Compliance with the Service Organization Control (SOC) 2 report is vital for any service organization. For auditing success, it is best to conduct an SOC 2 readiness assessment.
Negligence or ignorance of regulations will not be a valid excuse. Under the AICPA SOC framework, the assessor needs to sort out the policy documentation requirements and scope considerations to pass the auditing test.
A readiness assessment will anticipate any problems beforehand and will be a proactive approach to the audit.
The SOC 2 Report in a Nutshell
Understanding the SOC 2 report is already half of the battle. This is what your organization must prepare for during an audit. A readiness assessment must focus on all its essential details to succeed.
The SOC 2 report is documentation that seeks to provide transparency about the internal controls of a service organization when it comes to information security. This aims to assure the various stakeholders of a service organization, from clients, investors, and even auditors.
An SOC 2 report that passes with flying colors indicates that the service organization is appropriately managed and has adequate controls in place for information security.
Here are the various aspects of a service organization that falls under information security:
- Digital infrastructure
- Data storage
- Data processing
Laws are becoming increasingly more stringent when it comes to data security. An excellent SOC 2 report will be a fair reflection of the steps that a service organization is undertaking to protect clients’ private information and third-party partners.
Focusing on the Trust Services Principles
The SOC 2 report’s primary criteria are its five pillars called the Trust Service Principles (TSP).
The assessment will revolve around these five attributes as it relates to information security. These include:
- Processing Integrity
The TSPs list the qualifications that a service organization must implement. This makes the SOC 2 report prescriptive. But SOC 2 self-assessment is still essential because, at any given audit, some auditors are subjective about what they ask for.
As for scope, it is not set in stone to include in the reporting all five TSPs. Some reports include all, while some have only a select few of the Trust Service Principles.
With this uncertainty, it’s essential to be ready for all the TSPs.
Service organizations that cater to information systems should study the TSPs under the SOC 2 reporting. The AICPA describes this document as Reporting on an Examination of Controls at a Service Organization.
Auditors operate under SSAE 18 (Clarified Attestation Standards) when inspecting the compliance of a service organization. They evaluate the internal controls of the service organization when it comes to their cybersecurity risk management program.
Let’s closely assess and inspect the intricacies and specifics of the five Trust Service Principles that will be the subject of SOC 2 risk assessment:
The security principle covers the protection of resources against infiltration and attacks. This principle’s access controls are designed to prevent data theft, system abuse, and unauthorized network entry, software misuse, and tampering of vital company information.
For security bolstering, there are IT tools available that can be deployed, such as two-factor authentication of passwords, intrusion locks, and web application Firewalls.
The availability principle refers to the status of contract stipulations or service level agreements regarding the accessibility of resources, services, or products.
Both parties in the binding contract will agree about the availability of system resources. This agreement will determine the minimum acceptable performance level.
It does not cover system usability and functionality. But it will include issues about security if it will affect availability.
For this principle, the essential aspects are network performance monitoring, site failure, and security incidents management.
The processing integrity principle discusses whether the particular system can achieve its objective. For example, data networks should deliver an adequate data type at the right time and price point.
To gauge this principle, data processing must be correct, comprehensive, precise, accurate and has the right authorization protocol.
There is a difference between processing integrity and data integrity, however. Errors within the data are not the responsibility of the processing entity.
The essential aspects of this principle include quality assurance procedures and data processing monitoring.
The confidentiality of data is achieved if its disclosure and access are not for all. If there are controls in place to restrict it to a specific set of authorized personnel, this principle will succeed.
Examples include data for corporate purposes such as intellectual property, business development, initial price lists and other sensitive information exploited by financial espionage.
This principle’s vital aspects include encryption during data transmission, strict access controls, and network and application firewalls.
This principle covers the collection, retention, utilization, disclosure, and elimination of private personal information within a system.
These must conform with the service organization’s internal privacy policies and the regulations from the generally accepted privacy principles (GAPP) of the AICPA.
The controls that auditors will evaluate will focus on personally identifiable information (PII). The protection against unauthorized use must be strong. It should also be updated from new cybersecurity threats that emerge daily.
It refers to private and sensitive details that can categorically distinguish an individual, such as the following:
- Social Security number
The Objectives of the Audit
While SOC 2 audits are random and by surprise, they are not pointless. There is a method to the madness. Understanding these objectives during the readiness assessment can help secure success for the service organization.
One of its vital missions is the protection of consumer and investor confidence. The audit will evaluate the internal controls set in place by the service organization and inspire assurance and peace of mind.
During the readiness assessment, it is essential to anticipate the auditors’ questions before and any other questions they can pursue in the future.
These will undoubtedly revolve around data protection, specifically private and financial data. If it is related to information systems, expect that the SOC 2 audit may cover it.
Identifying the Audit Scope
Part of the readiness assessment is preparing the organization’s areas that may be included in the audit. The scope is a surprise for the most part. To cover all bases, it’s essential to get ready for all five Trust Service Principles, namely Security, Confidentiality, Processing Integrity, Privacy, and Availability.
In reality, the audit will not include all the five TSPs. But it is important to note that the Security principle is a required component of the audit.
The typical flow and scope of audits will cover data protection, software usage, personnel preparation, and infrastructure integrity from a larger picture.
Prepare accordingly and leave no stone unturned to increase the chances of passing the audit. Also, pay attention to the two types of SOC 2 reports.
- The SOC 2 Type I will focus on the design of the internal controls.
- The SOC 2 Type II will test its effectiveness.
The Type I audit is the stepping stone and a means of preparing for the much-complicated Type II audit.
Regulatory Compliance Concerns
It is safe to anticipate that the audit will look into the service organization’s compliance with the relevant government regulations and legal requirements.
The readiness assessment must look into the efforts of the service organization to comply with these legal guidelines. It is also wise to note any vulnerabilities during the compliance process.
There is no silver bullet when it comes to government regulations. Each industry has a unique set of rules. It is continually evolving and there is a need to be frequently updated with the news.
An example is the healthcare industry. They have to comply with the Health Insurance Portability and Accountability Act (HIPAA) regulations.
Service organizations that use credit card transactions must adhere to the Payment Card Industry (PCI) Data Security Standard.
The assessment team must be familiar with all the industry’s intricacies and the regulations that govern it to succeed. Studying the law will prove advantageous to a service organization. It will significantly help in understanding their rights and in avoiding penalties.
Implementing the SOC 2 Readiness Assessment
The SOC 2 audit has to be passed with flying colors for the service organization’s sustained success. A readiness assessment is a scrimmage to improve the functionalities and preparation for this audit.
It is a dress rehearsal that will run down all the essential aspects of the audit. It will also identify the processes behind vital internal controls.
It must also evaluate any potential risks that third party vendors may encounter when it comes to cybersecurity. Gaps must be covered in the readiness assessment so that they can be avoided in the actual audit.
Here is a detailed rundown of activities that must be included in a readiness assessment:
- Client cooperation. The client organization will do the guided assessment at their own pace to create a profile of their activities and scope.
- Gap analysis. These control activities try to locate vulnerabilities and gaps, with a specific list of recommendations and actions.
- Controls matrix. This is the listing of the objectives map, internal controls identification and control characteristics.
- Auditor documentation. This is the drafting of the request list for auditors as well as the testing procedures.
Reaping the Rewards of Readiness Assessment
When a readiness assessment is done right, it will help a service organization identify the procedures and processes that should be in place. Other supporting initiatives that must be working well will also be pinpointed.
The SOC 2 audit will look for compliance from the perspective of operations and information security. A readiness assessment will help prepare the service organization to master the five Trust Service Principles.
By devoting resources towards a readiness assessment, the audit will start on the right track. It can prove to be beneficial to the service organization in the long run with these boosts:
- Error reduction and elimination
- Cost efficiency in resources
- Precision and accuracy in results
- Faster determinations
- Quality output
- Consistency of outcome
- Digitized controls
- Expert automation
Navigating the five Trust Service Principles takes precision, expertise and attention to detail. It cannot be left to chance. Addressing security, availability, processing integrity, confidentiality, and privacy requires many intricacies to create an accurate SOC 2 report correctly.
There are numerous advantages that an organization can have when the SOC 2 report is done with expert guidance. These include the following:
- Boost in organizational reputation and clientele trust
- Strengthening of data protection and integrity
- More awareness when it comes to vulnerabilities
- Client-driven assessments
To reap all these benefits, it is best to secure the guidance of a partner you can trust. RSI Security has a sterling track record regarding giving assurances and peace of mind to service organizations that need to undergo an SOC 2 readiness assessment.
Our years of experience will help your organization comply with the Trust Service Principles with an SOC 2 report that is distinct and designed for your company’s business practices.
Suppose you are a service organization that focuses on data hosting, data processing, Software-as-a-Service (SaaS), or colocation. In that case, RSI Security can help you with your SOC 2 audit to ensure your interaction with data is secure and confidential.