• Secureframe Blogarrow
  • Who Needs a SOC 2 Report? Quick Answers to Common Compliance Questions
Who Needs a SOC 2 Report? Quick Answers to Common Compliance Questions

Who Needs a SOC 2 Report? Quick Answers to Common Compliance Questions

  • July 12, 2022

SOC 2 is one of the most common security frameworks SaaS companies rely on today, particularly in the US. But does your organization need it? What are the pros and cons of having a SOC 2 report?

Below we explain the basics of SOC 2, including what it is, the audit process, and why businesses choose to become compliant. We also share 5 questions to ask that will help you decide if SOC 2 compliance is the right choice for your organization.

Crash course: What is SOC 2?

SOC 2 stands for System and Organization Controls 2. It’s a security framework that outlines how companies can securely handle customer data that’s stored in the cloud. 

It was created by the American Institute of Certified Public Accountants (AICPA) in 2010 to help service providers build trust with customers. Being SOC 2 compliant tells current and potential customers that you have the appropriate safeguards in place to keep their sensitive data secure. 

A SOC 2 report is an attestation made by an independent CPA that verifies your organization meets the rigorous security standards laid out in the SOC 2 framework. 

SOC 1 vs SOC 2 vs SOC 3

SOC 2 is just one of the frameworks created by the AICPA. 

SOC 1 is designed for organizations that impact a customer’s financial reporting, like payroll or claims processing companies. SOC 1 reports attest that financial statements and other information is being handled securely. 

SOC 3 is similar to SOC 2 in that both reports evaluate an organization’s data security controls. However, there are a few key differences.

  • SOC 2 reports go into far greater detail around control tests and results. Because they’re more high-level, SOC 3 reports typically won’t satisfy customers who request a SOC report.
  • While SOC 2 reports can be either Type I or Type II, SOC 3 reports are always Type II. This means an audit window of 3-12 months.
  • SOC 3 reports are general reports that can be shared publicly, like on a company website. Because SOC 2 reports describe an organization’s systems and processes in-depth, they are private internal documents that are usually only shared with customers under an NDA.

The SOC 2 Trust Services Criteria (TSC)

The SOC 2 framework is built on five Trust Services Criteria (formerly called the Trust Services Principles):

  • Security: Protecting information from vulnerabilities and unauthorized access
  • Availability: Ensuring employees and clients can rely on your systems to do their work 
  • Processing integrity: Verifying that company systems operate as intended
  • Confidentiality: Protecting confidential information by limiting its access, storage, and use
  • Privacy: Safeguarding sensitive personal information against unauthorized users

Every SOC 2 audit will include the Security criteria, also referred to as the common criteria, while the others are optional based on the services you provide. 

SOC 2 Type 1 vs Type 2 reports

There are two types of SOC 2 attestation reports, Type I and Type II. One of the most important decisions organizations need to make when pursuing SOC 2 compliance is which type of audit report is the right fit. 

Here’s the main difference between SOC 2 Type I and Type II reports: Type I reports assess your internal security controls at a single point in time. The auditor will evaluate whether your current security controls are sufficient for protecting sensitive data and whether they fulfill the applicable Trust Services Criteria requirements.

Type II audit reports evaluate how well a service organization’s controls perform over a period of time, with a typical audit window of 3-12 months. This type of SOC report takes longer to complete and is typically more expensive.

Most organizations choose their report type based on timelines and resources. If you need a SOC 2 report as soon as possible, a Type I report can be completed in a matter of weeks. However, they’re often a short-term solution. 

Many potential customers are rejecting Type I reports, and you’ll likely need a Type II report at some point. Opting to complete a Type II report straight away can save you time and money since you’ll only have to undergo one audit. 

The SOC 2 audit process

The formal SOC audit process starts by selecting an auditor. You’ll need to find an accredited CPA to issue your report, preferably one who has experience with similar companies in your industry. 

Once the audit begins, the auditor will interview your team about company policies and processes. They will also review documentation and evidence of how your controls work, and consult with process owners for clarification or to request additional evidence. 

At the end of the audit, you’ll receive a written SOC 2 report summarizing your audit scope, systems and control environment, and control tests. The report will also include the auditor’s formal opinion about how well your controls perform: 

  • Unqualified opinion: The organization’s controls satisfy the requirements for compliance
  • Qualified opinion: The organization is close to coming into compliance, but one or more areas aren’t quite there yet
  • Adverse opinion: The organization’s controls fall short in one or more non-negotiable areas 
  • Disclaimer of opinion: The auditor doesn’t have enough information to support a formal opinion

Depending on the type of report you choose, a SOC 2 audit can take anywhere from 1-12 months. But preparing for a successful audit can take much longer. You’ll need to select your TSC, write policies and procedures, train your staff, conduct a gap analysis, implement any new controls, and select an auditor. All of these tasks can easily eat up hundreds of hours for your team.

Compliance automation can help you prepare for an audit in a fraction of the time. Secureframe automatically collects evidence during your audit window and alerts you of any nonconformities in your tech stack. You can also track your progress towards audit readiness with a central dashboard to get a real-time view of what you still need to do before bringing in an auditor. 

Do you need a SOC 2 report? 5 questions to help you decide

Understanding what SOC 2 compliance entails is just one half of the equation. The other half is deciding whether it’s the right choice for your organization right now. If you answer “yes“ to the majority of these questions, a SOC 2 report is likely worth your while.

1. Are customers and prospects requesting a SOC 2 report?

SOC 2 reports are not legally required. But many clients and potential customers will require a SOC report before doing business with you, especially mid-market and enterprise companies. Even if it’s not a hard requirement, prospects who are comparing similar service providers are likely to see a SOC 2 report as a differentiating factor when making their selection.

Ultimately, SOC 2 has gone from being a competitive advantage in the sales process to table stakes for information security. Without a SOC 2 report, you‘ll likely see sales processes stall or fall through during procurement and security reviews.

Even if you don‘t have prospects requesting a SOC 2 report now, remember it can take over a year to prepare for and complete your SOC 2 audit. It‘s never too early to start laying the groundwork for compliance.

2. Does your organization handle sensitive customer data?

Compliance isn’t just about avoiding something bad like a data breach — it’s about building a secure foundation for your business and your customers. Whether you’re using, storing, accessing, or processing customer data, it’s a best practice to be compliant with a cybersecurity standard like SOC 2 or ISO 27001. Completing the SOC 2 audit process will help you meet your customer's expectations and protect sensitive information from data breaches.

3. Does your business have defined security processes and policies?

The SOC 2 framework strengthens security by requiring your company to implement a variety of internal controls. A formal risk management strategy, regular employee training, policy reviews, and periodic audits can all improve the way your entire organization thinks about and manages risk. Not to mention it often uncovers operational inefficiencies like conflicting policies, redundant tools, and outdated software. 

4. Do you have a framework for managing organizational risk?

SOC 2 offers a framework for identifying and addressing risks to your business, whether they stem from security attacks, potential fraud, natural disasters, or faulty operational practices. Risk management is often overlooked but is crucial to a company that wants to scale securely and successfully navigate a shifting threat landscape.

5. Do you have a company culture that prioritizes security?

Security isn’t just the responsibility of senior management, the CISO, or the IT department – it’s everybody’s responsibility. Building the internal controls necessary for SOC 2 helps foster a better understanding of security throughout your organization. Start as early as possible, be transparent with team members about any new policies and procedures, and encourage them to speak up if they notice any potential risks or policy violations.

Bonus: Are you asking service providers for their SOC 2 reports?

Security doesn’t start and end with your own company and employees — vendor risk management is an important part of keeping customer data safe. If you aren’t completing a security review as part of your vendor selection process, you should be.

By reviewing a SOC 2 report, you’ll get:

  • A deeper understanding of the system used to deliver services
  • A management assertion from the service provider
  • An independent auditor‘s assessment of the service provider‘s control environment and their formal opinion on its design and/or operating effectiveness

Reviewing a vendor’s SOC 2 report can help you better understand any additional risks you might be taking on by doing business with them, and plan for any additional controls you need to implement to address those risks.

How Secureframe simplifies SOC 2 compliance

We save teams hundreds of hours and thousands of dollars spent writing security policies, collecting evidence, hiring security consultants, and performing readiness assessments. And because Secureframe continuously monitors your infrastructure and alerts you of vulnerabilities, you’ll get your SOC 2 report faster and save money while strengthening your security posture. 

Request a demo to learn more about how we can help you get SOC 2 compliant in weeks, not months.