SOC 2 Audits: What They Are and How to Stay Compliant, Part 1 of 2

Is your business in the process of learning more about System and Organization Controls (SOC) for Service Organizations?

Maybe you haven’t had any reason to travel down this particular auditing path yet. If you haven’t outsourced any services—think of things like Software-as-a-Service, cloud hosting and payment processing—or you only recently launched your business, the thought of learning about SOC 2 audits may seem completely foreign and a little overwhelming to you.

Considering the importance of information security, especially as businesses increasingly outsource vital and highly specialized tasks, businesses must ensure that they consistently and completely handle data appropriately. Mishandled data—particularly when it involves application and network security providers—can any enterprise vulnerable to a variety of attacks that include data theft, ransomware or extortion, and malware installation.

Take a few moments to learn more about how you can get up to speed on SOC 2 audits and how you can achieve and maintain compliance to protect your organization, clients, employees and any stakeholders.

Let’s Start with Some Basic SOC Audit Terminology

It may help you to understand some of the basic terminology about the various parties and other aspects of SOC auditing and SOC 2 audits, in particular. Take a look at the following terms to better understand who’s who and what’s what as we move along:

User Organization.

The organization, or entity, that has engaged a service organization and whose financial statements must be audited.

User Auditor.

The auditor, or auditing firm, engaged to report on the financial statements and internal controls of the user organization.

Service Organization.

The entity—or portion of an entity—engaged to provide services to a user organization and are part of the user organization’s information system.

Service Auditor.

The auditor who reports on controls of a service organization that are sometimes relevant to a user organization’s internal control, relating to an audit of financial services.

Report on Controls Placed in Operation.

The service auditor’s report on a service organization’s description of its controls.

Report on Controls Placed in Operation and Tests of Operating Effectiveness.

The service auditor’s report on a service organization’s description of its controls.

What Are SOC 2 Audits?

SOC 2 is a type of audit that ensures that your service organizations provide a safe operating environment where they are easily able to manage your data and protect the interests of your organization, as well as the privacy of your clients. The audit focuses on the controls that your organization has defined to properly govern the services it provides to your clients.

Developed and introduced by the AICPA, the SOC 2 audit focuses on the internal controls of a service organization, using the 5 Trust Services Criteria (TSC), which are Security, Confidentiality, Processing Integrity, Availability and Privacy.

Depending on your organization, or the reason for performing a SOC 2 audit, you may use a few or all of the TSCs to define the scope of your audit.

Further, it is important to note that you may perform one of two types of SOC 2 audits:

SOC 2 Type I.

This audit type describes the service organization’s systems and whether their design of controls meets relevant trust criteria put into operation at a specific point in time.

SOC 2 Type II.

This audit type details the operational effectiveness of controls over a period of time. User organizations and their auditing team generally select six months for the period of time to evaluate.

Who Requires SOC 2 Audits?

Anyone who needs detailed information and assurance about the controls at a service organization may request a SOC 2 audit. A broad range of users may occasionally need vital information related to one or more elements of the TSC.

The user organization often chooses to perform a SOC 2 audit, whether it is regularly scheduled or someone in the organization suspects that there may be a problem with one or more of the criteria at the service organization.

Additionally, clients might request a SOC 2 audit if they worry that their data is at risk for some type of compromise, which could result in a data breach. Further, any governing bodies over regulations like HIPAA, GDPR or PCI DSS may ask for assurance that your service organization properly handles your organization’s data.

What Is the Purpose of SOC 2 Audits and Who Uses Them?

The purpose of SOC 2 audits is to ensure proper handling of data being stored, processed or used at a site outside of the user organization’s facilities. Service organizations have become increasingly invaluable to growing organizations that need vital services that, for a variety of reasons, choose not to perform at their own site.

A SOC 2 audit plays an important role in providing the following:

  • Oversight of the service organization
  • Vendor management programs
  • Regulatory oversight
  • Internal corporate governance and various risk management processes

Tune In for the Part 2 of this Two-Part Post on SOC 2 Audits and How to Stay Compliant

There is a lot more ground to cover when it comes to SOC 2 audits and how you can easily and confidently stay compliant. Keep an eye out for Part II so you can learn how to prepare for the SOC 2 audit, what is included in the SOC 2 report, changes that SOC 2 has undergone over the years and again, how you can achieve and maintain solid SOC 2 compliance.

In the meantime, I.S. Partners, LLC. proudly features a team of top auditing professionals who perform SOC 2 audits daily and are fully up to speed on all the latest updates and regulations. We can help you start preparing for your SOC 2 audit today.

Call us at 215-675-1400, request a quote or launch a chat session so we can discuss all of your auditing needs.

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