Systems and Organization Controls (SOC) are a series of standards designed to measure how well an organization conducts and regulates its financial information and other data. Due to intense pressure to mitigate risk over financial auditing and controls, many organizations require vendors to institute SOC Controls and reporting. A SOC report is a verifiable auditing report which is performed by a Certified Public Accountant (CPA) or equivalent. A SOC report determines if financial controls are performed, if audits are conducted according to the stated controls of an organization, and the effectiveness of the audits performed.
There are multiple versions of SOC reports; SOC 1, 2 and 3, and two sub-types of SOC 2; type I and II. This article will explain the differences between the types of SOC 2 reports, the types of companies that require them, creating the specific reports and some ways to manage SOC compliance.
Types of SOC Reporting
In comparison to SOC 1 and 3, SOC 2 is designed for providers that store customer data in the cloud. It requires companies to establish and follow strict information security policies that encompass privacy, security, availability, processing integrity, and confidentiality of customer data. SOC 2 type I describes a vendor’s systems, and whether it is capable of meeting trust principles as of a specified date. SOC 2 type II describes the operational effectiveness of a vendor’s systems and controls during a set period of time.
The SOC 2 Type I Report
SOC 2 type I reports detail the suitability and design of the company’s controls, its scope and its management at a given point in time. It demonstrates proof of compliance with the American Institute of Public Accountants (AICPA) and other recognized accounting bodies’ auditing procedures and industry best practices. This benefits companies by assuring potential customers that their data will be safe in the hands of a SOC II compliant company.
There has been increased demand for SOC 2 type I compliant providers as cyber-attacks continue to rise in frequency and sophistication. While not legally required, SOC 2 type I compliance is highly sought after for companies handling customer data like healthcare providers and financial institutions to assure their customers that they have protective controls in place.
Depending how well a company is prepared for their SOC 2 type I, they can be audited immediately, and the report created. If a service organization has already performed a readiness assessment, has their controls in place and well documented, an approved auditor can begin the examination right away. Generating the SOC 2 type I report typically takes between 2 to 4 weeks, unlike the SOC 2 type II report, which takes 6 months to a year – making the SOC 2 type I report is ideal for companies assessing multiple potential vendors or looking to engage 3rd parties in a relatively short amount of time.
The SOC type I report requires less spending and effort as auditors require a smaller amount of data to determine compliance at a single point in time. SOC type I compliance is best suited towards smaller companies who operate in industries with less sensitive data and service organizations with less stringent security requirements.
The SOC 2 Type II Report
Like the SOC 2 type I report, the type II report is a description of a company’s system and the suitability of the design of controls, but it also assesses the operating effectiveness of said controls. While there are many benefits to SOC type I compliance, SOC type II provides a much higher level of assurance in comparison.
To achieve SOC type II compliance, a company must pass a thorough examination of its policies and controls over an extended period, requiring companies to dedicate even more time and resources. Most companies will select a period that overlaps the most with the company’s financial year. While there is no required minimum duration for the type II reporting period, the AICPA has suggested companies use a period of 6 months. To provide their clients with a continuous flow of reporting on their controls, companies usually decide in a 12-month reporting period to eliminate a break in the reporting period.
The SOC 2 type II compliance and reporting demonstrates superior data security and control systems to potential customers. Companies with SOC 2 type II compliance gain an advantage from the ability to engage larger, and more security-conscious organizations with their services.
SOC 2 type II compliance follows the same general principles of SOC type I but requires additional resources and working hours. SOC 2 type II compliance easier to acquire for companies with mature controls that are constantly monitored and updated accordingly. The SOC 2 type II audit is generally sought out by medium to large who operate with sensitive data or in heavily regulated industries with stringent security requirements.
Managing SOC 2 Compliance with StandardFusion
StandardFusion is a comprehensive GRC software, built for organizations of any size to manage their compliance initiatives and security program. Our platform is packed with features to assist with all your SOC 1 or SOC 2 needs including:
Task Management and Automation
Monitor progress, prioritize processes, and manage all your compliance and audit related tasks in one place. Turn recurring tasks into automated processes so users can gather evidence, track reviews, and understand exactly what action needs to be taken next.
StandardFusion allows you to connect each of your organization’s controls to a specific framework requirement. Define your mitigating processes, their workflow state, and who is responsible for each control from a centralized repository. Visualize the connections within your security program and manage them the same way that you think about them.
Manage the development, acceptance, and distribution of your policies organization wide. Save hours of follow up and reporting by tracking employee acceptance of new policies and assigning of approvals while keeping a record of all policies and past versions in a single place.
Easily create a risk registry in StandardFusion to track identified risks and maintain a record of them. Stay on top of potential issues that could result in unintended outcomes and fulfill regulatory compliance for SOC with an updated risk register.
Dashboards and Reporting
At-a-glance dashboards provide teams with complete visibility into every aspect of their compliance programs and audits, allowing users to quickly identify areas of improvement and address them accordingly. Whether you need high-level executive summaries or detailed compliance reports, leverage the data within StandardFusion and generate insightful reports for all audiences within your organization.
Regardless of which SOC report you need, StandardFusion is a fully featured GRC platform designed to simplify compliance for any framework. Our software helps you easily plan, execute, and keep up with regulatory requirements for an efficient and effective management experience. If you are struggling to manage your SOC attestation or any other compliance related activities, reach out to our team today and discuss how you can move forward.