Are You Complying with SOC Requirements? Here's a Checklist of Things To Do

by Adarsh Raj Bhatt in
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Key Takeaways

  • System and Organization Controls (SOC) audits provide businesses the peace of mind that their service providers, or prospective service providers, are functioning securely, ethically, and legally.
  • SOC 1 compliance certifies the integrity of business solutions and allows startups to produce evidence to consumers from a third-party auditor who has actually observed the security measures in place and in operation. By refining the processes and getting third-party certification, SOC 1 compliance can help businesses achieve a competitive edge and gain client confidence, which is a prerequisite for achieving customer success.
  • SOC-2 compliance is built on a set of five "Trust Services Categories" for successfully handling client data. These categories are availability, processing integrity, security, confidentiality, and privacy. SOC-2 compliance begins with security, which consists of broad requirements that apply to all 5 trust service areas.
  • SOC audit preparation may be divided into 5 simple steps: selecting the right SOC report, determining the audit's scope, understanding how to comply with regulations, establishing relevant policies, and conducting a risk assessment. 
  • The information for a SOC 1 report is generally sent to the user organization's supervisors, compliance officers, CFO, and CIO. The audience for a SOC 2 report is defined as persons who are informed of the nature of services supplied, the internal control systems, and the trust services criteria that apply. This could involve CFO, CIO, internal auditors, and vendor management professionals, authorities, or business associates who are familiar with how to use the report properly.

What is a SOC audit?

System and Organization Controls (SOC) audits provide businesses the peace of mind that their service providers, or prospective service providers, are functioning securely, ethically, and legally. Nobody really loves the term “audit”, but SOC audits build up a service provider's reputation and reliability - a strategic edge that's worth the effort and money that goes into an audit.

SOC 1 and SOC 2 Compliance Requirements

SOC-1 Compliance Requirements

Maintaining the SOC 1 procedures contained in your SOC 1 report over time is what SOC 1 compliance entails. Sustaining the operational efficacy of SOC 1 controls is another term for it. The IT general controls and commercial process controls that are required to establish reasonable confidence with respect to the control goals are known as SOC 1 controls.

SOC 1 compliance certifies the integrity of business solutions and allows startups to produce evidence to consumers from a third-party auditor who has actually observed the security measures in place and in operation. By refining the processes and getting third-party certification, SOC 1 compliance can help businesses achieve a competitive edge and gain client confidence, which is a prerequisite for achieving customer success. A SOC 1 audit is also a constructive method to improve your data compliance and security activities, which might be exactly what you require to maintain a competitive edge. SOC 1 conformity can help your company keep loyal customers, attract leads and potential clients, run more effectively, minimize fines for non-compliance or breaches, and, most significantly, convince clients that their personal information is safe.

SOC-2 Compliance Requirements

SOC-2 compliance is built on a set of five "Trust Services Categories" for successfully handling client data. These categories are: availability, processing integrity, security, confidentiality, and privacy. SOC-2 compliance begins with security, which consists of broad requirements that apply to all 5 trust service areas.

Security

The concept of security focuses on preventing illegal use of the company's assets and data, which is heavily required for SOC 2 compliance. Access controls can be implemented to prevent dangerous intrusions or unlawful data removal, abuse of business software, unauthorized modifications, or leakage of company information.

With regards to security, the simplest SOC 2 compliance checklist (enough to impress an auditor) should include the following controls:

  • Controls over physical and logical access — How do you limit and regulate logical and physical accessibility to prevent unauthorized access?
  • System operations - How do you regulate your system functions to identify and minimize aberrations (i.e., digressions from defined procedures)?
  • Change management — How do you establish a regulated change management procedure and keep unauthorized modifications at bay?
  • Risk Management - When tackling business challenges and the usage of any vendor services, how do you determine and implement risk reduction activities?

Availability

The availability model concerns your platform's accessibility, requiring you to manage and measure your structure, application, and database to guarantee that you have the computational capability and system components required to fulfill your business goals.

Under this section, SOC 2 compliance obligations involve:

  • Measuring current usage — Create a standard for capacity management so that you can assess the risk of reduced availability due to capacity limitations.
  • Recognizing environmental hazards - Evaluate environmental hazards that may have an influence on service availability, like poor weather, fires, power outages, or environmental monitoring system error.

Processing Integrity

The idea of processing integrity concentrates on supplying the correct information at the best available price and at the right time. Data processing should be legitimate and permitted in addition to being fast and accurate.

In this area, SOC 2 compliance obligations involve:

  • Creating and keeping accurate records of platform input activities
  • Defining processing activities in order to verify that products/services satisfy standards.

Confidentiality

The confidentiality section concentrates on limiting access to and sharing of confidential information so that only authorized individuals or organizations have access to information. Delicate financial data, company strategies, consumer data in general, and proprietary information are examples of confidential data.

In this area, SOC 2 compliance obligations include:

  • Implementing processes for identifying confidential details as they are received or generated, as well as processes for determining for how long the confidential details should be kept.
  • Implementing processes to delete sensitive information when it has been selected for deletion.

Privacy

The privacy function is concerned with the system's compliance with clients’ privacy rules as well as the AICPA's Generally Accepted Privacy Principles (GAPP). This SOC section comprises the procedures for collecting, using, and retaining private information, and the methodological approach to data disclosure and destruction.

In this area, SOC 2 compliance obligations include:

  • Using plain language — The company's data protection policy should be clear and consistent, leaving no room for misunderstanding.
  • Gather data from trustworthy sources —The company sho2uld verify that third-party data sources are trustworthy and that its data collection method is fair and lawful.

SOC preparation checklist

SOC audit preparation may be divided into 5 simple steps:

  • Selecting the right SOC report
  • Determining the audit's scope
  • Understanding how to comply with regulations
  • Establishing relevant policies
  • Conducting a risk assessment

Selecting the right SOC report

You'll want to make sure that you pick the right SOC report for your needs and the needs of your clients, based on the goals of your SOC audit. SOC 1 is by far the report that’s most often utilized; however, SOC 2, SOC 3, and SOC for Cybersecurity are all quite useful as well.

A SOC 1 assessment is perhaps the most well-suited if you wish to identify something particular regarding your financial regulations. If a client group has expressed alarm about the protection of their data, a SOC for Cybersecurity audit will almost certainly be required.

Determining the audit's scope

To understand the scope of the SOC audit, you must first ask yourself a series of questions. Several of these questions might include what activities you require the audit for, what platforms will be engaged, where those services would be delivered, and who would get the audit report.

The scope of service organizations that specialize in a certain service will be adequately defined. But businesses that provide a wide range of services across various sites and use diverse platforms may encounter obstacles. Organizations frequently create separate SOC statements for each of the services they provide in these situations.

Understanding how to comply with regulations

Service businesses may be asked to prove their conformity to one or more compliance standards linked with SOC audits. Depending on your business, kind of company, and region, you may be obligated by PCI DSS, HIPAA, GLBA, or any number of compliance regulations that demand reporting.

To reduce money spent and increase reporting efficiency, organizations should consider implementing technology that allows them to create compliance-ready results for these regulations - including for SOC - from a single trusted vendor.

Establishing relevant policies

Ensure that you have a well-outlined and documented set of systems and regulations in place for SOC audit compliance. SOC assessments will turn into written policies while performing the audit, and these guidelines will also be useful within the company when referring to compliance requirements and expectations.

Conducting a risk assessment

It's time to domestically assess whether you're ready for your SOC audit. A risk assessment helps you discover areas wherein security mechanisms should be strengthened and if there are any urgent risks to secure data preceding your SOC audit. These risks could include cases where security mechanisms should be strengthened as well as cases where there are any imminent threats to data security.

If you already have the right personnel and technology in place, you may try to conduct a risk assessment internally. Most companies, on the other hand, find it simpler to contract their risk evaluation to third-party data security experts.

SOC Reporting Requirement

Your clients are probably already considering the SOC reporting structure and how it influences which SOC report is most beneficial to their firm, management executives, and auditors. It's essential for service organization management to understand SSAE 16 and the new SOC architecture so they can explain how to use a SOC 1, SOC 2, or SOC 3 report effectively when a user organization requests one. 

Both SOC 1 and SOC 2 reports need information on the service organization's controls, tests, and outcomes, as well as the service organization’s auditor's findings. They both have a restricted distribution, although their audiences are slightly different. The aim of a SOC 1 report, according to the new standard, is to report on the controls at a service organization whose service offering is pertinent to the financial statements of the user organization (i.e., the client). The information for a SOC 1 report is generally sent to the user organization's supervisors, compliance officers, CFO, and CIO. The audience for a SOC 2 report is defined as persons who are informed of the nature of services supplied, the internal control systems, and the trust services criteria that apply. This could involve CFO, CIO, internal auditors, and vendor management professionals, authorities, or business associates who are familiar with how to use the report properly.

Service organisations should be aware of the following:

  • The significance of the new SSAE 16 guidelines for a service company
  • How might they (i.e., the service orgs) plan to respond to SOC requests?
  • What's the difference between SOC 1 and SOC 2 reports?

Summary

A SOC report is a verified auditing report completed by an American Institute of Certified Public Accountants (AICPA)-designated Certified Public Accountant (CPA). It is a set of services provided by a CPA in relation to the procedural controls of a service company. A SOC report reveals whether fiscal audits are conducted or not, if audits are conducted in accordance with the controls set by the served firm, and the efficacy of the audits conducted. In a nutshell, a SOC report is a compilation of the protections that are incorporated into the org’s data control base, as well as a test of whether or not such safeguards are effective.

If you are a legally regulated company, you must request a SOC report from your suppliers, since it becomes even more important for those vendors upon whom you are pinning your faith to handle your company's high-risk procedures. 

The significance of the new SSAE 16 guideline for a service company:

For the majority of service companies, the most notable advantage of SSAE 16 would be that it helps them to more effectively articulate data about their business and its management framework. SSAE 16 allows service companies to offer a strong and much-demanded perspective to their user organizations (i.e., customers) on their control environment as it relates to procedures that influence their customers’ financial statements

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