SOC 2 or SOC 3 is a procedure that attests a company’s commitment to the industry’s rigorous standards of processing integrity and data protection. In a nutshell, you can think of it as a quality control measure that you can use to gauge the level of security that software service organizations such as cloud service providers (CSPs) or SaaS companies have put in place to protect your data. The good thing about a SOC 2 or 3 report is that it is an independent certification that is provided by external auditors.
What is a SOC 2/SOC 3 Report?
SOC stands for Service Organization Control reports, and there are three different types namely SOC 1, SOC 2, and SOC 3. When considering which SOC report best fits the needs of your organization, you need first to understand what these audit reports mean. You also need to consider other areas such as the Trust Services Principles, Internal Control over Financial Reporting (ICFR), and restricted use.
SOC 1: This report is based on the SSEA 18 standard. It reports on the effectiveness of a service organization’s internal controls, which may be relevant to your Internal Control over Financial Reporting (ICFR) as a client. SOC 1 is primarily meant for financial institutions that house financial data such as banks or investment firms.
SOC 2: This report evaluates your internal control, procedures, and policies that directly relate to your organization’s system security. The audit report is designed to determine if service organizations remain compliant with the principles of privacy, security, confidentiality, availability, and processing integrity; otherwise referred to as the Trust Services Principles. SOC 2 is meant for non-financial companies that process or house data – financial or otherwise.
SOC 3: This report is also based on the Trust Services Principles just like SOC 2 with one major difference: restricted use. Unlike the SOC 2 or 1 report, SOC 3 can be freely distributed, and it is not restricted to user organizations. Although the SOC 3 report does not entail a detailed description of a service organization’s system, it does have the auditor’s report on whether the entity has maintained effective controls of its systems.
SOC 2 versus SOC 3 Reports
Both the SOC 2 and SOC 3 reports outline information related to the internal controls for security, processing integrity, confidentiality, availability, or privacy of a service organization. These are the five focus areas of the Trust Services Principles and Criteria of the American Institute of CPAs (AICPA).
Both report on similar information with the only difference being that a SOC 3 report is prepared for a general audience. It is, therefore, shorter and less detailed than the SOC 2 report that is intended for an informed audience of stakeholders. Also, a SOC 3 report can be shared on an organization’s website together with a seal indicating compliance.
HOW SOC 2 or SOC 3 Can Keep Your Business Secure
Obtaining a SOC 2 or 3 report is a rigorous process as it involves a third-party CPA firm coming to your service vendor’s datacenter site to assess their data availability and security stance. The assessment covers areas such as IT control systems, infrastructure, recovery process, security protocols, etc. Basically, the CPA auditor reviews a vendor’s security setup and process to determine their service effectiveness to clients.
This certification is, therefore, essential to you because it verifies that your software or cloud provider is effectively implementing and practicing what they advertise. Ergo, it makes no sense to have a CSP that cannot guarantee the safety of your data on the cloud. The SOC 2 or 3 report functions as an assurance that your vendor protects their data. It also gives you transparency for what exactly to expect from a vendor.
A SOC 2 or 3 report often lays the groundwork for other types of compliance frameworks. Being SOC 2 or 3 complaint can, often, mean that a service provider has aligned with other compliance standards for data security. For instance, a SOC 2 report can include supplemental materials to help you, the client, understand the stance of related standards and frameworks such as the HIPAA Security Rule.
This is essential since a cloud service provider can only provide a basis for enabling you to achieve your regulatory requirements including HIPAA, GDPR, PCI, or COBIT. You should ensure that your CSP articulates what responsibilities are yours.
Security Practices Critical to Meeting SOC 2 or 3 Compliance
A service provider that has achieved SOC 2 or 3 compliance has established a secure process with the required levels of oversight across the entire company. Specifically, it can monitor unusual system activity, user access levels, and system configuration changes. Your CSP needs to monitor for known and unknown malicious activity to ensure that your information is safe in their care.
- Anomaly Alerts
Once a security incident happens, your service provider needs to have sufficient alerting procedures in place to allow for immediate response and corrective action. SOC 2 or 3 certification means that your service provider has demonstrated that they can sieve false positives and only alert when unauthorized activity occurs such as file transfers; privileged account, login, or file system access; or exposure of data, controls, and configurations. Having effective alert systems in place allows for swift corrective action to ensure data security.
- Detailed Audit Trails
In the cloud environment, nothing is more essential than knowing what the root cause of an attack is and responding immediately especially if it is an active incident. SOC 2 or 3 compliance reports cover audit trails, which allow your service provider to get insight into an attack to make quick and informed response decisions.
- Actionable Forensics
Before settling on a service provider and entrusting them with your data, to you need to know that they monitor for suspicious activity, receive real-time alerts, and can take immediate corrective action to prevent the compromise of critical customer data or a system-wide situation. Since your service provider decisions are only as good as the intelligence behind them, you need accurate and actionable data, which is guaranteed by a SOC 2 or 3 certification.
The Bottom Line
Migrating from your on-premises datacenter to a cloud hosting option – private, public, or hybrid – can create uncertainty and fear. A SOC 2 or 3 report provides validation of the most likely critical concerns that you may have about data security, availability, and process control. This report also serves as a basis for probing a provider as it relates to SOC 2, SOC 3 or other compliance frameworks such as HITRUST and COBIT.
SOC 2 or 3 is all about setting up defined policies, practices, and procedures rather than ticking compliance checkboxes. Unlike SOC 1 that just requires a provider to pass an audit test, SOC 2 and 3 require long-term internal practices to ensure data protection and security.