What is SOC 2 Compliance?

SOC 2 stands for “Systems and Organization Controls 2.” SOC 2 is a framework and compliance process that enables software companies and professional services organizations to demonstrate their effective use of internal controls to ensure data security and information security in their own operations. 

Companies such as SaaS companies, certified public accountants, and IT service providers have widespread access to their clients’ data and private information. SOC 2 compliance validates that an organization’s internal controls meet high industry standards and are strictly and consistently followed to ensure processing integrity confidentiality.

In this article, we will answer the question “What is SOC-2 compliance?” by taking a closer look at this compliance framework, its importance in protecting sensitive data, and the benefits it provides businesses.

What is SOC 1 and SOC 2 Compliance, and What are Their Differences?

Before we examine what is SOC-2 compliance, it’s important to understand how SOC 2 compliance and its predecessor, SOC 1, came to exist.

SOC 2 grew out of the accounting profession. The American Institute of Certified Public Accountants (AICPA) first developed SOC 1, which gives assurances that an organization, such as CPA or auditor, is safeguarding the financial statements and information of their clients through access controls. 

For example, a company’s CPA may have broad access to their clients’ financials, and every company wants their private information safeguarded and strictly controlled.

SOC 2 is broader and was introduced by the AICPA to require an audit process to address security controls and standards specifically. The AICPA formulated the Trust Services Criteria, which cover security, availability, processing integrity, confidentiality, and/or privacy of customer data. 

To receive SOC 2 compliance, an organization must meet various levels of internal controls and demonstrate their adherence to these controls over time, specifically over a minimum of 12 months. This is where Type 1 and Type 2 levels come in. 

As part of the standards for attestation agreements, SOC 2 Type 1 requires a third-party auditor to confirm that an organization’s internal controls are suitable to meet the Trust Services Criteria and principles. 

But what is SOC 2 Type 2 compliance? It is an advanced form of SOC 2 Type 1 that takes the process one step further by requiring validation that the internal controls are actually being followed over time. 

What Kinds of Companies Must Be SOC 2 Compliant?

It’s important to understand that SOC 2 is not a legal requirement. Rather, it is a voluntary compliance and audit procedure that builds trust between service providers and their clients. 

Any business working with a SaaS company or a cloud or IT service provider wants assurances that the vendor they are working with has solid internal access controls, actively protects customer data, and follows their own internal controls to the tee. 

For a customer buying a SaaS product or choosing an IT service provider, it is impractical to independently audit every potential vendor. 

SOC 2 compliance helps build trust by enabling SaaS, cloud, and IT service providers to be independently audited by specialized third-party auditors.  

The SOC 2 Type 2 compliance report can be provided to any customer or client seeking further details.

How Does a Company Become SOC 2 Compliant?

Companies can elect to apply for either an SOC Type 1 or Type 2 certification. A Type 1 audit merely confirms that a company has a robust set of internal controls that address at least one of the five Trust Services Principles. 

The more challenging and time-consuming project is to seek a SOC 2 Type 2 certification, where adherence to the internal controls should be demonstrated over a period of time, commonly 12 months. 

Seeking an SOC Type 2 compliance is time consuming and costly. Specialized third-party auditors are expensive, to say nothing of the time and expense of internal staff and company leadership who need to engage in the audit process. 

SOC 2 Type 2 audits can range anywhere from $20,000 to $80,000 per year. Fortunately, there are several software tools on the market that are designed to measure and document control adherence to over time. 

These sorts of tools help companies stay focused and compliant, while reducing the overall amount of time an auditor needs to spend validating compliance.  

What are the Benefits of Working With an SOC 2 Compliant Vendor?

Trust

Managing the security and integrity of your vendors is important. Working with a SOC 2 Type 2 compliant vendor or service provider gives you the trust and confidence that you are working with a professional provider with strong internal controls. 

You can engage a new vendor quickly and be confident that your data and privacy will be protected.  

Your Compliance

When companies are being certified or audited themselves for their own specific industry compliance requirements, they must often demonstrate that their own downstream vendors and suppliers are compliant. 

Therefore, savvy organizations are making SOC 2 Type 2 compliance a must-have requirement for all of their SaaS, cloud, and IT service provider relationships.

Better Business Relationships

SOC 2 makes good business sense as well. The biggest challenge in managing vendors and suppliers is the gap between what they say they do and what they actually do in practice. 

SOC 2 compliance closes this gap and forces organizations to engage with independent third-party auditors to validate internal controls over time. 

Companies that require SOC 2 Type 2 compliance will have a strong stable of vendors and will minimize risks to their data and privacy, while mitigating operational risks that come from lax cybersecurity.

Work With an SOC 2 Compliant Managed Services Partner

Now that you know what SOC2 type 1 and type 2 are, you can make educated decisions about which IT vendors and service providers to do business with.

However, if you are still wondering what is SOC 2 compliance, we can help. At NENS, we are in the process of becoming SOC 2 certified to give our clients the added trust and confidence to outsource their IT management and support. 

We are pleased to invest the time and effort that will be required each year to renew our SOC 2 compliance and look forward to sharing the details with prospective clients and business partners. 

For more information about our services and SOC 2 compliance, contact us today for more information.