SOC2 is today the de-facto standard in security compliance frameworks. Complying with it is an important factor in passing your quarterly and annual financial audits. This is because nowadays security determines, to a great extent, whether or not your business will exist and grow. How did it come to be, and why, exactly, should you care?
Let’s break it down.
What is SOC 2 and Why Do You Need It?
SOC 2, designed to demonstrate that a business is doing everything in its power to protect and secure customer data, has become one of the most important compliance frameworks today. Developed by The American Institute of Certified Public Accountants (AICPA), SOC 2 applies to nearly all businesses collecting, storing, and sharing customer data.
While getting SOC 2 certification is optional, there are major costs associated with failing to get it and a whole lot of businesses won’t even consider working with companies that aren’t certified. That’s because at its core, having SOC 2 certification signals to your potential customers and vendors that security is of paramount importance to your organization.
Having SOC 2 certification clearly and tangibly illustrates that your business has achieved an important level of security and operational competency and thus, it acts as a competitive advantage. It will also help you support and reinforce your answers to IT and security questionnaires from prospective customers, enabling deals to go through with minimized friction.
This, in turn, fortifies the “going concern assumption”. This means that your financial auditors believe that the business is sustainable in the foreseeable future. It allows allows them to provide a “clean” auditors report to accompany your financial statements. Any other result would badly undermine your ability to act as a business, whether in front of clients, banks, investors, or the tax authorities.
What is a SOC 2 Audit?
Organizations seeking SOC 2 certification must pass an audit carried out by a CPA. The auditors themselves are regulated by The American Institute of Certified Public Accountants and must use the AICPA’s specific guidelines when performing an audit. The auditor will prepare a highly detailed report based on the evidence provided by the company.
To meet SOC 2 effectively, organizations must establish and create written security policies that cover 5 Trust Service Criteria (referred to as the TSC), as outlined by the AICPA. These are:
Security – How the business protects data, systems, and networks from breaches and attacks. This is also referred to as the Common Criteria, the most prominent—and only required—section of any SOC 2 audit.
Availability – How the business ensures the uptime of systems.
Confidentiality – How the business ensures that data they hold remains confidential.
Processing Integrity – How the business ensures that processing is, in the words of the AICPA, complete, valid, accurate, timely, and authorized.
Privacy – How the business collects, uses, shares, stores, and deletes personally identifiable information (PII).
What is Included in the Audit Report?
Unlike many other compliance frameworks such as PCI and HIPAA, SOC 2 is relatively flexible, as it’s based on the 5 Trust Criteria and controls are chosen by each individual organization. Each audit consists of seven separate in-depth reports that make up the comprehensive report and the result is that no two audits are alike. In the end, there is no passing or failing grade to the audit—it’s the auditor’s opinion of your environment, protocols, and performance.
How Long Does a SOC 2 Audit Take?
Organizations typically spend months preparing for an audit, setting up the needed controls and ensuring the existing compliance/security posture is optimal. It also depends on the complexity of the environment, i.e., the sensitivity level of the data collected, the number of employees, the complexity of the systems involved, and the number of locations to be covered.
How Often are SOC 2 Reports Required?
Audits typically take place every year as the certification is valid for 12 months. This makes sense since it’s likely that over the course of the year, at least some significant changes may have been made, impacting an organization’s security and compliance posture. Another point to consider is that organizations failing to perform regular annual audits are signaling to auditors, potential customers, and partners that something is lacking in their dedication to compliance and security standards.
Stop Stressing About SOC 2
As complex as it is, achieving SOC 2 compliance is an important goal. Though the journey isn’t simple, being compliant will serve as a major advantage by giving partners and customers the peace of mind to know their data is being optimally stored and managed. Moreover, it will enable your organization to adopt additional frameworks faster and with less prep time. True, it’s a lot of effort, but it will be well worth it in the long run.
Contact us to make it happen.