesses whether your network meets the expected performance standards and uptime. It comprises controls related to incident response and recovery, disaster recovery planning, as well as continuous service availability.

Confidentiality

This assesses your ability to protect confidential information such as customer data, financial data, and intellectual property within your systems. It also covers controls that prevent unauthorized disclosure, including access control, data classification, data retention policies, and confidentiality agreements.

Processing Integrity

This principle assesses whether your processing capabilities are accurate, timely, and complete. It includes security controls related to data processing accuracy, input validation, data reconciliation, and error handling procedures.

Privacy

This is another core part of any SOC 2 report that evaluates your capacity to protect Personally Identifiable Information (PII). It assesses if you collect, use, retain, disclose, and dispose of PII in accordance with your company’s privacy regulations. It covers controls relating to consent management, data retention, data subject rights, and privacy policy implementation.

How Much Does SOC 2 Type 1 Cost?

A SOC 2 Type 1 is the most affordable SOC 2 framework assessment for SaaS providers looking to reassure their clients or stakeholders. A typical audit for small to medium-sized enterprises ranges from $7,500 to $15,000. However, the cost skyrockets to $20,000 to $60,000 for large enterprises.

Typically, the cost of a SOC 2 Type 1 audit depends on the size of your company, the scope of assessment, the nature of your IT infrastructure, and the service provider. While affordable, the audit only assesses if your security controls are suitably designed. It doesn’t evaluate their operational efficiency, which is valued by enterprise clients who handle sensitive customer data.

A SOC 2 Type 1 audit is an excellent way to demonstrate cybersecurity compliance if you’re operating on a tight budget or a short time frame.

What Is the Difference Between SOC 1, SOC 2, and SOC 3?

The AICPA designed the SOC framework to provide three types of SOC reports to address varied compliance needs. You’ll need to decide between SOC 1, SOC 2, and SOC 3 when demonstrating compliance, which can be a difficult task, especially if you’re new to SOC frameworks.

Understanding the role of each of the three SOC frameworks can help you choose the type of compliance that meets your business needs.

• SOC 1 also known as Statements on Standards for Attestation Engagements No. 18 (SSAE 18), is crucial in evaluating financial reporting controls. You’ll need a SOC 1 report if your firm’s internal security control measures can affect your clients’ financial statements. It’s often required by payment processing companies, payroll providers, and collection agencies.

• SOC 2 is a framework that evaluates your data center and cloud security controls based on the five Trust Services Criteria—security, availability, processing integrity, confidentiality, and privacy. You may use this report to reassure clients and stakeholders that your SaaS company complies with the highest data protection standards.

• SOC 3 is a water-down version of the SOC 2 Type 2 report offering a high-level overview of your firm’s security measures. It is tailored for the general public and doesn’t contain sensitive information. You may use it as part of your marketing strategy to demonstrate compliance to your customers and stakeholders.

While SOC 2 isn’t a legal requirement, it’s highly beneficial to SaaS providers. The attestation helps instill trust by proving your commitment to data security. While SOC 2 isn’t a legal requirement, it’s highly beneficial to SaaS providers. The attestation helps instill trust by proving your commitment to data security. SOC 2 Type 1 and Type 2 reports offer different levels of assurance. They show how well an organization’s controls work. A Type 1 report evaluates control design at a specific time. A Type 2 report assesses both design and how well controls work over a period, usually at least six months. This difference is key for clients and stakeholders. They seek to understand not just if security exists. They also want to know how well it protects data.

What Are the SOC 2 Type 2 Standards?

SOC 2 Type 2 standards refer to the Trust Service Criteria set by the AICPA to help SaaS providers improve their cybersecurity measures. They help you examine your security controls and systems related to five principles—security, availability, processing integrity, confidentiality, and data privacy.

A SOC 2 Type 2 attestation report evaluates your security controls design and assesses their operational efficiency over a set time period, usually 3 to 12 months. Its assessment standards provide a comprehensive evaluation of your cybersecurity control environment. They set the bar when you need to demonstrate your capacity to protect sensitive information and compliance with federal and industry-specific regulations.

A SOC 2 Type 2 also examines the nitty-gritty details of your IT systems, focusing on five core areas:

• Infrastructure: Covers the hardware components—facilities, networks, and equipment—that comprise your IT environment and deliver your services.

• Software: Includes the operating software and programs that your firm uses to process data.

• Personnel: The people—developers, managers, operators, and users—who help you deliver services to customers.

• Data: The information your firm uses or processes—databases, files, tables, and transaction stream—as it delivers its services to the customers.

• Procedures: These are the processes that bind your processes and help you ensure seamless service delivery.

Give Your Business a Much-Needed Edge with Trava

Data breaches and ransomware are common. SaaS customers are increasingly security conscious. Securing a SOC 2 certification can give your business a much-needed edge on the market. It shows that you value your customers and want to protect their data and privacy. It also boosts your ability to handle cyber threats proactively. This ensures smooth service and great customer experience.

Need help improving your cybersecurity posture? Schedule a meeting today!