SOC 2 Compliance Checklist to Prepare for an Audit

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Data is everything today. The success of a business depends on the information it collects and uses. Now, a lot of organizations give their data to a service provider to store and maintain. Your client needs to trust your security framework to make sure their data is safe with you. To provide this confidence, your organization needs to be SOC 2 compliant. 

SOC stands for “Service Organization Controls”. SOC reports have been created by the American Institute of Certified Public Accountants (AICPA). SOC 2 is an auditing procedure which is done to ensure the service providers manage their client’s data securely in favour of their organization’s interests and clients. More and more businesses are now required to comply with the AICPA SOC 2 reporting framework. If you are a service company, you need to get the SOC 2 report to showcase your client’s data security.

Getting SOC 2 compliant is not an easy task and requires following some steps. In this article, I will share a checklist that is going to help you prepare for a SOC 2 audit.

Define the Organization’s Goals

This is the first step in the SOC 2 auditing checklist. Ask a question to yourself, why do you want a SOC 2 report for your organization? What are the benefits you are looking for by generating the SOC 2 report? So, organizations can have different reasons for SOC 2 audit and they need to be very clear about it from the beginning. There are various benefit goals of SOC 2 reports:

  • Brand protection
  • Buyer appeal
  • Competitive advantage
  • Marketing differentiator
  • Vendor management
  • Governance and risk management
  • Regulatory oversight

So, you need to select which all goals you want the SOC 2 report to cover. SOC 2 covers only non-financial and operational goals. 

Define the Scope / Select the Trust Service Principles

Next, you need to define the scope before the SOC 2 audit. There are many things that can be audited in the organization, but you need to be clear about what exactly needs to be audited to get the maximum benefit. To define the scope, you need to select from the trust service criteria/principles. There are five different trust service categories with security being the baseline. So, every SOC 2 report will have at least security as a baseline but there are four additional categories that companies may choose to add a lot of times: confidentiality, availability, processing integrity and privacy. They can be kept in the scope based on industry norms or preferences or expectations or client demands. 

So, if you take a data canter as an example, availability would be critical to their customers. When you are dealing with the healthcare industry, to them, privacy trust service is essential. For organizations in the FinTech domain, integrity is important. So often, first-year companies start with security (trust service) to build their program. Over time, they consider whether it makes sense to mature that program by adding additional categories.

Choose the Type of SOC 2 Report

For SOC 2, there are two types of reports which you can generate, type 1 and type 2. Now, both the reports are used to assess the data security, but they still have differences. You need to choose the type of SOC 2 report based on your goals and scope.

SOC 2 Type 1: This is the report you can generate the day you are ready with all of your controls. You are qualified to get a report on that day. If you are doing a readiness test and are gathering evidence during that time, you can be issued a SOC 2 Type 1 report once you get that last piece of evidence. This is the report which most organizations go for in their first year. But that is typically not enough for the marketplace expectation. So, they start with SOC 2 Type 1 report which is generated faster and can be enough to secure the client’s data and communicate it to them. And then they move to SOC 2 Type 2 report.

SOC 2 Type 2: This report takes a fair amount of work and time. It covers SOC 2 Type 1 part also, but it usually evaluates the organization’s control for 12 months before they are given a type 2 report. Sometimes organizations get the type 2 report in 6 months also if it is their first year. Usually, the day you get your SOC 2 Type 1, that will begin your audit period for your SOC 2 Type 2. Then either you do a 6 or 12 months period audit in your first year, and then usually subsequent years you do a 12 month rolling period.

Perform a Readiness Assessment

Now perform a readiness test internally or choose a vendor who helps the organization get SOC 2 compliant. Most organizations go with a vendor option to help them in getting ready for a SOC 2 audit. This is the final step before the actual SOC 2 audit happens. This is done to understand the gaps that might still be there to meet the standards set for SOC 2. It tells you where you stand, what controls are yet to meet the criteria, and how far you are from completing the SOC 2 standards.

So an auditing firm (external vendor) you hire will do a readiness assessment for your organization. They will help you identify the gaps and provide you the guidance on what would meet the requirement and how they might go about fixing that. For example, maybe they have to write policies or update a few processes to qualify for the SOC 2 standards.

This final step of the SOC 2 readiness assessment is very critical because service organizations need to comprehensively identify and assess their entire control environment before even considering beginning an actual audit. Many times, deficiencies and other problem areas surface during the SOC 2 readiness assessment requiring immediate attention or suffer the consequences of less than satisfactory findings for your final audit report and nobody wants that.

What is the purpose of a SOC 2 report for your company?

If your organization is a service-based one and provides services that directly impact users’ operational efficiency (e.g. cloud service provider, SaaS), you will need to be compliant. You will need to be SOC2 compliant.

Your users might request a SOC 2 report to assist with their auditing. This report could damage your reputation and hurt client relationships.

An SOC audit can help you understand your security controls’ performance and identify potential problems. You can fix them before they become major problems.

SOC 2 compliance has many advantages and no disadvantages.

A SOC 2 report has many benefits, including:

  • Strengthen your client relationships by obtaining a SOC 2 audit . This SOC 2 audit will show your clients that you care about security and integrity.
  • Avoid security breaches by obtaining a SOC Report. This will ensure that you meet the highest standards and prevent any data breaches
  • Find out valuable information about your company: Get more information about your overall performance, and how to improve your controls.

Who conducts the SOC 2 exams?

SOC 2 inspections are considered “attestation” audits. This means that an external auditor should visit your company, examine the controls in place, and give an opinion.

This opinion includes:

  • The scope of the engagement (how much time the audit will take).
  • Description of the organization’s responsibilities
  • Tested design of controls
  • The organization’s management provides a description
  • Type of report that will be issued
  • Actual auditor’s opinion on the execution of controls

Remember that SOC 2 examinations must be conducted by a certified public accountant (CPA) as they are governed under the AICPA.

SOC 2 Audit Success Tips

These are five best practices organizations can use to conduct a successful SOC 2 Audit.

1. Update administrative policies

Compliance teams should develop and implement policies that are consistent with the company’s daily workflow and processes.

These are the topics security policies should address:

  • System access
  • Disaster recovery
  • Incident response
  • Analysis and risk assessment

These policies should be reviewed and updated regularly by organizations. These policies can be used by the SOC 2 auditor as evidence of a security programme.

2. Install technical security controls

Cloud security controls should be matched to the policies of the service provider.

The compliance team should consider creating technical security controls for the following:

  • Control of access
  • Firewall and networking
  • Encryption
  1. Install anomaly alerts

SOC 2 compliance requires that alerts be set up for any activities that result in the unauthorized exposure of or modification to data, configurations, or controls.

To avoid false positive alerts, the anomaly alerting process may be tailored to suit your organization’s risk profile and environment.

3. Conduct detailed audit trails

Audit trails should be detailed. They must also provide cloud context that allows you to determine the root cause of the attack and create a plan for resolving it.

Audit trails that are detailed provide insight into:

  • Unauthorized modification of data or configuration
  • Key system components can be removed or added
  • The attack’s point of origin and its breadth

4. Take forensic data and make it actionable

    SOC 2 compliance means a decreased mean time for detection (MTTD), and a shorter mean time to correct (MTTR).

    Organization’s forensic data can provide insight into the origin and impact of an attack on different parts of the system as well as the path of travel and the next move by the aggressor.

    Conclusion

    So, there are significant pointers that will come under the SOC 2 compliance checklist. You cannot ignore them if you as an organization want to pass the SOC 2 audit. Getting SOC 2 compliant will boost the organization’s business by establishing it as a professional competitor in its domain. And once you pass the SOC 2 audit, you can share your SOC 2 report with your clients to build trust with them for the long term.

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