As technology continues to evolve over the years, it has become more prone to security lapses, and hackers have become sneakier. Given the circumstances, the most important thing nowadays is data security for the operating effectiveness of service organizations.
SOC 2 reports generally assure companies and businesses that the services provided to them are safe and secure. SOC 2 report might lay out the postulates for confidentiality, privacy principles, security controls, processing integrity, data integrity, safely processing of user data, and availability. It mainly consists of the company’s information security measures to store customer data.
SOC 2 Certification
External auditors issue a SOC2 certification to companies after assessing their compliance with the trust principles of SOC2. It is based on the system and the functions of that particular company.
The Trust Principles Of SOC2
SOC 2 is based on the criteria of 5 trust principles elaborated below.
The safety of data and computer systems from malware and access by unauthorized parties is related to the trust principle of security. It can be done by utilizing the information technology security infrastructures like two-factor authentication, firewalls, and other security attempts to protect the company’s information from external access.
This principle relates to a company’s capability to maintain network performance at basic levels and cope with security breaches and threats.
Processing Integrity is about the performance of systems as their operations need to be error-free, without any delay, and not under the influence of any unauthorized party. Completion, authorization, and accuracy are the qualities processing integrity needs in information procedures.
It concerns a service organization’s system capability to keep the data safe and protected and only accessible to certain nominated personnel of the company. This information consists of the client.
Client data security can not be compromised and can only be accessible to authorized individuals of the company. Other such data includes business secrets, laws and regulations, contracts, and agreements, which must be kept secure at any cost.
Biodata like name, address, and contact numbers must also be kept private. A company should be able to keep such information safe and secure from any unauthorized party’s access
SOC 2 Audit
Audits of SOC (System and Organization Controls) refer to the risk assessment related to the use of service companies and unbiased observers.
They play a vital role in vendor management programs, governance, management of risks, and regulatory control.
SOC Audit has three stages for service companies, which are mentioned below.
SOC1 Audit is related to the company’s internal control over financial reporting on ICFR. These are practiced according to International Standard for Assurance Engagement ISAE 3402 or Statement on standards for Attestation Engagements or SSAE 18
SOC2 Audit is related to assessing the service company’s availability, processing integrity, security, privacy controls, and security according to the American Institute of Certified Public Accountants or AICPA’s Trust Services Criteria TSC and SSAE 18. A SOC 2 report is meant for prospective pre-existing clients.
SOC 3 audits are somewhat similar to SOC 2 audits. However, the reports of SOC2 are precise and structured for the general audience.
SOC 1 and SOC 2 audits have been classified into two types:
Type 1 – an audit that is performed on a pre-decided date.
Type 2 – an audit that is performed over a specific period, mostly six months. SOC 3 audits are classified as Type 2.
SOC 2 Audit Report
A SOC 2 audit report gives assurance and information regarding a service company’s security, availability, processing integrity, confidentiality, and privacy controls in detail .hey are compliant with the AICPA’ TSC according to the SSAE 18
SOC 2 Compliance
SOC 2 compliance was first introduced by Chartered Service Control Organization Institute. SOC 2 compliance is a constituent of the American Institute of CPAs’
Service Organization Control reporting platform. It ensures that it will protect customer data and personal information is kept private and secure at all costs.
SOC 2 compliance is essential in keeping the company’s data safe and secure. It, however, isn’t necessary for cloud computing vendors and SaaS.
Companies must undergo audits regularly to ensure that the demands of all the trust principles are fulfilled and SOC 2 compliance is ensured.
SOC 2 Compliance Tools
One kind of IT security doesn’t suit every security-providing organization. A deep analysis of risks should be made to recognize one-of-a-kind risks regarding a particular service. The controls that minimize the risks also need to be recognized.
Cloud tools like Azure, GitHub, Google Cloud Platform, AWS, and GSuite being used by a service organization can be integrated with a platform of SOC 2 automation. This makes the main control operations transparent to the auditing entity.
A number of the tools mentioned provide continuous monitoring of the operation of main controls of the environment, specifically the ones related to the SOC 2 report. It notifies the tool users when the control operations deviate from their usual behavior.
Risks Regarding SOC 2 Compliance Tools
The utilization of SOC 2 compliance tools is not free from risks. There are risks related to the use of such tools. For instance, if an auditor relies too much on a tool without being aware of the information that the tool represents, it would pose risks.
An ideal auditor would comprehend the monitoring and questioning abilities of the SOC 2 compliance tools. Hard drive encryption, antivirus installation position, operating system, and enabling of screensaver lockout are a few examples of working environment controls that are under the monitoring of SOC 2
Advantages Of SOC 2 Compliance
It makes the company stand out amongst its competing organizations
It helps recognize controls related to the company’s clients and check the controls to verify their design and operation. It enables the development of a persistent, reliable, and controlled process.
At Any occasion, the market cannot be entered without SOC2. Several financial organizations require SOC2 report Type II before doing business agreements.
Practices To Ensure SOC 2 Compliance
The application of the following practices can help companies achieve SOC2 compliance consistently.
If there is any cybersecurity attack in a company, then there must be an alarm that notifies the personnel about the event. This alarm system should be set up to go off only when the cloud deviates from the usual trend.
There should be a threshold for alerts to prevent any false alarms. For this purpose, continuous cyber threat monitoring must be established for effective system processing.
A quick response system should be developed. Comprehensive Audit reports will help identify the malware, conduct investigations, and respond promptly.
All these measures will help improve the service organization controls and ensure adherence to SOC 2 compliance.
The AICPA TSC
The TSC is a third-party control criterion recognized by the industry for organizations providing auditing services. They are classified into 5 trust principles: security, privacy, processing integrity, availability, and confidentiality.
Criteria that each of these 5 principles possesses are following the 17 principles in the Committee of Sponsoring Organizations of the Treadway Commission or COSO 2013 Internal Control.
The Cover Of Common Criteria
- The control environment
- Communication and information
- Risk assessment
- Monitoring of controls
- Control activities regarding the structure and controls implementation.
Along with the 17 common criteria, about five trust services principles have additional criteria. It can be applied to any of the categories and also to all of them. For Example, criteria meant for logical access can be applied to all five categories.
The Cover Of Supplemental Criteria
- Logical and physical access controls
- System operations
- Change management
- Risk mitigation
Who Can Perform SOC Audits?
Only a Certified Public Accountant or an accountancy company can perform the SOC2 Audit in the United States. In the United Kingdom, SOC audits are carried out by a member of the Institute of Chartered Accountants in England and Wales or ICAEW who are qualified enough.
The auditors must follow the standards set for them by the AICPA. They should perform the Audit according to the guidelines, including proper planning, supervision of audit processes, and execution. The work of the AICPA members should be reviewed to ensure that the audit procedure is according to the standards set by AICPA.
CPA organizations can hire non-CPA experts with adequate security and information technology knowledge and skills for audit preparation. However, a CPA should review and release the final audit report. This will allow the service company to use the logo of Aitson on its website.
The Purpose Of SOC 2 Reports
As outsourcing and cloud computing are emerging, the need for SOC2 reports by companies in the United States is also increasing. SOC2 reports assure their clients that the services provided are secure and reliable. If there’s a lack of SOC2 audit reports, the company can face countless audits from its clients directly.
Example Of SOC2 Report
Some companies provide IT infrastructure to service providers like Amazon Web Services. These service organizations have SOC2 reports from a CPC firm which assure its safety, security, reliability, and effectiveness over a while
Targets Of SOC2 Audits
SOC2 audits are intended for service-providing companies, such as cloud services, financial services, and web marketing. In such circumstances, the clients can request an audit report regarding their customer data and confidential information.
In this way, a level of trust is built between the stakeholder and customer by the SOC 2 audit. SOC2 Audit also allows the service providers to serve the top-tier suppliers.
Confidentiality Versus Privacy Criteria
Various countries are using privacy laws. The CCPA or GDPR provides security to the population of a particular region. Privacy laws in the United States have started following an industrial approach.
In this approach, the privacy laws are applicable to certain regions of industry and particular types of data and do not apply to a single person or citizen.
The privacy criteria of AICPA can only be applicable if a company deals with customer data or gathers information about them, aiming to provide them with services.
SOC2 and SOC2 audits are an essential part of a service organization to gain the trust of its clients. It helps assure the clients of a service provider that their operations are safe and secure and they are fully capable of tackling external threats and security breaches.
The clients can demand audit reports that align with AICPA’s criteria of availability processing integrity confidentiality to ensure that their information will remain confidential and private. SOC2 is necessary owing to the hacking trends and increasing cybersecurity threats in outsourcing and cloud computing.
Service providers, thus, need to carry out SOC2 audits through CPAs and issue the CCPA-approved audit reports to their clients, business partners, and other supporting companies for a successful business.