Companies have learned the hard way that vendor and partner data should be considered when hardening their security program. If your organization provides outsourced services to another company, you may be asked to undergo a SOC audit and provide a report as an important part of a company’s third-party risk management program
Learn about the different types of SOC audit reports and which type of audit your organization should have.
A SOC audit report assesses an organization’s ability to provide secure outsourced services. A SOC audit report provides a potential client with insight into the potential risks associated with outsourcing certain financial and technology-related business functions. It also enables a service provider to demonstrate competency and security to potential clients.
SOC reports come in a few different forms. An organization may be asked to undergo a SOC 1, SOC 2, or SOC 3 audit. Additionally, these audits can be either Type I or Type 2.
SOC 1 and SOC 2 audits focus on reporting different things. The choice between whether an organization should undergo a SOC 1 or SOC 2 audit depends on the type of services the business provides.
SOC 1 audits are for organizations that perform services that have financial impacts on their clients. In a SOC 1 audit, the focus of testing is on the organization’s internal control of financial reporting. Organizations that may require a SOC 1 audit include payment processors, billing organizations, and collections agencies.
SOC 2 audits are designed for organizations providing other types of services. These reports focus on the internal operational and IT controls the organization has in place. Managed Service Providers (MSPs), cloud service providers (Software as a Service, Infrastructure as a Service, etc.), and outsourced IT providers are examples of organizations that may be asked to undergo a SOC 2 audit.
In a SOC 2 audit, organizations are evaluated based upon their ability to meet five Trust Service Principles/Criteria:
Both SOC 1 and SOC 2 audits and reports can be performed in a couple of different ways. These different assessment methods are labeled as Type 1 and Type 2.
Type 1 audits are designed to provide a “point in time” assessment of an organization. The auditor determines if the organization’s controls are capable of meeting requirements and if they are effective and enforced at the time of the audit.
Type 2 SOC audits extend the window for which the implemented controls are being tested. Rather than evaluating the controls at a single point in time, they are tested throughout the entire audit period, which is typically six months.
SOC 2 audits may also be combined with evaluations against other regulatory frameworks. For example, if the services that an organization provides involve touching protected health information (PHI), they may be asked to undergo a SOC 2 + HIPAA audit. Organizations processing financial information for their customers may require a SOC 2 + PCI audit. Or an organization may be asked to demonstrate their compliance with a range of regulations by demonstrating compliance with the HITRUST CSF via a SOC 2 + HITRUST audit.
Related Reading: Does HIPAA Apply to Me?
One common area of confusion is the difference between SOC 2 and ISO 27001 audits. While both include an external audit of security controls, they have different approaches and end goals. After an ISO 27001 audit, an organization can receive a compliance certificate if their Information Security Management System (ISMS) correctly identifies, analyzes, and addresses all of the risks associated with its information assets. In contrast, a SOC 2 report assesses the organization’s controls designed to manage information security risks to their customers’ data.
A SOC 3 report covers the same controls as a SOC 2 report; however, whereas a SOC 2 report is not for public consumption, a SOC 3 report but is specifically intended for a general audience. This truncated version easier to understand includes the auditor’s insights and is made to be shared with customers, used in sales and marketing, and put on your website.
SOC audits are designed to assess the effectiveness of the controls that a service organization has in place to protect its clients. Meeting the requirements to pass a SOC audit requires preparation and knowledge and shouldn’t begin when a current or potential client asks for a report.
Are you ready to apply more rigor to your SOC audit reporting? Reach out to start the conversation.