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  • SOC 2 Compliance: Requirements, Audit Process, and Benefits for Business Growth
SOC 2 Compliance: Requirements, Audit Process, and Benefits for Business Growth

SOC 2 Compliance: Requirements, Audit Process, and Benefits for Business Growth

  • January 03, 2023

For SaaS businesses, customer trust is the most valuable currency. Without it, organizations can’t attract customers or retain them long enough to maintain efficient, sustainable growth.  

But in today’s age of growing cyber threats, earning and keeping customer trust can be difficult. A single data breach can cost millions and devastate a brand’s reputation. 81% of consumers say they would stop engaging with a brand online following a data breach.

Prospects, customers, and business partners require proof that organizations have sufficient data protection controls in place to protect sensitive and personally identifiable information. SOC 2 compliance can offer them that assurance.

A SOC 2 report gives customers, business partners, investors, and other stakeholders the assurance they need to trust you with their data. Achieving compliance with SOC 2 can be a powerful competitive advantage, enabling companies to shorten sales cycles and move upmarket.

This article covers all the nitty-gritty details of SOC 2 compliance. We explain compliance requirements, the audit process, typical costs, and answer frequently asked questions about SOC 2 to help you decide if pursuing compliance is the right move for your business. If you’re looking to dive even deeper into the framework and best practices for achieving compliance, check out our SOC 2 Compliance Hub with 35+ articles and free compliance resources.

SOC 2 is a security framework for protecting customer data. By achieving SOC 2 compliance, organizations demonstrate that they have proper risk management in place and have implemented security policies and procedures that can effectively protect sensitive data. Organizations must undergo a third-party audit by an accredited CPA firm to assess compliance with SOC 2 requirements.

An Overview of SOC 2 Compliance

Data security and privacy are growing concerns for today’s consumers. Organizations must be able to demonstrate that they can effectively protect customer data against increasingly sophisticated attacks in order to survive in the marketplace.

Security certifications like SOC 2 and ISO 27001 offer companies guidance around what kinds of cybersecurity controls to implement, as well as the opportunity to have a trusted third-party attest to the operating effectiveness of those controls. Let’s dive into the basics of the SOC 2 framework.

What is SOC 2?

SOC 2 is a security framework that outlines standards for safeguarding customer data. SOC stands for System and Organization Controls (formerly service organization controls).

A SOC 2 attestation report is the result of a third-party audit. An accredited CPA firm must assess the organization’s control environment against the relevant Trust Services Criteria. 

Achieving SOC 2 compliance demonstrates that you have completed a proper risk assessment and risk mitigation as well as implemented security policies and procedures to protect sensitive data from unauthorized access or use. 

Who does SOC 2 apply to?

SOC 2 compliance applies to SaaS companies, service providers, cloud computing companies, hosting services, or data center providers. While SOC 2 is not legally required, every technology-based organization that stores customer data in the cloud should demonstrate SOC 2 compliance.

If your customers are based in the US, a SOC 2 report is almost essential to attract prospects and close deals. SOC 2 has become the most commonly requested security and compliance standard for procurement and vendor security teams in the US.

What are the benefits of SOC 2 compliance?

SOC 2 compliance isn’t mandatory; neither is it legally required. However, getting certified in the digital era offers multiple benefits. 

1. Speed up your sales cycle

The SOC 2 report provides third-party-certified answers to questions any prospect may pose. As the Hasura team claims, “Being able to provide SOC 2 in the RFIs of potential clients speeds up the sales cycle.” 

2. Gain a competitive advantage

With the spiraling threat of data breaches, users want assurance that their data is adequately protected. A SOC 2 report lets you build trust and transparency and gives you an edge over competitors.

3. Increase customer trust

SOC 2 compliance report offers a fresh and independent view of your internal controls. It increases transparency and visibility for customers, thus unlocking infinite sales opportunities. 

As Anthony Heckman, head of business development UnitQ, said, “We couldn’t get to the next stage of growth without processes like SOC 2 in place and couldn’t have closed enterprise customers without it.”

4. Proactively address risk

The process of achieving SOC 2 compliance gives organizations the confidence that they have sound risk management practices in place to identify and address vulnerabilities. Using SOC 2 compliance automation tools can align internal controls with relevant trust principles. As a result, it enables you to avoid costly security incidents, saving you significant amounts (in 2020, IBM estimated the cost of a data breach to be $3.62 million). 

SOC2 report graphic of compliance benefits: customer trust, new clients & markets, improved security & processes

What’s the difference between SOC 1 and SOC 2 reports?

There are three types of SOC compliance reports: SOC 1, SOC 2, and SOC 3 reports. 

A SOC 1 report addresses the internal controls over financial reporting (ICFR). It focuses entirely on financial reporting objectives and doesn’t deal with the confidentiality, privacy, or availability of customer data. 

A SOC 2 report covers broader operational objectives for service organizations. It focuses on the internal controls aligned with security, privacy, availability, processing integrity, and confidentiality of customer data. 

There are two types of SOC 2 audit reports: SOC 2 Type I and SOC 2 Type II. 

Lastly, the SOC 3 report focuses on trust service criteria for a general use report.

SOC 2 Type I vs Type II

Unlike security certifications like ISO 27001, HIPAA, or PCI DSS, a SOC 2 report is unique to each service organization.

There are two types of SOC 2 attestation reports. A Type I report assesses an organization’s cybersecurity controls at a single point in time. It tells companies if the security measures they’ve put in place are sufficient to fulfill the selected TSC. Because they are point-in-time audits, a Type I report can be completed in a matter of weeks and is typically less expensive than a Type II audit. 

A Type II audit assesses how an organization’s cybersecurity controls perform over a period of time, typically a 3, 6, 9, or 12-month audit window, to gauge their operating effectiveness. Because of this timeline, Type II audits take longer and are more expensive than a Type I audit. 

Deciding which report type to pursue usually comes down to how quickly an organization needs to have a report in hand. If a SOC 2 report is needed as soon as possible to close an important customer, an organization can obtain a Type I report faster and then prepare for its Type II audit. If there isn’t as much urgency, many organizations opt to pursue a Type II report. Most customers will request a Type II report, and by bypassing the Type I report, organizations can save money by completing a single audit instead of two. 

SOC2 Type 1 vs SOC2 Type 2 report graphic with pros and cons list

The SOC 2 Trust Services Criteria (TSC): Compliance requirements

The American Institute of Certified Public Accountants (AICPA) built the SOC 2 framework around five Trust Services Criteria:

  • Security: Evaluates whether your systems and controls can protect information against physical access, damage, use, or modifications that could hinder users. Security is also known as the “common criteria,” as it’s the only mandatory trust principle. The others are optional. 
  • Availability: The availability principle checks whether your system and information are readily available for use as committed to via service-level agreements (SLAs). It applies to service organizations that offer cloud computing or data storage services. 
  • Processing integrity: It examines the accuracy, timeliness, validity, completeness, and authorization of system processing. This also applies to SaaS and technology companies that provide e-commerce or finance-related services.
  • Confidentiality: It examines whether your systems and internal controls are capable of protecting confidential data. You should include this principle in your SOC 2 report if you handle confidential information, like insurance or banking data for clients. 
  • Privacy: Unlike confidentiality, which applies to a wide array of sensitive data, privacy focuses entirely on personal information. It evaluates whether your systems gather, store, show, use, and dispose of personal information in a manner that meets client objectives. 

The first step in the SOC 2 compliance process is deciding which Trust Services Criteria you want to include in your audit report. In other words, which TSC are in scope for your audit. You implement systems and information security controls based on the Trust Services Criteria relevant to your organization and your customers.

AICPA Trust Services Criteria list and guidance for which trust services principles to include in a SOC2 compliance audit

The SOC 2 audit process

Understanding what happens during a SOC 2 audit can help organizations better prepare and have a more successful outcome. Below, we’ll outline what happens during a SOC 2 audit, how long the process takes, and the typical costs involved. 

Who performs a SOC 2 audit?

SOC 2 audits can only be performed by an AICPA-accredited Certified Public Accountant (CPA) firm. The auditing firm must be independent so it can perform an objective examination and deliver an unbiased report. 

If you’re ready for a SOC 2 audit and are looking for a trusted auditing firm, you can refer to our list of highly-regarded CPAs.

What happens during a SOC 2 audit?

SOC 2 is an attestation report, not a certification like ISO 27001. You don’t pass or fail a SOC 2 audit. Rather, you get a detailed report with the auditor’s opinion on how your service organization complies with your selected Trust Services Criteria.

Auditors spend anywhere from a few weeks to a few months reviewing your systems and controls, depending on the scope of your audit and the report type you chose. They’ll run tests, review evidence, and interview members of your team before producing a final report.

The audit report explains the auditor’s findings, including their opinion on whether your security controls are compliant with SOC 2 requirements.

  • An “unqualified opinion” is a pass, and the organization is compliant with SOC 2.
  • A “qualified opinion” means the organization is almost compliant, but one or more areas require improvement.
  • An “adverse opinion” means the organization falls short of SOC 2 compliance in one or more non-negotiable areas.
  • A “disclaimer of opinion” means the auditor doesn’t have enough evidence to support any of the first three options.

The full report also includes an overview of the audit scope, descriptions of tests and test results, a list of any cybersecurity issues the auditor discovered, and their recommendations for improvements or remediation requirements. It also includes a management assertion, which allows organizations to make claims (or “assertions”) about its own systems and controls.

A clean report assures customers and prospects that your organization has implemented effective security measures and that they’re functioning effectively to protect sensitive data. 

Unlike ISO 27001 certifications, SOC 2 reports don’t have a formal expiration date. That said, most customers will only accept a report that was issued within the last 12 months. For this reason, most companies undergo an audit on an annual basis. 

How long does it take to get SOC 2 certified?

Certification timelines depend on a few factors, including the size and complexity of your organization and systems, audit scope, report type, and audit window.

SOC2 compliance timeline with steps: audit prep, Type I report, evidence collection, audit, and Type II report

SOC 2 Type I audit timeline

Pre-Audit Preparation: 1-3 months

To prepare for a Type I audit, organizations typically create and implement policies, establish and document procedures, complete a gap analysis and remediation, and complete security awareness training with employees. 

Audit: 1 month

The auditor will conduct a point-in-time audit and issue a SOC 2 Type I report. 

SOC 2 Type II audit timeline 

Pre-Audit Preparation: 1-3 months + audit window

To prepare for a Type II audit, organizations usually select the relevant TSC, conduct a gap analysis and remediation, implement policies and processes, train employees, and complete a readiness assessment. 

Audit window: Start the clock on your 3, 6, 9, or 12-month review window. This is the period of time that your controls and processes are running and you are collecting evidence for your auditor to review.

Audit: Month 9-12

The auditor will conduct their assessment of your documentation, interview your team, and issue your SOC 2 Type II report.  

Getting SOC 2 compliant with Secureframe can save you hundreds of hours of manual work. Our automation platform provides a library of auditor-approved policy templates and hundreds of integrations to automate evidence collection. Our team of in-house compliance experts will help you at every step of the way, from understanding control requirements and determining your audit readiness all the way through the audit itself.

The entire preparation phase and audit can be broken down into phases.

The pre-audit phases typically take between two and nine months to complete and include the readiness assessment, gap analysis, and remediation. 

The audit itself can take between one and five months, depending on report type and audit scope. 

Steps to prepare for SOC2 audit: choosing report type and TSC, gap analysis and remediation, documentation

Phase 1: Define SOC 2 scope

Decide whether to pursue a Type I or Type II report and the Trust Services Criteria you’ll include in your audit based on your contractual, legal, regulatory, or customer obligations. Depending on why you’re seeking SOC 2 compliance, you can include only security or all five TSC.

Phase 2: Gap analysis 

Determine your control objectives relative to your TSC, then assess the current state of your control environment and complete a gap analysis against SOC 2 requirements. Create an action plan for remediating any gaps in your controls. 

Phase 3: Remediation and readiness assessment

In this phase, you allocate resources to execute the remediation plan and close the gaps uncovered in the previous phase. After completing a SOC 2 readiness assessment, you can begin the formal audit.

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SOC 2 Self-Assessment Checklist

Use this step-by-step checklist to assess your SOC 2 audit readiness.

Download the checklist

Phase 4: Begin the audit

Now the auditor will begin the attestation process, evaluating and testing your controls against the TSC you’ve selected.

Phase 5: SOC report delivery

SOC 2 auditing can take up to five weeks, depending on audit scope and number of controls. The auditor will deliver the SOC 2 audit report with four standard features:

  • Management’s assertion
  • Description of services
  • Auditor’s opinion
  • Results of testing

How much does a SOC 2 audit cost?

Just as the certification timeline can vary, the cost of SOC 2 depends on several factors. 

  • Whether you are pursuing a Type 1 or Type 2 report
  • The number of Trust Services Criteria included in your audit
  • The size of your organization and complexity of your systems and controls
  • Any outsourced services, like hiring a consultant to complete a readiness assessment and help implement controls  
  • Hiring the CPA firm to conduct the audit
  • Any additional tools and/or employee training needed to remediate gaps

SOC2 compliance cost list

Most companies can expect to spend between $20k-$200k to prepare for and complete a SOC 2 audit.

SOC 2 compliance automation

As mentioned above, SOC 2 compliance isn’t mandatory or a legal requirement for your service organization. However, the benefits it delivers make it near-impossible for any technology company to compete without it. 

Preparing for and achieving SOC 2 compliance is a major commitment, requiring a significant investment of time and resources. Compliance automation simplifies and streamlines the process significantly, saving time and money while maintaining strong security standards. 

Benefits of compliance automation platforms include: 

  • Automated evidence collection to eliminate manual tasks like taking screenshots and organizing documentation 
  • Continuous monitoring of your tech stack and cloud services to ensure compliance and flag nonconformities 
  • Simplified vendor and personnel management
  • Auditor-approved policy templates to save time spent on policy creation 
  • Applying your current controls across multiple frameworks to simplify compliance with frameworks like SOC 2 and ISO 27001

Secureframe offers all of the above and much more, including a team of expert former auditors to support you throughout the entire SOC 2 compliance process. 

Schedule a demo of Secureframe

See how our powerful security, privacy, and compliance automation platform can simplify and streamline your SOC 2 compliance.

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Free resources to simplify SOC 2 compliance

Check out our library of free resources to help you navigate the SOC 2 compliance process. You’ll find guides, policy templates, evidence collection spreadsheets, compliance checklists, and more.

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The SOC 2 Compliance Kit

Simplify SOC 2 compliance with key assets you’ll need to get your report, including a SOC 2 guidebook, customizable policy templates, readiness checklist, and more.

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SOC 2 compliance FAQs

What does SOC 2 compliance mean?

SOC 2 is a security framework, and SOC 2 compliance involves establishing security controls and processes that satisfy the requirements of that framework. If an organization implements the required security controls and completes a SOC 2 audit with a certified third-party auditing firm, they receive a SOC 2 report that details their level of compliance. 

What is required for SOC 2 compliance?

SOC 2 is a flexible framework that allows organizations to implement controls based on their unique systems and business needs. That said, organizations must fulfill requirements of their selected TSC. This typically involves: 

  • Information security: Data must be protected against unauthorized access and use
  • Logical and physical access controls:  logical and physical access controls must be in place to prevent unauthorized use
  • System operations: System operations must be in place to detect and mitigate process deviations?
  • Change management: A controlled change management process must be implemented to prevent unauthorized changes
  • Risk mitigation: Organizations must have a defined process for identifying and mitigating risk for business disruptions and vendor services

What are the 5 principles of SOC 2?

The SOC 2 framework is built on 5 Trust Services Criteria, as defined by the American Institute of CPAs: security, availability, processing integrity, confidentiality, and privacy. Of these five TSC, only security (also known as the common criteria) is required to be included in the audit report.

What is the difference between ISO 27001 and SOC 2?

SOC 2 and ISO 27001 are similar frameworks that both address security principles like data integrity, availability, and confidentiality. Both frameworks also require an independent audit by a certified third party. 

However, there are key differences between the two frameworks. ISO 27001 is more prevalent internationally, while SOC 2 is more prevalent in the US. ISO 27001 also requires organizations to have a plan in place to continually monitor and improve their information security controls over time. SOC 2 is generally more flexible, allowing companies to choose which TSC to include in their audit in addition to the security requirement. ISO 27001, however, involved prescribed controls that organizations need to implement. 

Who needs SOC 2 compliance?

Any business that handles customer data in the cloud will benefit from compliance with SOC 2, especially those serving customers in the US. While SOC 2 is not legally mandated, more customers are requiring vendors to have a SOC 2 report before signing a deal. A current SOC 2 report helps organizations build customer trust, establish strong security practices, expand into new markets, and stand out from competitors.

What are the two types of SOC 2?

Organizations can choose to pursue a SOC 2 Type I or SOC 2 Type II report. A Type I report involves a point-in-time audit, which evaluates how your control environment is designed at a specific point in time. A Type II report evaluates how those controls perform over a specific period of time, or audit window, typically 3, 6, or 12 months.

What is a SOC 2 readiness assessment?

A SOC 2 readiness assessment is a pre-audit test that can confirm that your organization is well-prepared for a SOC 2 audit. 

The purpose of the review is to pinpoint controls that conform (or don’t conform) to trust service criteria. It also uncovers areas that are lacking proper controls and helps create a remediation plan.

Use our SOC 2 readiness assessment checklist to visualize your level of audit readiness and quickly identify gaps.