What Is a SOC 3 Compliance Report? Everything You Need to Know

What Is SOC 3? 

The System and Organization Controls (SOC) 3 report serves as a summary of the SOC 2 attestation report for general use. It provides an overview of the SOC 2 audit findings in a format designed for external stakeholders and the general public. 

Unlike a standalone audit, SOC 3 is a derivative of the SOC 2 audit, which must be completed first. It serves as a marketing tool to illustrate the key findings without the detailed technical specifics found in the SOC 2 report. 

The SOC 3 report is prepared by a certified public accountant (CPA) who has conducted a SOC 2 audit for a service organization. 

SOC 3 reports are usually requested by potential or existing vendors of large enterprises that handle sensitive customer and personal data, such as software as a service (SaaS) companies, data centers, and cloud computing businesses. 

What Is the Difference Between SOC 3 vs. SOC 2 Reports?

Understanding the distinctions between SOC 2 and SOC 3 reports is crucial for evaluating their respective roles in demonstrating an organization’s commitment to security and compliance. 

Below is a table that highlights the key differences between these two types of SOC reports, providing insights into their purposes, audiences, content, and usage. 

Dive Deeper

SOC 1 vs SOC 2 vs SOC 3: Compare the Differences & Benefits

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Components of a SOC 3 Report

The components of a SOC 3 report provide a clear summary of an organization’s compliance with the TSC. Designed for a broad audience, this report outlines the organization’s adherence to essential standards in security, availability, processing integrity, confidentiality, and privacy. 

Understanding these components helps in evaluating the effectiveness and reliability of the organization’s controls.

A SOC 3 report has the following components:

1. Scope and Objectives. This is where the auditor outlines the scope and reasons for the audit, as well as the processes evaluated, the intended audience, and the assessment duration. 
2. Management’s Assertion. This section contains a letter from the service organization’s management asserting that they believe the controls covered in the report were effective throughout the specified reporting period. Management’s responsibilities include:
   • Defining the boundaries of the system being assessed
   • Describing the principal service commitments made to user entities and the system requirements needed to meet those commitments
   • Identifying risks that threaten the achievement of service commitments and system requirements
   • Designing, implementing, and documenting controls to mitigate identified risks
3. Auditor’s Opinions. The letter summarizes the SOC examination, including the audit scope and time period covered. It provides the auditor’s independent opinion on whether management’s assertion was fairly stated based on the AICPA’s applicable. The letter also outlines management’s responsibilities, the auditor’s responsibilities, and inherent limitations of the controls and audit process.
4. Statement About the Audit’s Limitations. This is where the auditor gives a statement about the inherent limitations of the evaluation, as required by AT-C §205.05.  
5. Company and System Descriptions. This contains brief descriptions of the company’s services, system requirements, infrastructure, background, software products, and organizational structure.  

Who Needs a SOC 3 Report?

Any organization that stores vendor data in a cloud service and must provide assurances about their data security, privacy, processing integrity, and confidentiality controls without too much technical jargon should have SOC 3 reports. 

These enterprises include: 

• Infrastructure as a service (IaaS) organizations, such as data centers, cloud computing services, and internet service providers 
• Platform as a service (PaaS) like data analysis and IT security management businesses
• SaaS providers, such as customer relationship management, customer support, accounting, financial data processing, credit card processing, medical and insurance claims, and record management software 
• Legal, pharmaceutical, human resource, and technology consulting companies

To make it simpler, if you’re a business that processes and works with sensitive data, you need to be SOC 3 compliant to demonstrate that you have strong internal data security controls.   

Significance of a SOC 3 Report

SOC 3 reports show that you take data security and privacy seriously. They also help you reduce the risk of security breaches, offer the right information to prospects, and build your brand’s reputation. 

Here are more details on how a SOC 3 report benefits your business:

Public Assurance and Transparency

A SOC 3 report provides a public seal of assurance that can be prominently displayed on a company’s website or in marketing materials. It signals to customers, prospects, partners, and the general public that the organization has undergone an independent audit and adheres to robust controls. 

Unlike SOC 2 reports, which are restricted and intended for a specialized audience, SOC 3 reports are designed for public consumption, demonstrating a proactive approach to security and privacy.

It Provides the Right Information

SOC 3 reports provide just enough information that it doesn’t overwhelm prospects but still provides a thorough independent audit that builds trust. 

For instance, it doesn’t mention jargon-rich technical processes and components that might be difficult for clients, partners, and prospective customers without the necessary technical knowledge to understand. 

This helps companies reassure external stakeholders that they’ve undergone rigorous evaluation and have security protocols in place to protect sensitive data from falling into the wrong hands. 

It Builds Your Brand Reputation

The SOC 3 report will walk your clients through your security controls and processes, such as encryption methods, access controls, and incident response strategies, to demonstrate that you’re committed to protecting their data.  

This transparency will help you improve relationships with existing clients and establish a brand reputation for high data protection standards, making it more likely for potential clients to choose your company. 

Demonstrating Security Commitment

A SOC 3 report highlights an organization’s commitment to aligning with industry best practices and compliance standards. It serves as a testament to the organization’s dedication to protecting customer data and fostering trust and confidence. 

Through this report, businesses demonstrate the strength of their internal controls and security systems.

Is a SOC 3 Report Mandatory?

No, a SOC 3 report isn’t mandatory by law—or for doing business. However, if you provide services that could impact your vendors’ internal security controls, such as by hosting customer data or processing personal information, you might be expected to be SOC 3 compliant.

At I.S. Partners, we offer SOC 3 consulting services designed to complement the SOC 2 audit. Think of SOC 3 as an add-on that amplifies the value of your SOC 2 by making the results public. 

By opting for SOC 3, you’re not just complying with industry standards—you’re also boosting your organization’s credibility and showing your commitment to transparency and security. Let us help you make the most of your SOC 2 audit by extending it into a SOC 3 report that enhances your market trust and confidence.

When Should You Consider a SOC 3 Report?

While SOC 3 reports don’t go into as much detail as SOC 2 reports do, you can use them when you want to market your business, show that you meet regulatory and security compliance requirements, or simplify vendor management.

Below are critical instances that may call for a SOC 3 report.

1. When You Need to Market Your Business

Since it doesn’t contain technical language or sensitive information, you can easily use a SOC 3 report on your website and other public forums to show potential customers that your organization meets high standards for data security and privacy. 

This builds trust in your business, which, in turn, prompts more vendors to turn to you for cloud solutions. 

2. When You Want To Meet Regulatory and Compliance Requirements

In highly competitive industries, such as cloud services, finance, and healthcare, trust and transparency are paramount. A SOC 3 report can be a powerful differentiator in these environments, as it provides a public and easily shareable proof of your organization’s commitment. 

By obtaining a SOC 3 report, your organization can stand out in a crowded marketplace where security is a key concern for clients and partners. In competitive industries, where trust can be a deciding factor in business relationships, having a SOC 3 report can give you an edge, reinforcing your reputation as a reliable and security-conscious partner.

3. When You Want To Simplify Compliance Communication

Customers and partners often request proof that your organization adheres to strict security and compliance standards, particularly when handling sensitive information. Responding to these inquiries with a detailed SOC 2 report can be challenging, as it contains confidential data not meant for broad distribution.

A SOC 3 report simplifies this process by providing a high-level summary of your compliance with the Trust Service Criteria, making it suitable for sharing with a wider audience. This allows you to efficiently demonstrate your commitment to security without revealing sensitive details.

By opting for a SOC 3 report, you can streamline compliance communication, saving time and effort while building trust with customers, vendors, and partners. The SOC 3 report serves as a ready-made document that affirms your adherence to industry standards, reducing the need for lengthy explanations or follow-up inquiries. 

How To Develop an Effective SOC 3 Report?

Developing a SOC 3 report involves several key steps, largely derived from the SOC 2 process. This compliance demonstrates your commitment to robust security and operational controls, enhancing public trust and market credibility. 

Here’s a concise guide to help you navigate the essential steps toward SOC compliance. 

1. Determine Your Objectives

Identify why you want to undergo a SOC audit. Is it to improve your company’s security posture and build trust with clients? Do you want to expand into new markets to gain a competitive advantage or meet the demands of your industry? 

For instance, if you’re looking to attract new clients for your hosting service, a SOC 3 report will help you show your commitment to data security and privacy. 

After you’ve narrowed down your objectives, you’ll be able to find out which Trust Services Criteria you need to use and tailor the audit process to meet your company’s needs. 

2. Select the Right Audit Criterion

Once you understand your objectives, go through the Trust Services Criteria and make sure your current policies, procedures, and technologies comply with those that are relevant to your goals. You can comply with one or more categories of the criteria. 

For example, under the security criteria, you might need to show auditors how you manage encryption, access controls, and incident responses.

3. Set up a Compliance Team

Create a team of people who will work with future auditors. These people should be from IT, legal, compliance, operations, and other departments to ensure they have the technical knowledge to implement policies. 

You could make your IT manager responsible for documentation related to access logs and system configurations, while your compliance officer could make sure that policies and procedures meet regulations. 

4. Collect Documentation 

After your team implements SOC 3-compliant processes, you need to collect and organize all documentation, such as policies and incident response plans, that show how your controls operate. 

For instance, you could gather all documentation showing how your firewalls are configured. This could include a list of company rules, change logs, and even code. 

5. Perform an Internal Test

Before your audit, conduct an internal audit to find any gaps in your controls. You can work with I.S. Partners to perform readiness assessments and penetration tests to identify backdoors and weaknesses. 

These tests should adhere to the CC3.2 principle of the COSO framework. This means you need to make sure your risk assessment process: 

• Identifies information assets like physical and virtual devices, software, data flows, external data systems, and organizational roles.
• Assesses the criticality of these assets and finds potential threats (whether intentional, unintentional, or environmental) associated with each asset. 

The following controls are commonly tested during SOC audits:

• Encryption 
• Access controls 
• Network and application firewalls
• Processing monitoring 
• Performance monitoring 
• Disaster recovery 
• Intrusion detection 
• Two-factor authentication 
• Incident response 

6. Find a Qualified Service Auditor To Perform the Audit

If you haven’t already done so, find a CPA firm affiliated with the AICPA that has performed SOC audits in your industry and has been peer-reviewed.

In fact, if you’re just starting with SOC audits, hire I.S. Partners early in the process. We can help you quickly identify gaps in your security controls, decide on the right criteria, and walk through the scope of your audit to ensure everything is aligned. 

You also avoid common pitfalls, save time and resources, get expert advice on which criteria are best for your use case and industry, and are more likely to get a positive SOC 3 audit report. 

7. Undergo the SOC 2 Audit

The selected auditor will evaluate the effectiveness of your security controls and risk management program based on the AICPA’s TSC standards. The audit may involve on-site inspections, systems testing, employee interviews, and documentation reviews. The goal is to assess whether your controls meet the required TSC. The SOC 3 process follows the SOC 2 audit system.

8. Obtain an Attestation Report

After the audit, the auditor will provide an attestation report summarizing the audit results. If your controls meet the applicable TSC, you will receive a SOC 3 report. This report serves as a formal recognition of your compliance efforts.

9. Publish the SOC 3 Report

Once compliant, publish the SOC 3 report on your website or include it in your marketing materials. This public disclosure demonstrates your commitment to security and builds trust with clients and stakeholders.

10. Establish Ongoing Monitoring

Maintaining SOC 2 and 3 compliance is an ongoing process. Establish continuous monitoring and improvement of your security processes, conduct annual audits, and stay vigilant about potential risks and changes in the regulatory landscape.

Develop the Best SOC 3 Report With the Help of I.S. Partners

A SOC 3 report complements your SOC 2 audit by providing a public, user-friendly summary of your data security practices. While SOC 2 details your controls and their effectiveness, SOC 3 offers a simplified overview that boosts customer confidence and supports vendor contracts.

By adding SOC 3 to your compliance strategy, you enhance transparency, manage risk more effectively, and strengthen your brand’s reputation. SOC 3 helps showcase your commitment to data security in a format that’s accessible to all stakeholders, not just those with technical expertise.

With over 20 years of experience, I.S. Partners excels in guiding organizations achieve SOC 2 compliance and develop a SOC 3 report. Our tailored approach ensures every step of the process aligns with your unique needs, from initial assessments to the final report.

Ready to elevate your data security practices and build stronger customer trust? Book a free 30-minute consultation with our expert team today.

About The Author

John DeCesare

John has over 22 years of experience working in the manufacturing, distribution, not-for-profit, governmental, insurance, public utilities and service industries. John has expertise in various aspects of the accounting, auditing and consulting disciplines. He has directed a full range of value-added services and has consulted to Senior Executives in middle market and Fortune 500 companies. His experience includes Sarbanes-Oxley compliance, SOC 1 audits, outsourcing and contract services, financial management, accounting and strategic planning, due diligence, business restructuring / re-engineering, process improvement and risk assessment.