SOC 2 Compliance Requirements: A Comprehensive Guide

Modern businesses juggle vast amounts of sensitive customer data as part of their day-to-day operations. Customers trust businesses to keep this data safe using updated cybersecurity and privacy measures.

System and Organization Controls 2 (SOC 2) is a voluntary auditing framework that can help your organization protect sensitive information and prevent data breaches. This framework was developed by the American Institute of Certified Public Accountants (AICPA) to guide organizations in developing internal security controls.

Achieving SOC 2 compliance demonstrates your organization’s strong commitment to data security and protection. Compliance helps build trust and open up new business opportunities with enterprise clients. In this guide, we’ll break down the key components of SOC 2 compliance and the auditing process, as well as guide how an IT professional can assist.

Key Takeaways

• SOC 2 is a voluntary security auditing framework developed by the American Institute of Certified Public Accountants.
• Any organization that works with sensitive data can benefit from undergoing an SOC 2 audit.
• There are five Trust Service Criteria of SOC 2 compliance: security, availability, process integrity, confidentiality, and privacy. Only the security TSC is mandatory, but you can select others based on your business needs.
• There are two types of SOC 2 reports. A Type 1 report focuses on your security controls at a specific point in time. In contrast, a Type 2 report is more comprehensive and examines the effectiveness of your controls over a more extended period.
• Working with a managed IT services provider can simplify SOC 2 compliance.

What is SOC 2 compliance?

To comply with SOC 2, businesses must adhere to the framework’s five Trust Service Criteria and implement rigorous security policies. SOC 2 compliance also involves conducting in-depth audit reports to verify that your systems meet the necessary standards. SOC 2 is an attestation rather than a certification, which means that an independent CPA firm determines whether your organization meets the criteria for compliance.

Meeting these compliance standards shows your customer base that you’re committed to keeping their data safe. When your organization is SOC 2 compliant, your clients get confidence knowing that their confidential information is safe and secure.

Many types of organizations can benefit from being SOC 2 compliant, including SaaS platforms, cloud service providers, data centers, managed service providers (MSPs), and any other service organization that handles sensitive customer data.

Many large enterprises require their service partners to be SOC 2 compliant. Additionally, 50% of businesses have terminated vendor relationships due to security concerns. Compliance can help prevent this from happening to your organization.

Failing to comply can have serious consequences for your organization. Not only is your organization at a higher risk of a data breach, but you may also face legal consequences and substantial financial penalties if you claim to be SOC 2 compliant but are not.

SOC 2 is one of several compliance frameworks established by the AICPA. Many organizations also use SOC 1 and SOC 3 audits to demonstrate their information security levels.

The five Trust Service Criteria of SOC 2

The Trust Service Criteria (TSCs) are the pillars of SOC 2 compliance. These are the criteria that auditors will evaluate to determine your compliance status.

The security criteria are the only ones of the TSCs that are mandatory for every audit. The other four criteria may be optional based on your business model and the services you offer to your customers.

Let’s break down each TSC and the internal controls necessary to meet them.

1. Security

The security TSC is also known as the “common criteria”. To adhere to it, organizations must take reasonable steps to prevent unauthorized access and disclosure of information. Organizations must also take action to avoid damage that could compromise the availability, integrity, confidentiality, and privacy of their systems or affect their ability to operate safely.

Here are some security practices and tools your organization can implement to adhere to this criterion:

• Network monitoring: Use firewalls and intrusion detection and prevention systems to block abnormal traffic.

• Access controls: Use multi-factor authentication, password policies, and the principle of least privilege to limit unauthorized access to your systems.
• Encryption: Encrypt data at rest and in transit to prevent exposure.
• Security awareness training: Host regular sessions for employees to teach key cybersecurity concepts, and use phishing simulations to encourage mastery.
• Vulnerability management: Conduct regular risk assessments and utilize software updates and patching to mitigate vulnerabilities.

2. Availability

This criterion focuses on keeping your systems accessible to both internal teams and customers and ensuring they operate as intended. This means preventing downtime whenever possible, as well as preventing system damage or performance issues that could make your services unavailable to stakeholders.

This criterion is optional, but it is beneficial for improving system performance and meeting client standards for operational effectiveness.

Here are the controls you can use to maintain system availability:

• Disaster Recovery: Create a disaster recovery and business continuity plan that outlines how you’ll respond in the event of a cyberattack or other security incident.
• Uptime monitoring: Implement 24/7 system monitoring with downtime alerts.
• Redundancy mechanisms: Implement failsafes to protect data and maintain key features in the event of unexpected data loss or system damage.
• Capacity planning: Allocate your system resources to handle peak capacity loads effectively.
• Performance monitoring: Track system performance to identify areas for improvement.

3. Processing integrity

This TSC requires organizations to conduct system processing in a way that is complete, valid, accurate, timely, and authorized by the appropriate parties. Essentially, you’ll need to process data correctly and take steps to remedy errors as soon as they’re detected to meet these SOC 2 requirements.

The processing integrity criteria are optional, but are very helpful for organizations in finance and healthcare that work with personal data and need to meet strict compliance standards beyond SOC 2.

Here are some internal controls that help organizations meet the criteria for processing integrity.

• Data input and output controls: Implement systems to validate and reconcile data as it enters the system, ensuring accuracy and integrity.
• Quality assurance: Implement QA measures throughout your data processing procedures to limit errors.
• Error detection: Automate error detection to catch and correct mistakes as soon as they happen.
• Data Retention and Disposal: Implement policies for secure data retention and safe disposal of information when it is no longer required.
• Change management: Implement structured processes for updating or modifying your IT systems to ensure that sensitive data remains secure throughout the process.

4. Confidentiality

To adhere to this TSC, your organization must maintain the confidentiality, security, and privacy of any information designated as such and comply with the terms of the agreement. This criterion applies to sensitive information that is not personally identifiable information (PII).

While it’s optional, meeting this criterion helps you build trust with clients, especially if you’re handling trade secrets or intellectual property. Here are some internal controls you can implement to meet the confidentiality criteria:

• Access restrictions: Limit who can access parts of your system that contain confidential information. This includes both digital and physical access.
• Data encryption: Confidential information should always be encrypted, regardless of where it’s stored.
• Secure deletion procedures: Remove confidential information from your systems securely when it is no longer needed. Additionally, wipe old hardware that contains sensitive data before disposing of it.
• Non-disclosure agreements (NDAs): Have employees and business partners who work with confidential information sign a legally binding NDA.
• Segregation of duties: Divide data protection and management tasks among your team so no single individual is responsible for managing confidential information.

5. Privacy

This criterion specifies that personal information is collected, used, retained, disclosed, and disposed of following the Generally Accepted Privacy Principles (GAPP) and with your organization’s privacy notice to customers. The privacy criteria apply specifically to PII, rather than other forms of confidential data.

• Secure data collection and storage: All PII should be collected and stored securely in encrypted servers.
• Privacy policies: Draft a detailed privacy policy outlining how data will be handled and distribute it to your customers.
• Consent management: Obtain consent from customers before collecting sensitive data.
• Data anonymization: When storing data, keep it anonymous or use pseudonyms where appropriate.
• DSAR handling procedures: Define how data storage access requests will be handled and outline your organization’s measures to prevent data exposure.
• Privacy regulation compliance: Adhering to privacy regulations, such as the GDPR, CCPA, and HIPAA, will also help you meet the requirements for the privacy criteria.

SOC 2 report types: Type 1 vs. Type 2

There are two types of SOC 2 reports, both of which evaluate your organization’s security posture and adherence to SOC 2 standards. However, these reports differ in terms of the time frames and scope of security they cover.

SOC 2 Type 1 report

A Type 1 report assesses your internal security controls at a specific point in time to determine whether or not they meet criteria. The assessment is based entirely on your system’s design, rather than its performance. This type of audit provides a snapshot of your control environment at the current time and typically takes just a few weeks to complete.

These reports are ideal for organizations that need quick proof of compliance to secure a contract. They’re also suitable for startups or organizations conducting their first SOC 2 audit, as they’re less intensive than Type 2 reports.

However, using Type 1 reports on an ongoing basis is not the most efficient approach. 76% of organizations that follow a point-in-time compliance approach feel the required effort is a burden. Type 2 reports encourage continuous compliance, which is significantly more efficient.

SOC 2 Type 2 report

A Type 2 report assesses your organization’s security controls over a more extended period. This type of audit assesses both the system’s design and its operational effectiveness over a period of 3 to 12 months. This audit involves the continuous collection of evidence and monitoring of the system.

A Type 2 report is far more comprehensive than a Type 1 report, so many organizations prefer them. If you work with large enterprise clients, they may require that you provide a Type 2 report.

	Type 1 report	Type 2 report
Time frame	Point-in-time takes weeks to complete	Ongoing, takes months to complete
Assessments	Design integrity	Design integrity, operational effectiveness
Best for	Startups, companies that need fast compliance reports	Large companies invested in ongoing compliance

SOC 2 compliance: A step-by-step guide

Here’s a step-by-step SOC 2 compliance checklist to help you prepare and conduct an audit successfully.

Step 1: Define scope & trust services criteria

Determine which parts of your system will be included in the scope of the audit. For smaller organizations, the audit encompasses the entire system, whereas for large organizations, it focuses on a specific type of data or service that must meet specific security standards.

Next, select which TSCs you want to cover in the audit. The security criteria are mandatory; however, depending on your services and client commitments, you may also want to audit other TSCs.

Step 2: Conduct a readiness assessment (gap analysis)

Next, conduct an internal readiness assessment by evaluating your current security controls, policies, and procedures against the established TSCs. This will help you identify gaps and weaknesses that need to be addressed before conducting the audit.

Step 3: Implement & remediate controls

Next, develop and implement any missing security controls. Additionally, strengthen any weak areas that threat actors could exploit. Depending on the results of your readiness assessment, this might involve implementing new technologies such as multi-factor authentication, endpoint detection and response, or SIEM.

On top of that, you’ll need to create necessary security policies to fill the gaps you found in your initial assessment. For example, if you did not have an incident response plan or change management policy in place, now’s the time to create one. Formalize all documentation during this step to help the audit run smoothly.

Step 4: Establish continuous monitoring

If you’re conducting a Type 2 report, you’ll need to collect evidence that your controls are operating effectively throughout the entire audit period, which often lasts for months. The easiest way to do this is by implementing systems for ongoing system monitoring and activity logging. Your IT team should also regularly verify that security controls are functioning as intended.

Step 5: Engage an independent CPA monitor

Only an independent CPA firm licensed by the AICPA can conduct an SOC 2 audit. Once you’ve prepared and addressed any security gaps in your systems, the final step is to select the right CPA firm for your needs. Ideally, you should choose a firm with experience in your industry and cloud environment.

Step 6: Conduct a formal audit

Now it’s time for the CPA to conduct the formal audit. To do this, they’ll interview staff, review your documentation, and test your controls. You may also need to provide specific types of evidence, as requested by your auditor.

After completing the audit, the CPA issues a formal report. This report will outline the controls you have in place. The CPA will also provide their opinion about your compliance status.

Step 7: Schedule ongoing maintenance & annual audits

SOC 2 compliance is a continuous commitment. After your initial audit, schedule ongoing system reviews and maintenance to ensure your controls remain effective.

To maintain client trust and demonstrate ongoing security measures, you’ll want to schedule annual Type 2 audits.

The Diamond IT advantage in achieving SOC 2 compliance

Navigating the complexities of SOC 2 type compliance can be very daunting, especially if you don’t have a large IT team or in-house compliance specialists. A managed IT services provider, such as Diamond IT, helps make this process easier.

Diamond IT’s team of expert IT, cybersecurity, and compliance experts understands the stringent requirements of SOC 2 compliance. We’ll help you improve your systems, prepare for the audit, and most importantly, avoid security risks that could harm you or your customers.

How Diamond IT facilitates your SOC 2 journey

Here’s how our team helps your SOC 2 audits run smoothly:

• Readiness assessments: We conduct thorough gap analyses to identify areas of non-compliance and remediate them.
• Control Implementation: We help implement and optimize your security controls in accordance with SOC 2 requirements and your unique IT needs.
• Policy & documentation support: We’ll help you develop the security policies necessary for SOC 2 compliance and document them thoroughly.
• Continuous monitoring & evidence collection: We offer 24/7 system monitoring as part of our managed security services. We also assist your team in gathering the evidence necessary for a Type 2 audit.
• Auditor liaison: We’ll work directly with your chosen CPA auditor to provide the necessary documents and answer their questions.
• Ongoing Management: We help maintain your IT environment’s compliance throughout the year.

In addition to SOC 2 audits, we serve as your strategic IT, cybersecurity, and compliance partner, helping you maintain secure systems so you can focus on running your business.

Contact Diamond IT today to learn more or schedule a consultation.

Frequently Asked Questions

What is the difference between SOC 2 Type 1 and Type 2 reports?

SOC 2 Type 1 reports assess whether your security controls are designed properly at a specific point in time. Type 2 reports evaluate both the design and the ongoing effectiveness of those controls over a period of several months. Many enterprises prefer Type 2 reports for their deeper level of assurance.

Is SOC 2 compliance mandatory?

SOC 2 compliance is not a legal requirement. However, it is often expected by enterprise clients, especially when handling sensitive data. Achieving SOC 2 compliance demonstrates your organization’s commitment to data security and can enhance your chances of winning contracts with security-conscious customers.

How long does it take to achieve SOC 2 compliance?

SOC 2 compliance timelines vary. A Type 1 audit typically takes a few weeks because it focuses on controls at a single point in time. Type 2 audits take longer, usually between 3 and 12 months, because they monitor the ongoing performance and effectiveness of your security controls.