Understanding SOC 2 Audit Preparation

Compliance is not something to take lightly or push to the side, especially in an organization that leans heavily on technology in service of the business. Every day, new software-based companies pop up, and competition can be fierce — the last thing you want to be known for in this competitive landscape is being non-compliant. 

Failing compliance audits tells current and potential customers that your organization is non-secure and untrustworthy, which can result in a huge loss of public confidence, customer adoption, and overall profitability.

Familiarity with different compliance standards such as SOC, PCI, GDPR, and HIPAA is important in terms of retaining a positive, trusted brand image, as well as for staying in line with current security and privacy standards and practices. 

This is where understanding and preparing for a System and Organizational Controls (SOC) audit comes in handy. If your service organization is involved in the storage and use of personal information, which these days is just about every organization, then creating a SOC 2 roadmap will be an integral part of your company’s future. 

Without this roadmap, you’re leaving your company vulnerable to non-compliance with SOC 2, resulting in a less secure system, more openings for data breaches, and a loss of trust in your brand and products. To avoid this, it’s paramount that you recognize what SOC 2 is and its importance in relation to the longevity and security of your company.

The main driver of a SOC 2 audit is through customer requests. There may also be a regulator that requests the report, but SOC 2 has picked up a lot of traction in the market and is well-known in the realm of people that are looking to work with organizations that ultimately process confidential data in some way. If your customers haven’t asked for a SOC 2 report yet, they will soon, especially if you’re using technology to deliver your product or service.

What is SOC 2?

There are a few different types of SOC audits — SOC 1, SOC 2, and SOC 3. 

• A SOC 1 audit is focused on internal controls related to financial reporting. 
• A SOC 2 audit is designed to address a service organization’s controls that are involved in its operations and compliance. 
• As for a SOC 3 audit — the SOC 2 and SOC 3 frameworks cover the same subject matter, and they are based on five Trust Service Categories (TSC). However, a SOC 2 report is a restricted-use report, meaning it is intended for use by the service organization’s management, customers, prospective customers, and business partners, while a SOC 3 report can be distributed to the public for anyone to reference.

A SOC 2 report is the most detailed report, and it’s used across organizations that use technology to provide their product or service — it doesn’t have to be relevant to just financial reporting like a SOC 1. 

There are two subcategories — SOC 2 Type I and SOC 2 Type II. A SOC 2 Type I report assesses the design of security processes at a specific point in time, whereas, a SOC 2 Type II assesses the effectiveness of those controls over a period of time.

During a SOC 2 audit, your organization is not assessed against any standards other than the ones that have been laid out by management. There are no external standards that need to be met — your full focus can remain on your organization’s internal controls and infrastructure. Essentially, you are able to set the standard that your customers need and demand and ensure that you are meeting those standards as audited by a third party.

Key Attributes of the SOC 2 Audit

SOC 2 was developed by the AICPA and is centered around the five Trust Service Categories that are all based on underlying criteria. The relevant criteria to be assessed on will depend on the Trust Service Categories selected by management / the organization, and various control owners throughout the organization will have different responsibilities based on the organization’s needs.

The entire scope is defined by management and some key attributes that are included in the scope of a SOC 2 report are infrastructure, software, data, procedures, and people. A SOC 2 report generally covers between six to twelve months and is typically performed annually. 

Some companies opt for a SOC 2 Type I audit when it’s their first time, because it focuses on an opinion at a single point in time over the design of controls only, which in turn helps define and improve future controls and processes. Otherwise, it’s very common for organizations to undergo a SOC 2 Type II audit.

Trust Service Categories and Their Applicability

There are five Trust Service Categories that can be included in the scope of a SOC 2 audit. The categories are: 

1. Security (also referred to as common criteria)
2. Availability
3. Confidentiality
4. Processing integrity
5. Privacy

Security is a required category, but management can also choose any or none of the other categories to be included in the report. If contracts with customers don’t specify the categories that will be included in a SOC 2 report, then the decision rests solely on management’s shoulders and will be based on the organization’s specific commitments to customers and system requirements.

The five Trust Service Category definitions as developed by the AICPA are as follows:

Security (Required)

Definition

Information and systems are protected against unauthorized access, unauthorized disclosure of information, and damage to systems that could compromise the availability, integrity, confidentiality, and privacy of information or systems and affect your organization’s ability to meet its objectives.

Applicability

Applicable to most outsourced environments when users of the system require assurance regarding the provider’s security controls for any system.

Availability (Optional)

Definition

Information and systems are available for operation and use to meet your organization’s objectives.

Applicability

Most applicable when there are commitments regarding processes to achieve system availability in SLAs (service-level agreements) as well as disaster recovery.

Confidentiality (Optional)

Definition

Information designated as confidential is protected to meet your organization’s objectives.

Applicability

Most applicable when there are commitments regarding your organization’s practices for protecting sensitive information.

Processing Integrity (Optional – Uncommon)

Definition

System processing is complete, valid, accurate, timely, and authorized to meet your organization’s objectives.

Applicability

Most applicable for a variety of nonfinancial and financial scenarios when there are commitments as to the completeness, accuracy, timeliness, and authorization of information and transactions.

Privacy (Optional – Uncommon)

Definition

Personal information is collected, used, retained, disclosed, and disposed of to meet your organization’s objectives.

Applicability

Most applicable where the provider interacts directly with end users and gathers personal information. It provides a mechanism for demonstrating the effectiveness of controls for a privacy program.

How To Prepare for a SOC 2 Audit

Attaining a SOC 2 report is one of the most common requirements for any technology-focused company and service organization that stores user data in the cloud. Assuming you’ve determined you need the audit report, here’s how you can plan for a SOC 2 audit:

Define the Goals

Before you do anything, it’s important you define the goals of the audit process. The goals you define at this stage will influence the policies, controls, and procedures you need to consider ahead of the SOC 2 audit. You’ll need to determine what to review in terms of your key operations, product offerings, tiers of the product, and more. 

You also need to determine whether to go for a SOC Type 1 or SOC Type 2 report. For example, you can start with a SOC Type 1 as you consider obtaining a SOC Type 2 report. Alternatively, you could just go for a Type 1 report. 

Understand the Audit’s Scope

At this stage, you’ll need to define the organization’s contractual commitments, regulatory requirements, and what Trust Service Categories (TSC) apply to the business. For example, if your customers are located in the European Union (EU), you have to consider the implications of GDPR requirements. Similarly, if you’re operating in the healthcare sector, you have to take into account the impact of HIPAA regulations on the business. 

In all these instances, SOC 2 audit can help you prove compliance to prospects or customers who may need to verify your compliance status. You also need to define the optional TSC that the auditor should use in the assessment in addition to the mandatory Security category. For example, you can choose which of the Availability, Confidentiality, Privacy, Processing Integrity, and Privacy categories you would like the business to be audited against.

Assign Control Owners

Every step of the audit process is essential in streamlining and achieving SOC 2 compliance. However, assigning controls is where the entire process of SOC 2 audit preparation can get bumpy and veer off the course. In this regard, you need to ensure that you’ve assigned and clarified the duties and responsibilities of all team members involved in SOC 2 audit preparation. 

It’s also worth noting that not all controls require the same amount of work. As such, you need to make it clear to everyone involved about the expectations of the SOC 2 audit. If one task is missing or incomplete, the responsibility should fall on the control owner.  

Assess Current Processes and Controls

Assessing the current processes and controls is a crucial stage in SOC 2 audit preparation as it allows you to probe the auditability of your systems. You can think of this stage as a “pre-test” step that will enable you to see how well your processes and controls adhere to the SOC 2 compliance checklists. It helps you to locate the gaps in the system’s procedures, controls, and documentation before the audit finds them. 

Consider Compliance Automation

Enforcing compliance can help the organization to detect potential cybersecurity breaches, foster trust, and keep operations running safely and efficiently. However, the process can also be costly, plus riddled with a lack of coordination and potential human errors. For many organizations, the answer to this problem lies in implementing a compliance automation solution such as JumpCloud as a way to improve compliance velocity and minimize costs.  

Compliance automation solutions provide companies with workflow capabilities related to compliance, including control analyses, self-assessments, and controls testing. Automated compliance is particularly important to companies that operate in highly regulated industries with changing regulatory requirements. This is because it simplifies the compliance processes and makes them more productive and accurate for auditors. 

Readiness Assessment

A readiness assessment is a rehearsal version of the actual SOC 2 audit. It explores and presents fundamental objectives companies must achieve to be SOC 2 compliant. It enables you to discover gaps in the organization’s SOC 2 compliance processes while recommending proper controls for responding to rapidly evolving compliance obligations.

This understanding is crucial to helping you develop an effective strategy for achieving SOC 2 compliance throughout your organization. These steps can help you make the readiness assessment more streamlined and painless:

• Start with self-assessment. You can undertake this process at your own pace, depending on the activities and scope of the audit.  
• Identify and prioritize the gaps. After the assessment, ensure you have documented and prioritized the changes involved in ensuring the company is SOC 2-compliant. 
• Develop a timeline. Once you’ve figured out the changes that need to be made, you need to create a roadmap to address the issues in the order of priority you defined. 
• Monitor and fine-tune. Ensure that you have a process in place to monitor and fine-tune compliance issues. 

SOC 2 Audit Preparation and Your Bottom Line

Going through a SOC 2 audit or running the compliance program manually can be frustrating, time-consuming, and costly. While no magic solution can make your organization instantly compliant, an effective compliance automation solution can help you get (and stay) compliant without the pain points of doing it manually. 

The JumpCloud Directory Platform is one such compliance automation solution that can help you figure out what you need to do to become SOC 2 compliant. JumpCloud Directory is an all-in-one cloud-based directory platform that IT teams can leverage to automate user management tasks while documenting them into the organization’s change control and records for auditing purposes. This allows organizations to eventually become SOC 2 compliant as they can prove that they have a well-documented, automated, and repeatable process for providing the required compliance records. Learn more about managing compliance with JumpCloud.