Key Takeaways
1. SOC 2 compliance is vital for SaaS companies as it demonstrates their commitment to security and trustworthiness.
2. A security breach can have severe consequences, including loss of trust, damaged reputation, and legal repercussions.
3. I.S. Partners offers expert-led services to streamline the SOC 2 compliance process for SaaS companies.
What Is SOC 2 for SaaS?
SOC 2 for SaaS is an independent audit report that evaluates a tech service’s organizational controls for cloud-based data. It is specifically designed for service providers that store their customers’ sensitive data in the cloud.
When asked what sets SOC 2 for SaaS apart from other industry requirements, I.S. Partners expert Joe Ciancimino explains,
“SOC 2 engagements do not include a set of prescriptive requirements; however, often for SaaS Companies, the controls are related to cloud-infrastructure and relate to how the application controls/cloud-infrastructure controls are managed and monitored.”
Joe Ciancimino, SOC Director, I.S. Partners
With the increasing frequency of cyberattacks, SaaS companies prioritize preventative cybersecurity measures to reduce costs and protect themselves and their customers. SaaS SOC 2 compliance plays a crucial role here—it shows that your SaaS application is secure, resilient, and ideal for security-conscious customers.
Vendors ask for compliance standards like SOC 2 for SaaS companies because B2B SaaS providers handle sensitive customer data from many organizations, making them prime targets for cyberattacks and at risk of data breaches.
Significance of SOC 2 for SaaS
The importance of SOC 2 for SaaS is clear: it sets the stage for managing and lowering security risks while meeting compliance requirements. This attestation boosts trust in SaaS companies among their customers.
Below, we list the significance of SOC 2 for SaaS:
Focus on Cybersecurity
As a SaaS company, if you have cybersecurity as a top priority, it can set you apart, especially when it comes to working with big enterprise organizations. They often insist that vendors provide a SOC 2 report during vetting.
And if you’re lucky enough to get chosen, they might want you to undergo a SOC 2 audit every year, covering the past 12 months. Getting ahead of the game by prioritizing a SOC 2 audit early on shows these big players that you mean business regarding cybersecurity and that commitment doesn’t waver as you grow.
As prime targets of cyberattacks, undergoing a SOC 2 audit ensures that a SaaS company has sufficient controls to protect sensitive data. This creates a more trustworthy environment for SaaS companies and their customers.
Builds Your Client’s Trust
If clients can’t trust your solution, why would they use it? A data breach could seriously damage your reputation, causing hard-to-shake-off ripple effects.
Once your SaaS solution is breached and customer data is compromised, your organization faces a rocky road ahead with security challenges and a damaged reputation. Your clients will lose trust in you, potential new customers will hesitate to work with you, and legal issues could arise.
A SOC 2 report is the key solution to building trust. It comprehensively summarizes how you approach security to protect customer data.
Gain Competitive Advantage
Having a SOC 2 compliance report opens doors to a whole new group of prospects who value security and seek vendors with SOC 2 compliance. Securing a report gives you an edge over other companies as you readily give customers the assurance they need.
In addition, having a SOC 2 report allows your business to be widely recognized, even by international companies.
Our expert-led services at I.S Partners make SOC 2 audits a breeze. Our blend of technology and expertise ensures you’re in good hands every step of the way.
You get “Big 4” services without the hefty price tag. With thousands of successful audits and gap analyses, we provide free software to streamline the process and make compliance a breeze. Let’s make your SOC 2 journey a success!
What Are SOC 2 Requirements for SaaS Companies?
SOC 2 compliance for SaaS requirements starts with meeting the AICPA criteria. To achieve SOC 2 certification and pass an independent compliance audit, companies must adhere to five key Trust Services Criteria.
During an assessment, companies are required to choose which criteria to focus on. The focus can greatly vary depending on the nature of your business operations.
Security
This principle ensures your organization has the right access controls to protect confidential information with confidentiality, integrity, and availability. Unlike other criteria, the security TSC is mandatory for all SOC 2 reports to manage security incidents.
Availability
This principle ensures that information and systems are accessible for operation and use to meet the organization’s objectives.
Processing Integrity
The data processing integrity principle ensures that data is processed accurately and reliably, ensuring the system achieves its goals without errors, delays, omissions, or unauthorized manipulation.
Confidentiality
This principle protects data from unauthorized access, use, or disclosure. It demonstrates that an organization can secure information, control access, and properly dispose of confidential data when necessary.
Privacy
Privacy principle ensures that data is collected, used, and disclosed by applicable laws and regulations. It covers whether the company must limit access, use, and retention of information or if it can only be shared with specific individuals.
However, to fully grasp SOC 2 for SaaS and determine the scope of your SOC 2 audit, it’s crucial to understand the Trust Services Criteria. These criteria help assess an organization’s cloud security risks and opportunities.
Critical Steps for SOC 2 Compliance for SaaS Companies
Similar to other SOC 2 audit procedures, SOC 2 for SaaS companies involves systematic steps for compliance. These steps involve clear scope identification, continuous monitoring for improvement, and consistent compliance.
Below, we describe the critical steps for SOC 2 compliance for every SaaS company:
- Define objectives and scope. Identify the purpose and objectives for SOC 2 compliance. Define the scope by selecting relevant Trust Services Criteria (TSC): Security (mandatory), Availability, Processing Integrity, Confidentiality, and Privacy.
- Conduct risk assessment and gap analysis. Perform an internal risk assessment to identify potential threats, vulnerabilities, and their impact. Conduct a gap analysis to evaluate your current security posture against SOC 2 requirements, identifying missing controls and areas needing remediation.
- Implement controls and remediate gaps. Design and implement SOC2 security controls, policies, and procedures to address identified risks and gaps. Ensure controls align with selected TSC and are appropriate for the organization’s maturity level. Improve existing controls or add new ones to remediate issues found in the gap assessment.
- Perform readiness assessment. Conduct an internal audit or readiness assessment to validate that controls are designed and operating effectively before the formal audit. Gather evidence (e.g., reports, screenshots, signed documents) to demonstrate adherence to SOC 2 requirements. Identify and fix any remaining issues before engaging an external auditor.
- Engage a SOC 2 Auditor. Select an independent CPA firm with experience conducting SOC 2 audits, preferably in your industry. Provide the SOC 2 auditor with access and evidence needed to evaluate controls. Coordinate interviews, walkthroughs, and testing. The auditor will validate control design and operational effectiveness and issue a report with their opinion.
- Maintain compliance. Establish ongoing monitoring to ensure controls remain effective over time. Many controls require evidence collection throughout the year. Conduct annual SOC 2 audits to maintain the report. Treat compliance as a continuous program, not a one-time event.
You can optimize the process by engaging a reputable auditing firm early in the process. An auditor can help you perform a readiness assessment, guide you through choosing the right focus and criteria, and establish critical controls.
Employ the help of I.S. Partners – a SOC 2 expert in the compliance industry. Allow our SOC 2 auditors to help you streamline your audit experience and remove the hassle from the experience.
Is SOC 2 Required for SaaS?
Legally, no. A SOC 2 is not a mandatory requirement of SaaS providers. However, vendor contracts often request it and show dedication to securing client data. SOC 2 is crucial for selling SaaS products, especially in industries like government, finance, or healthcare.
For instance, a financial firm wants to use a SaaS platform to manage client portfolios. SOC 2 compliance gives them peace of mind, knowing the SaaS provider follows top-notch security standards. This lowers the chance of personal information breaches or financial fraud, making the SaaS option more appealing.
Which Type of SOC 2 Audit Is Best for SaaS Companies?
SOC 2 audits offer two main types of SOC reporting: SOC 2 Type 1 and SOC 2 Type 2. Both focus on assessing a SaaS company’s SOC 2 controls and processes related to the 5 trust principles of data. To figure out which Trust Principles matter most for your organization, refer to our earlier article on SOC 2 Trust Service Criteria.
| SOC 2 Type I | SOC 2 Type II |
| SOC 2 Type I provides a snapshot of a service organization’s system and evaluates the suitability of control designs. This report outlines the existing systems and controls, validating the adequacy of all administrative, technical, and logical controls. | The SOC 2 Type II SaaS report is similar to that of Type 1 but goes a step further. It examines evidence of control effectiveness over a minimum of six months to ensure that the systems and controls described by the service organization’s management are functioning as intended. |
Here’s the simple breakdown: If your SaaS company is new to SOC 2 security compliance and has limited time or budget, starting with SOC 2 Type 1 is a good idea for the first year. This allows a readiness assessment to identify control failures and create a plan to fix them, ultimately achieving SOC 2 Type 1 Compliance within the year.
Later on, as resources permit, aiming for SOC 2 Type 2 Compliance is ideal. However, to get there, you’ll first need to pass through the initial stage of SOC 2 Type 1 Compliance. However, in terms of getting the most value for your investment, SOC 2 Type 2 is the top choice.
Remember, SOC 2 reports are tailored to each organization, considering their unique business security practices. A SOC 2 audit process ensures that you comply with cybersecurity measures that are relevant to your industry. Plus, as a SaaS provider, it helps uncover any vulnerabilities in your system, benefiting both you and your clients. It’s a win-win situation.
Note: You can get the SOC 2 Bridge Letter in the interim period as well.
How Are SAAS Companies Audited for SOC 2?
A SOC 2 audit is ideal for SAAS companies. It shows that security controls are meeting industry and customer standards.
- The first step to becoming SOC 2 compliant is to have a third-party auditor analyze whether you’ve implemented specific security controls according to an accepted framework.
- After the gap analysis, the auditor requests evidence and documentation from the company to prove that management accurately represents internal controls.
- Afterward, the auditor issues an attestation report based on the AICPA TSC. Now, you can use the attestation to win more client deals.
Keep in mind that SOC 2 audits can last from six months to a year, excluding preparation time, which can take three to six months.
How Can I.S. Partners Support Your SaaS Business?
Cloud computing and SaaS are revolutionizing how companies build comprehensive solutions. As awareness and adoption grow, organizations create SaaS integration platforms (SIPs) to develop additional SaaS applications.
Let’s say you urgently need to show compliance because a crucial enterprise client demands it to finalize a deal. Rather than waiting for a Type 2 report, a Type 1 report assessing your current information security controls can be a quick fix. We recommend aiming straight for the SOC 2 Type II report if possible.
We can guide you through the essential aspects of SOC 2 that every founder should understand. From the outset of your journey to achieving the desired compliance, our team at I.S Partners is here to assist you.
Our expert services include hands-on guidance through the entire SOC 2 auditing process. Get US-based expert CPAs working on your assessment. If you already have compliance software for your SOC 2, our team can integrate the process seamlessly and optimize your information.
Get all of the SOC 2 solutions that you need from I.S. Partners. With our help, we can avoid the hassle and pressure of undergoing a strict and comprehensive audit such as SOC 2. Plus, you’ll work with the same dedicated team throughout, boasting nearly 20 years of experience in the compliance industry.
Curious to learn more? Schedule a call with us today!
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