SOC 2 Compliance Requirements
As cyberthreats increase, security frameworks sprang up to address this growing concern. Organizations processing debit or credit card transactions must comply with PCI-DSS standards. Companies contracting with the US Department of Defense must meet CMMC standards…the list goes on and on.
However, the System and Organization Control (SOC) cybersecurity framework has become a standard for many companies. SOC applies to third-party service providers processing or storing customer data, including Software as a Service (SaaS) platforms.
Certified Public Accountants (CPAs) conduct SOC 2 audits to assess compliance for SaaS providers with five trust service principles established by the American Institute of Certified Public Accountants (AICPA). Then, CPAs generate a report detailing their audit findings.
SOC 2 compliance involves the following five Trust Services Criteria (TSC):
Security. Addresses how sensitive customer data is protected.
Availability. Determines how reliable a system is for end-user access.
Processing Integrity. Confirms that the systems operate as designed.
Confidentiality. Reviews processes for limiting access and use of stored confidential data.
Privacy. Evaluates the safeguards for protecting personal information from unauthorized access.
The framework outlines how sensitive information should be protected. The controls listed under security are the minimal standard for compliance. The remaining trust principles are optional.
CPAs use the SOC 2 framework to guide their evaluation of a service provider's cybersecurity capabilities. Auditors assign the following ratings based on their results.
Unqualified. Organizations pass an audit with no areas of concern.
Qualified: Organizations pass, but auditors identify areas of concern that companies should address.
Adverse: Service providers fail the audit
Disclaimer of Opinion: Auditors use this rating to indicate insufficient information was available to make an attestation.
The final report documents the findings that lead to the rating.
Although SOC 2 compliance is voluntary, more companies are expecting cloud-based providers to be compliant. Thales 2023 Cloud Security Study found that 38% of businesses rank SaaS applications as a primary target for hackers, and 36% rank cloud-based storage as the top target. SOC 2 compliance lets businesses know that cloud-based solutions have a strong security posture.
Learn more about SOC 2 certification online.
Any business that collects, stores, or processes sensitive customer data should have SOC 2 compliance certification. Without certification, service providers such as SaaS platforms or data-storage solutions could lose business to a compliant competitor. As the cost of a data breach continues to rise, companies will insist on an independent assessment of a cloud-based provider's security posture. After all, a third-party audit provides an independent assessment of a provider's security strength.
As Thales' 2023 study found, organizations are concerned about data security in cloud-based applications. Of those surveyed, 75% said that 40% of their cloud-stored data was classified as sensitive. That is a dramatic increase from 49% in 2022. With more companies moving applications and storing data in the cloud, securing sensitive information becomes an essential part of any business plan.
The Cost of Data Breach Report for 2023 determined that the average breach cost $4.45 million (US). Cloud-based data storage environments accounted for 82% of all data breaches, while only 18% involved on-premise-only data storage. Multi-environment systems took 15 more days to contain and added $750,000 (US) to the cost of a breach.
The AICPA offers a group of services that evaluate the internal operations of a service organization in areas such as finance and security. The services include the following:
SOC 1: Independent audit of service organizations' financial statements and the internal controls in place to ensure reporting accuracy.
SOC 2: Independent audit of service organizations regarding the controls in place for TSC.
SOC 3: Independent auditor's opinion on the effectiveness of SOC 2 controls.
SOC for Cybersecurity: Information on a service organization's cybersecurity risk management.
SOC for Supply Chain: Information about the TSC controls in place for managing risks associated with supplier and distribution networks.
Using a SOC 2 framework, AICPA-certified CPAs perform SOC 2 audits and deliver reports to the audited organization. SOC 3 provides a report similar to SOC 2 but removes details that may compromise the controls in place. Service organizations can share a SOC 3 report with potential clients, customers, and partners.
SOC 2 certification is a multi-step process, beginning with an internal assessment of security controls. Each trust service principle has a set of requirements that organizations must meet to ensure a qualified rating. SOC 2 certification requirements for the security principle are also known as the common criteria, as they are shared across all five trust principles.
SOC 2 has two types of compliance. Type I audits examine the documentation for implementing SOC 2 controls, while Type II audits evaluate how well the policies and procedures work in a live environment. Most organizations begin with Type I compliance and progress to Type II. The two-step process helps service providers create the documents needed to complete Type II compliance.
Security is the only mandated principle for SOC 2 compliance. It focuses on preventing the unauthorized use of an organization's digital assets, data, and systems. The following nine controls make up the security compliance requirements.
CC1: Control Environment. Auditors are looking at an organization's cybersecurity culture. Does the security focus encompass hiring practices and training? Is the Board of Directors well-informed on cybersecurity trends?
CC2. Communication and Information. Auditors assess how well an organization manages its responsibility for collecting and sharing protected data internally and externally.
CC3. Risk Assessment. This control focuses on how organizations assess risk. Companies should have documented criteria for evaluating potential risks and their impacts.
CC4. Monitoring Activities. This security control examines the processes in place to monitor security efforts. The focus is on who will perform audits, how often they will be performed, and how the results will be reported.
CC5. Control Activities. Auditors evaluate the policies and procedures in place to ensure compliance. They look at their corporate-wide awareness and availability.
CC6. Logical and Physical Access Controls. This control is about prevention. What policies and procedures are in place to prevent an infrastructure compromise? The documents should cover physical and logical access to equipment and data. They should include directions on how to dispose of network equipment such as hard drives and how data should be handled.
CC7. Systems Operations. Auditors assess system architecture. What tools are in place to monitor, detect, and contain potential threats? Are procedures in place for reporting incidents and breaches?
CC8. Change Management. Changes to an organization's operating environment should follow an established request and approval process. Auditors will look for change management controls for technologies, policies, and procedures.
CC9. Risk Mitigation. What tools are in place to mitigate the risks identified in CC3. Risk Assessment? Are the mission-critical risks addressed?
Availability encompasses the accessibility and reliability of an organization's infrastructure. It includes controls to monitor the system to detect, prevent, and correct disruptions in service. These SOC 2 certification requirements are focused on the following:
Business Continuity.
Backup Plans.
Disaster Recovery.
Auditors are looking for policies and procedures that ensure critical data is backed up, and capacity measurements meet or exceed demand. They also want disaster recovery plans to restore or maintain essential operations after a disaster. Business continuity procedures document how an organization will operate when faced with a long-term disruption. The goal is to ensure that the end users can access the system reliably.
Processing integrity refers to the controls that are in place to protect data when in use. Whether it's processing a credit card payment or pulling customer data to complete a form, in-flight data must be secure. Recording how data is used during operations requires logging software. The logs should contain detailed information to help identify possible errors.
Processing integrity controls include monitoring critical system processes. The monitoring tools should demonstrate that the system operates consistently and the resulting data is accurate.
Confidential information refers to digital assets with restricted access. Financial information, product specifications, and intellectual property are examples of corporate data with controlled access. Confidentiality controls include logical and physical access.
Auditors expect procedures that identify confidential information when it is generated or received. The documentation should detail where the information is located, how it is stored, and how it is disposed of. Confidentiality controls require information to be encrypted while at rest and in transit, including the potential of misdirected emails or attachments.
Privacy controls are designed to protect personally identifiable information (PII) or data that can be used with other information to arrive at a person's identity. Auditors also look for privacy statements on documents, websites, and forms that clearly explain how PII will be used and protected.
Although the United States does not have a national privacy law, some states are looking to adopt their own. The European Union's (EU) General Data Protection Regulations (GDPR) is considered the most comprehensive privacy law and can serve as a guide for SaaS vendors.
The simple answer is yes. Every organization should adhere to a recognized cybersecurity framework to protect digital assets from unauthorized use. Customers will demand confirmation of a company's cybersecurity posture. Without a SOC 2 attestation, SaaS vendors are asking customers to "trust them." Many will consider a competitor with the requested documentation.
SOC 2 audits often overlap with other security frameworks, expediting the certification process for NIST or ISO standards, for example. Shortening other certification processes can save an organization time and money. SOC 2 attestation also minimizes the risk of a breach which can cost millions to contain.
Most of all, SOC 2 documentation gives SaaS platforms peace of mind. Knowing that their systems are secure eliminates the constant worry that a breach is waiting to happen. It also forms the basis of a strong customer relationship that is built on trust.
Yes, SOC 2 compliance requires an internal audit at least once a year. The frequency of internal audits depends on an organization's SOC 2 policies. For initial certification, auditors recommend that an internal audit be performed before attempting full SOC 2 compliance. The assessment should identify weaknesses and vulnerabilities to be addressed before an external audit.
A significant part of SOC certification is the policies and procedures. Auditors expect the following policies.
Acceptable Use
Access Control
Business Continuity
Change Management
Confidentiality
Code of Conduct
Data Classification
Disaster Recovery
Email and Communication
Encryption
Incident Management and Response
Information Security
Information, Software, and System Backup
Logging and Monitoring
Physical Security
Password
Remote Access
Risk Assessment and Mitigation
Software Development Lifecycle
Vendor Management
Workstation Security
Navigating through numerous policies can be overwhelming, but Trava's experts serve as SOC 2 policy templates, guiding organizations through the process.
Technically, SOC 2 certifications do not expire. However, most people consider a SOC 2 report valid for 12 months from the date of issue. Any information older than one year is considered "stale" and may not reflect the vendor's current cybersecurity posture. Auditors recommend a renewal every 12 months.
SOC 2 certification has become a standard requirement for any cloud-based provider. Whether delivering an application or offering storage facilities, SaaS platforms need SOC 2/SOC 3 reports to establish their security posture. While the process may appear daunting, certification provides a competitive advantage. It demonstrates a commitment to keeping consumer data safe.
The process identifies weaknesses and vulnerabilities that can lead to system compromises. By maintaining SOC 2 certification, SaaS platforms can reduce cybersecurity risks from bad actors which can cost millions to contain. It also helps ensure that systems adhere to regulatory requirements for the protection of consumer data.
If your organization is looking to manage its cyber risk through SOC 2 certification, talk to Trava. At Trava, we believe that managing cyber risk is the first step in growing your business. Explore our case studies to see how other companies have minimized risk with SOC 2 compliance.
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