As a consultancy with over a decade of delivering secure, reliable digital products, we’ve found the System and Organization Controls (SOC) audit process to be the best way to evaluate, improve, and confirm that our security practices are comprehensive enough for clients with the highest security requirements. Across service industries, this audit and reporting process is considered the gold-standard security assessment. While SOC is typically engaged by service-providing organizations that handle large amounts of sensitive data for other companies (e.g., payroll processing, health data, data centers, web hosting, cloud storage, SaaS, etc.), we’ve found immense value as digital product consultants because it bolsters our internal security and proves our trustworthiness to partners.
Because the different audit and report types can get confusing, we’ve created a short primer from our perspective to describe what they are, why they are important, how they differ, and which types of companies benefit from engaging them. If you already know about SOC reporting but want to learn more about our SOC 2 experience and why it has been valuable for us as a digital product consultancy, discover Eric’s thoughts here [LINK ADDED].
SOC Foundations
Pronounced “sock,” the SOC framework, or System and Organization Controls framework, was developed by the American Institute of Certified Public Accountants (AICPA, is the national professional organization for Certified Public Accountants). Undergoing SOC audits can help vendors identify vulnerabilities and fix flaws to prevent data breaches. The result of a SOC audit is a SOC report that can be shared with customers to help them understand a vendor’s security practices (i.e., evaluate if they’re secure enough to do business with). The AICPA defines three types of SOC reports: SOC 1, SOC 2, and SOC 3. The numbers differentiate the report types and do not indicate a sequence that companies must follow. The most comprehensive audit and report type is SOC 2.
Differences between SOC 1, SOC 2, and SOC 3 Reports
In general, SOC reporting is relatively standardized but may be approached differently depending on a company’s business and at the auditors’ discretion. For example, a SOC 1 audit looks different for us as digital product consultants than it would for a payroll processing company with significant responsibilities to securing customer financial data.
SOC 1 reports, as we’ve encountered them, reveal whether security controls and policies are effective on a limited scale. It’s considered limited because the auditor evaluates one system, person, or project at one point in time, as opposed to an evaluation of any cross-section of your security practices at any time. The auditing process for the SOC 1 report often begins with a Gap Analysis, which is when an auditor interviews you to assess what controls are needed at your organization and recommend security improvements. Your team uses these findings to implement effective security controls within a discrete instance (one system, person, or project). Your auditor then audits that one system, person, or project against your controls and delivers a SOC 1 report evaluating whether these security controls and policies were implemented effectively on that limited scale.
SOC 2 reports reveal whether your security controls and policies are effective on a company-wide, comprehensive scale. This report is generated after a thorough audit assessing company-wide controls and policies. Your auditor can ask for evidence at any time for any instance (system, person, or project), which serves as proof of the comprehensiveness of your security controls. The resulting report is very detailed and only disclosed to clients or partners under NDA.
SOC 3 reports are condensed versions of SOC 2 reports curated for general, public use (e.g. posted on your website). The purpose of this report is to give companies with completed SOC 2 audits a way to publicly advertise their compliance status without revealing sensitive security details. Whereas SOC 2 reports are confidential because of their level of detail, SOC 3 reports are safe to share.
In summary, for our purposes, SOC 1 reports evaluate the suitability of security controls across one system, person, or project. SOC 2 reports are more extensive and evaluate whether controls and policies are effective across all systems, people, and projects. SOC 3 reports are paired-down versions of your SOC 2 reports that can be used to advertise compliance status publicly.
The power of SOC 2
SOC 2 audits are valuable because achieving them helps establish secure internal practices, and a positive report outcome assures potential clients of a company’s trustworthiness. Undergoing such an extensive audit process isn’t easy, but it’s very beneficial for organizations that store, process, or transmit customer data.
What is the result of a SOC 2 audit?
After auditors review a service organization’s controls based on the Trust Services Criteria (security, confidentiality, processing integrity, privacy, and availability of customer data), they issue a SOC 2 report describing their findings. The report includes their opinion on whether the service organization’s controls effectively meet the five Trust Services Principles for their data. It also includes highly detailed descriptions of the auditor’s control tests, procedures, test results, and a full description of the system. Because of the sensitive nature of this report, it is considered highly confidential and only shared with clients who have signed an NDA.
What types of companies should engage in the SOC 2 audit process?
If your company manages sensitive data in the cloud and/or data centers, getting a SOC 2 audit and report can bolster your internal security controls and signal reliability to your clients. In addition to showing customers your trustworthiness, engaging the audit process can make your company more secure by proactively discovering and addressing potential security weaknesses before they impact your business.
Even if your company is not a traditional service organization, getting an audit can be valuable because it strengthens your internal security and proves to clients that you are a safe, reliable partner for their projects. Presence is not a service organization in the traditional sense, but engaging the SOC 2 audit process has been incredibly valuable for us. It consistently bolsters our internal data privacy controls, signals our commitment to security, and attracts digital product partnerships with clients that require secure environments and products. Our SOC 2 report assures clients that only authorized users can access their environments and that the systems we build for them will be safe from hostile actors.
If you're considering security auditing for your company, read Eric Müller's recommendations for a smooth, efficient process in Engaging SOC 2 Audits to Strengthen Your Company's Security and Reputation.