The American Institute of Certified Public Accountants (AICPA) manages various certification programs for service organizations, including those for software-as-a-service (SaaS) providers. If clients are concerned about how a SaaS company secures their data, a System and Organization Controls (SOC) 2 Type 2 report offers tangible assurance of trust. SOC 2 Type 2 certification enhances customer confidence, reduces incident impact, and simplifies compliance.
Benefits of SOC 2 Type 2 Certification
Type 2 Certification is the most comprehensive SOC 2 report available, though it’s not the only type companies can obtain. SOC 2 Type 2 certification benefits your organization by:
- Providing robust security assurance to clients
- Offering long-term cost savings and loss prevention
- Protecting against potential reputational damage
- Streamlining regulatory compliance efforts
Benefit #1: Robust Security Assurance
The SOC 2 Type 2 audit is an in-depth process that provides deeper insights into your security controls than other SOC reports (SOC 1, SOC 2, SOC 3). Its extensive evaluation by the auditing body assesses both the design and maintenance of your security controls over an extended period.
The duration of a SOC 2 Type 2 audit varies based on your company’s size, complexity, clientele, and risk environment. While a SOC 2 Type 1 Report typically takes about two months to produce, a SOC 2 Type 2 report often requires 12 months. This year-long testing period ensures strong evidence of your security measures.
Benefit #2: Long-Term Cost Savings
The cost of a SOC 2 Type 2 audit ranges from $20,000 to $80,000, depending on the size and complexity of the company. This estimate does not include additional expenses, such as staffing and extra software, which can significantly increase the overall cost. For comparison, while a SOC 2 Type 1 Audit is estimated to cost under $17,000, additional factors like lost productivity can push the total cost above $140,000.
However, these figures pale in comparison to the average costs of a data breach, per IBM’s 2023 report:
- Data breaches cost $4.45 million on average, up 4.95% from 2021.
- Breaches involving lost or stolen credentials and those affecting multiple countries or business sectors tended to incur higher costs
- For mega breaches, or those involving more than 50 million records, they incur costs averaging around $10.7 million.
- Businesses that experience reputational damage from a data breach can see an average loss of approximately 20% to 30% of their total breach costs due to lost business.
By reducing the likelihood of data breaches, SOC 2 Type 2 audits help prevent not only the immediate costs of data theft but also the long-term opportunity costs associated with lost business.
Benefit #3: Brand Reputation Protection
Examining the above statistics further, noting that lost business constitutes about 20% to 30% of the average data breach cost, might understate the true impact of reputational damage.
Trust is crucial for all service organizations, and a past or potential breach can lead to client abandonment, resulting in complete business loss or even collapse. Thus, SOC 2 Type 2 audits offer significant value, especially for companies recovering from previous attacks. By enhancing security measures and demonstrating commitment to data protection, SOC 2 Type 2 can help restore and protect your brand. SOC 2 Type 2 certification can also provide a competitive advantage for companies that haven’t suffered attacks in the past over their uncertified peers.
Benefit #4: Streamlined Compliance Mapping
SOC 2 Type 2 certification provides valuable support in meeting regulatory compliance across various frameworks or standards relevant to your business. For instance:
- If your company serves clients in the healthcare sector, you may need to comply with HIPAA/HITECH as a covered entity or business associate.
- If you process credit card payments, compliance with Payment Card Industry (PCI) Data Security Standards (DSS) or other PCI regulations is likely required.
- Depending on your business’s location and the data privacy laws applicable to your clients, standards like California’s CCPA or Europe’s GDPR might apply.
Fortunately, the AICPA offers mapping guides that align SOC 2’s Trust Services Criteria with other compliance frameworks, highlighting overlaps and connections.
SOC 1, SOC 2, and SOC 3 Report Comparison
In addition to the benefits mentioned, companies should consider which SOC level is most suitable for them when deciding to undergo a SOC 2 Type 2 audit. This choice depends on the type of service your company provides and the intended audience for the SOC report. Specifically, SOC 1 audits are designed for different organizations compared to SOC 2 and SOC 3 audits. While SOC 2 and SOC 3 reports are for the same companies, they target different audiences.
SOC 1: Report on Internal Control over Financial Reporting
The full title of SOC 1 is “Report on Controls at a Service Organization Relevant to User Entities’ Internal Control over Financial Reporting” or “SOC for Service Organizations: ICFR.” Internal control over financial reporting (ICFR) refers to service organizations’ clients and their internal staff or contractors (the “user entities”) who need to secure financial records or documentation.
SOC 1 audits typically involve financial service providers, such as payroll management. However, they can also apply to this particular segment within a company that provides other services. For example, if a SaaS company provides cloud hosting and financial services, it may seek out a SOC 1 audit. But if it doesn’t prioritize these services, it’s more likely to seek a SOC 2 or SOC 3 audit.
SOC 2: Report on Trust Services Criteria (TSC)
The full title of SOC 2 is “Report on Controls at a Service Organization Relevant to Security, Availability, Processing Integrity, Confidentiality or Privacy,” or “SOC for Service Organizations: Trust Services Criteria.” Companies may elect to use other control frameworks for SOC 2 auditing, but the AICPA’s Trust Services Criteria (TSC) is preferred by most SOC 2 auditors.
Unlike SOC 1, which focuses on internal controls related to financial reporting, SOC 2 audits assess a service organization’s overall security through system and organizational controls. This makes SOC 2 applicable to a broader range of service organizations, including SaaS and cybersecurity providers. SOC 2 reports are typically tailored for a specific, limited audience, such as clients or auditing authorities, and can be issued as either a SOC 2 Type 1 or Type 2 report.
SOC 3: Report on TSC for General Use
The full title of SOC 3 is “SOC for Service Organizations: Trust Services Criteria for General Use Report” or “Trust Services Report for Service Organizations.” As these titles suggest, SOC 3 is a simplified version of SOC 2.
SOC 3 employs the same framework and confirms the same information as SOC 2 reports—whether Type 1 or Type 2—but does not provide specific details about each element of a company’s security controls or the TSC used. Instead, a SOC 3 report is intended for a general public audience and is commonly used for broader distribution, such as posting on a company’s website on the “About Us” page or sharing with clients.
Comprehensive SOC Compliance
The key benefits of SOC 2 Type 2 certification include strong security assurance, cost savings, enhanced brand protection, and simplified regulatory compliance management.
RSI Security recommends that service organizations pursue SOC 2 Type 2 certification. Our expert team is at your disposal to assist with every step of the process. Our SOC 2 compliance services include readiness assessments, patch management, and auditing.
To get started on your journey toward SOC 2 Type 2 certification, contact RSI Security today!
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