System and Organization Controls Audits and reporting are fundamental activities in our IT-driven business environments. An independent framework, SOC report variations (SOC 1, 2 and 3) provide your business with ways to assess your security and provide proof to potential clients and partners that you are implementing effective security and privacy controls to protect their data.
Here, we’ll cover some of the basics of SOC audits, including the differences between SOC 1, 2 and 3 reports.
What is System and Organization Controls Auditing, and Why Is it Important for My Business?
System and Organization Controls (SOC) Reports are important security and compliance audits that companies can go through to demonstrate levels of cybersecurity and data protection for sensitive customer data.
SOC audits are typically not required as part of a specific industry. While the standard was created by the American Institute of Certified Public Accountants (AICPA), it was formatted to address the handling of client data in areas like finance, banking or any industry managing Personally Identifiable Information (PII).
Who uses these audits and reporting? Almost any company handling customer data can opt to undergo a SOC audit. While there are no legal requirements for a SOC report in a general sense, having a SOC attestation of compliance can instill a sense of trust and faith from your customers and your business partners. Additionally, many businesses or other organizations may require SOC auditing as part of a contract.
With that in mind, System and Organization Control audits and reports follow three major reporting styles:
- SOC 1
- SOC 2
- SOC 3
Along with these reports, the AICPA has also released a dedicated SOC for Cybersecurity audit to focus specifically on enterprise-level cybersecurity and risk management. Of all the reports, SOC 2 is the most widespread and when someone mentions SOC compliance, more often than not they are speaking about SOC 2 audits.
What is SOC 1?
A SOC 1 report covers general business processes and controls related to security and risk in your organization about customer data and the use of your services. Falling under the Statement on Standards for Attestation Engagements (SSAE) 18 AT-C 320, this report emphasizes financial information and operations. That is a report on your, and your clients’ financials.
Within SOC 1 there are two categories:
- SOC 1 Type I: Includes control descriptions on your controls and their implementation of the date of your audit.
- SOC 1 Type II: Type II reports include everything from a Type I report as well as opinions from the auditor on the effectiveness of your infrastructure.
This report can serve an important role in helping groups like financial partners, executives with potential enterprise clients, user organizations, financial service organizations, or financial auditors (depending on your industry).
What is SOC 2?
When people talk about SOC certification, chances are they are talking about SOC 2 audits. SOC 2 audits are operated by a registered CPA with security authorization from the AICPA to conduct audits and focus on your organization’s control infrastructure, administrative structure and data processing capabilities.
In essence, whereas a SOC 1 helps an outside group understand how your security controls related to customer accounts and financial statements, an audit specifically emphasizes your capabilities in terms of security, privacy and confidentiality.
To structure an audit, these reports are comprised of 5 Trust Service Criteria:
- Security: The baseline of this type of audit, also known as “common criteria”. Security criteria include cybersecurity controls that protect client information against theft, breach, or unauthorized access. This criterion applies to data at any point of your operations, including creation, sharing, storage and transmission. All reports will include, at minimum, a security audit. Many organizations will simply undergo a security audit regularly to maintain certification.
- Privacy: The Privacy criteria is a demonstration to auditors that you only use client data in a way that was agreed upon, and that you maintain the privacy of that information in other contexts. That means showing that you can track and log data and system events, control who accesses data through Identity Access Management (IAM) and protect data from outside exposure through encryption.
- Processing Integrity: Here, you’re showing that your IT operations, whether they are automated technologies or people-driven processes, can process data for business purposes without generating false information or manipulating existing information to the detriment of the client. This covers disparate areas like developing sound code, detailing a robust software development life cycle and monitoring the flow of data from one application to the next.
- Availability: Simply put, you attest that your system can store and transmit data in a way that is readily available to relevant people in your organization as well as clients. This can include maintaining proper data processing capacity and having a complete backup solution.
- Confidentiality: Showing that you can store data correctly. Encryption, firewalls, and documentation show that whether data is at rest or in transit, your system keeps it confidential and without accidental disclosure. Especially pertains to PII and Personal Health Information (PHI).
Since the Security Trust Criterion is required of all of these reports, some organizations opt for just a security audit. But all five criteria are useful and important to almost any organization, and some companies in industries handling sensitive information might require more expansive audits.
Additionally, SOC 2 also has two subtypes:
- SOC 2 Type I: Describes your organization’s system and how the design of the controls is suitable to their industry purposes. This includes a review of documentation and process plans.
- SOC 2 Type II: Covers everything from Type I, but also includes evidence of effectiveness via an evaluation of relevant systems for a period of at least six months.
While the Type I report can be valuable as an overview of your system, Type II is usually much more valuable as a resource of attestation of security capabilities.
What is SOC 3?
Generally speaking, this report will contain the same kind of information as a SOC 2 report covering security, privacy, and so on.
However, a this report is for general audiences, whereas a SOC 2 report is targeted towards executives and IT leadership.
These reports are shorter and broader, and simply demonstrate the “bigger picture” of your compliance posture. SOC 3 reports are most useful as public-facing documents, typically on a website page, to demonstrate certification.
Take Control of Your SOC Audits with Lazarus Alliance
SOC audits are recurring activities, meaning you’ll undergo regular audits annually. Such audits can, without proper preparation, take countless hours of work spanning over weeks or even months.
Trust Lazarus Alliance as your compliance partner and we will streamline that timeframe to weeks and even days. With our unique mix of expertise, experience and automation services, we can empower your SOC compliance across any sort of audit and guarantee you have every tool you need to achieve and maintain certification.
Interested in learning more about Lazarus Alliance SOC auditing and consultation services? Call 1-888-896-7580 to discuss your organization’s compliance needs.