A System and Organization Controls (SOC) 2 audit is becoming an increasingly important compliance requirement, even for small businesses. With rising concerns over data security and privacy, customers and partners want assurances that companies have strong controls in place. While SOC 2 audits may seem intimidating, they don’t have to break the bank and can even strengthen your security posture. This article provides a comprehensive overview of SOC 2 audits tailored for small businesses.
What is a SOC 2 Audit?
A SOC 2 audit examines a service organization’s controls related to security, availability, processing integrity, confidentiality, and privacy. The audit is performed by an independent CPA (certified public accountant) firm and results in a report outlining the company’s controls along with an opinion indicating if they meet SOC 2 criteria.
There are two types of SOC 2 reports:
- Type 1 – Reports on management’s description of the system and the suitability of the design of controls at a point in time
- Type 2 – Includes the Type 1 criteria and also tests the operating effectiveness of controls over a period of time (often 6 months or more)
Most businesses will want to pursue a Type 2 audit report, as this provides more assurance to customers that controls are working properly.
Why Get a SOC 2 Audit?
There are several compelling reasons for small businesses to get a SOC 2 audit:
Builds Trust and Credibility
A clean SOC 2 report signals to customers that you take security and compliance seriously. This can increase sales and retention, particularly when bidding for contracts with larger enterprises.
Satisfies Vendor Requirements
Many companies require SOC 2 reports from vendors and business partners that handle sensitive data. A SOC 2 audit helps meet this prerequisite and open doors to new business opportunities.
Strengthens Security Posture
Preparing for a SOC 2 audit motivates companies to evaluate and enhance security, availability, and privacy controls. Even if deficiencies are found, the audit identifies areas to improve.
Meets Industry Standards
In regulated industries like healthcare and finance, SOC 2 compliance may be a legal or industry-mandated requirement. A SOC 2 report demonstrates adherence to evolving industry standards.
SOC 2 Audit Process and Requirements
While the criteria focus on controls, undergoing a SOC 2 audit involves both documentation and technical measures. Here are the key steps:
Planning
Work with auditors to define objectives, scope, timelines, and deliverables. Focus the audit on relevant trust principles based on your business and clients’ needs.
Documentation
Create detailed documentation describing your system, management oversight, processes, compliance policies, and control activities. This serves as the benchmark for evaluating the design and operating effectiveness of controls.
Interviews and Walkthroughs
Auditors will meet with personnel, observe processes, inspect offices, and walk through technical controls to gain an understanding of the system and controls.
Testing
The auditor performs tests to determine if controls are operating as described and meeting criteria. This includes examining records and evidence, sampling transactions, and attempting unauthorized system access.
Remediation
If deficiencies are identified, you can remediate issues prior to finalizing the audit report. This helps achieve a clean opinion.
Reporting
The auditor prepares a report detailing their opinion on whether controls meet the established trust principles and criteria. You can provide the report to clients to showcase your compliance.
Key Controls and Processes for SOC 2 Compliance
Maintaining compliant controls does not have to be arduous for small businesses. Some of the essentials include:
- Documented policies and procedures covering security, availability, privacy, incident response, and other critical areas.
- Access controls to limit system access to authorized individuals like role-based access, multi-factor authentication, and password policies.
- Network security controls such as firewalls, intrusion detection systems, encryption, and vulnerability management.
- Physical security controls like locked doors, security cameras, and entry controls.
- Change management procedures to review, test, and approve system changes.
- Data backup processes to enable recovery and continuity.
- Risk management activities focused on identifying and mitigating risks.
- Employee security training to ensure awareness and adherence to policies.
- Incident response planning to respond to security and privacy incidents.
Leveraging frameworks like ISO 27001 or NIST CSF provides a roadmap to implementing controls that support SOC 2 compliance.
SOC 2 Audit Costs and Timeline
For small businesses, SOC 2 audits typically range from $15,000 to $50,000+ and take 3-6 months to complete. Cost and time depend on the audit scope, size of the system and organization, and number of control deficiencies identified. Investing in preparation can help reduce overall costs.
Maintaining Compliance After the Audit
The initial SOC 2 audit is just the first step. Ongoing compliance maintenance is crucial. Steps for continuing compliance include:
- Retain audit documentation to facilitate future audits
- Continue control operation and testing
- Review policies and procedures at least annually
- Remediate any new control deficiencies
- Report any significant system changes to auditors
- Have a recurring Type 2 audit performed annually
Disciplined control operation and oversight following the initial audit leads to cleaner, faster, and more affordable future audits.
SOC 2 Audit FAQs
Which trust principles should I focus on?
Most small businesses start with a SOC 2 Type 2 audit for security and confidentiality which covers the most critical customer concerns.
How long is a SOC 2 report valid?
Reports describe controls at a point in time and have no expiration date. However, the descriptions and opinions grow stale over time. Customers usually want reports from the past 12-18 months.
What happens if we fail the audit?
You can work with the auditors to remediate control gaps prior to finalizing the report. Failed audits are rare. More commonly, some deficiencies may be identified leading to a qualified opinion. There is no need to make the report public.
Are virtual service providers required to be SOC 2 compliant?
It is not legally required, but major cloud providers all pursue SOC 2 to satisfy security-conscious customers. Any service provider handling sensitive data should strongly consider SOC 2.
Can I prepare for the audit on my own?
It is possible but challenging. Using an experienced compliance consultant to advise and assist with audit preparation is highly recommended to save time, optimize controls, and pass the audit smoothly.
Do I Need Any Other Compliance Certifications?
SOC 2 focuses on internal controls for security, availability, privacy, and more. Other certifications may be warranted depending on your industry, data types, regions, and other factors. Complimentary certifications to consider include:
- ISO 27001 – Internationally recognized security standard
- HITRUST – Specific to healthcare data security and privacy
- PCI DSS – Payment card data security requirements
- GDPR – EU data protection requirements
- CCPA – California consumer privacy requirements
A qualified consultant can advise which additional compliance standards may be appropriate and help streamline achieving multiple certifications.
Get Started with SOC 2 Compliance
As concerns over data protection increase, SOC 2 attestations provide an essential assurance of trust and security controls. While the process seems daunting, breaking it down into manageable steps and engaging experienced advisors makes SOC 2 feasible even for small businesses. A clean SOC 2 report unlocks new business opportunities and strengthens your stance in the evolving regulatory landscape.
