Mastering SOC 2 Certification: Your Complete Guide

Organizations of today are increasingly relying on cloud computing and third-party providers to store and process sensitive customer data. This has amplified the need for service organizations that handle customer information to demonstrate their trustworthiness through independent validation of their security and compliance controls.

Enter the SOC 2 framework. SOC 2 (System and Organization Controls 2) has emerged as a critical industry benchmark for companies to transparently showcase adherence to strict standards for security, availability, processing integrity, confidentiality and privacy.

What is it?

Created by the American Institute of CPAs (AICPA), SOC 2 provides organizations with a way to manage risks and build trust in the eyes of customers. It has become ubiquitous for SaaS companies and any service provider housing financial, healthcare or other regulated data.

This article provides an in-depth look at SOC 2 – its origins, components, certification process, and benefits. We’ll explore the different types of reports, updated trust principles criteria, and steps involved in obtaining SOC 2 attestation. 

Understanding the SOC 2 framework allows organizations to get started on the path towards compliance, while enabling customers to learn what SOC 2 certification means and why it matters. Let’s explore the world of SOC 2. 

A Brief History of SOC 2 

SOC 2 has its origins in earlier auditing standards for service organizations. It was formally introduced in 2011 as part of the AICPA’s Service Organization Control (SOC) reporting framework. 

Origins – SAS 70 and SSAE 16 

In 1992, the AICPA introduced SAS 70 (Statement on Auditing Standards No. 70) as a way to provide assurance around controls at service organizations. It was used by many organizations for over 15 years. 

SAS 70 was eventually replaced by SSAE 16 in 2010, which introduced the SOC auditing structure. SSAE 16 stands for Statement on Standards for Attestation Engagements No. 16. 

The SOC Reporting Framework 

Under SSAE 16, three types of SOC reports were established: 

• SOC 1: Focuses solely on controls relevant to financial reporting. Used by service providers processing financial transactions. 
• SOC 2: Provides a broad look at controls governing security, availability, processing integrity, confidentiality and privacy. Widely adopted by SaaS/cloud companies. 
• SOC 3: A summarized version of a SOC 2 report for public disclosure. Used for marketing purposes to provide trust assurances. 

SOC 2 was created with the rise of cloud computing in mind. It provides organizations with an independent assessment of controls beyond just financial reporting. 

Ongoing Evolution 

In 2016, the AICPA introduced SSAE 18 which updated and superseded SSAE 16.

Some key aspects of SSAE 18 include:

• Confirms SOC 2 still aligns with Trust Services Criteria.
• Introduces ADVANCED designation for SOC 2 audits with higher requirements.
• Adds additional guidance around reporting information in SOC 2 reports.
• Requires descriptions of infrastructure, software, people, procedures, and data involved in meeting control objectives.
• Strengthens requirements for auditor communication with customers.

The introduction of SSAE 18 updated and built upon the existing SOC 2 framework to further improve effectiveness, transparency and consistency. It continues the ongoing evolution of SOC 2 as an invaluable industry standard for service organizations.

Since its introduction, SOC 2 has become the premier standard for measuring vendor trust and transparency. In 2017, the SOC 2 criteria were updated to its current version based on the AICPA’s Trust Services Principles and Criteria. 

SOC 2 continues to be refined to address emerging cybersecurity concerns, privacy regulations, and new IT delivery models. It has proven to be an adaptable and relevant industry benchmark for companies operating in the digital age. 

Types of SOC 2 Reports 

There are two types of SOC 2 reports that can be issued by an accredited CPA firm – Type I and Type II. They differ in the nature of the auditing procedures performed, and the level of assurance provided. 

SOC 2 Type I Report 

A SOC 2 Type I report is an examination of a service organization’s controls at a specific point in time. The auditor tests the design and implementation of controls but does not evaluate their operating effectiveness over a period of time. 

Some key attributes of a SOC 2 Type I report: 

• Provides a snapshot of system and control status 
• Assesses whether controls are suitably designed to meet criteria. 
• Identifies gaps in process and policy design. 
• Results in a readiness assessment 

The Type I report is often the first step for organizations pursuing SOC 2 certification. 

SOC 2 Type II Report 

The SOC 2 Type II report reflects a more rigorous audit of the service organization’s controls over a minimum 6-month period. 

Key features of the Type II report: 

• Examines both the design and operating effectiveness of controls 
• Tests controls are operating adequately over time 
• Provides a detailed trust services report 
• Delivers a high level of customer assurance. 

For most organizations, the SOC 2 Type II represents the end goal to demonstrate trustworthiness and transparency. 

Key Distinctions Between SOC 1, 2 and 3 

While SOC 2 is focused on security, availability, processing integrity, confidentiality and privacy, SOC 1 and SOC 3 reports have different purposes under the SOC framework. 

SOC 1 

The SOC 1 report is centered around financial reporting controls. Some key attributes: 

• Tailored for service organizations processing financial transactions 
• Focuses strictly on internal controls relevant to financial audits 
• Aligns with SSAE 18 and PCAOB standards. 
• Most often used by payment processors, payroll services, etc. 

SOC 1 provides assurance around financial data integrity, but does not address security, availability or privacy controls. 

SOC 2 

In contrast, the SOC 2 report covers a broad set of trust principles beyond just financial controls. Attributes of SOC 2 include: 

• Applicable to wide range of cloud/SaaS providers 
• Aligned to rigorous AICPA Trust Services Criteria 
• Covers security, availability, processing integrity, confidentiality and privacy 
• Trusted standard for datacenters, SaaS companies, etc. 

SOC 2 provides expansive assurance around vendor risk management. 

SOC 3 

The SOC 3 report is a summary of SOC 2 intended for public dissemination.  

Characteristics include: 

• Provides high-level overview of SOC 2 report 
• Excludes detailed testing procedures 
• Used as marketing tool to provide trust assurances 
• Shorter report without technical specifics 

The SOC 3 satisfies vendor marketing and transparency needs. 

While complementary, each SOC report has a distinct purpose. Understanding the differences helps organizations select the appropriate auditing standard based on unique business needs and customer expectations. 

Core Elements of the SOC 2 Framework 

The SOC 2 framework consists of four key components defined by the AICPA that comprise the foundation for SOC 2 assurance. 

• Trust Services Criteria 

The Trust Services Criteria are the set of principles and control objectives used to measure effective controls under the SOC 2 standard. They define the specific control criteria across security, availability, processing integrity, confidentiality and privacy that service organizations must meet. 

Developed and maintained by the AICPA, the Trust Services Criteria provide the benchmark that auditors use to evaluate and test controls. They underpin the overall SOC 2 framework. 

• Management Assertion 

A pivotal piece of the SOC 2 process is the written assertion by management that the organization’s controls meet the Trust Services Criteria and operate effectively. 

This formal statement affirms that policies, procedures, and operations ensure security, availability, processing integrity, confidentiality and privacy based on the AICPA’s standards. 

• Testing Procedures 

The SOC 2 auditor performs a series of tests and procedures to obtain and evaluate evidence against management’s assertion. 

Testing steps help validate that suitable controls have been designed and operate effectively across the various Trust Services Criteria. The testing rigor increases for a Type 2 report covering an extended time period. 

• SOC 2 Report 

The culminating output of a SOC 2 engagement is the issuance of a SOC 2 report by an accredited CPA firm. This report communicates: 

1. The scope and objectives of the audit 
2. Management’s assertion regarding controls 
3. Details of testing performed 
4. The auditor’s opinion on whether controls meet the Trust Services Criteria 

The SOC 2 report provides independent validation of controls to build stakeholder confidence and trust. 

SOC 2 Trust Services Criteria (2017) 

The SOC 2 Trust Services Criteria defines the control objectives service organizations must meet to attest to effective security, availability, processing integrity, confidentiality and privacy. 

The criteria are organized into five principle categories: 

A. Security 

The security principle covers controls for access, infrastructure and data protection: 

1. Logical access – authentication, authorization, password management 
2. Physical access – datacenter, workplace controls 
3. Infrastructure security – firewalls, endpoints, encryption 
4. Change management – system and service changes 
5. Backups – data recovery and retention processes 

B. Availability 

Availability focuses on system and service uptime and resilience: 

1. System capacity – sizing, load testing, bottlenecks 
2. Redundancy – failover, RAID arrays, hot swaps 
3. Disaster recovery – backups, alternate sites, testing 
4. Monitoring – network, app and system monitoring 
5. Incident response – severity classification, escalation 

C. Processing Integrity 

Processing integrity relates to the completeness and accuracy of system processing: 

1. Validity checks – input validation, error detection 
2. Data transmission integrity – encryption, hashing 
3. Error logging – event tracking, alerts, thresholds 
4. Error remediation – identification, resolution, root cause 

D. Confidentiality 

Confidentiality covers the protection of sensitive customer data: 

1. Data classification – sensitivity, labelling, handling 
2. Access controls – least privilege, segregation of duties 
3. Transmission controls – encryption, secure transfer 
4. Storage controls – encryption, data minimization 
5. Destruction – secure data deletion and destruction 

E. Privacy 

Privacy focuses on managing and protecting personal information: 

1. Notice – purpose specification, openness 
2. Choice and consent – options, voluntary participation 
3. Collection limits – transparency, data minimization 
4. Use limitations – retention, limiting to stated purpose 
5. Access controls – viewing, modifying and deleting data 

The SOC 2 Certification Process 

Gaining SOC 2 attestation involves a multi-step process that requires coordination across many functions and layers of the business. 

Planning Phase 

The planning phase involves: 

• Defining objectives, scope, timeline and budget 
• Selecting Trust Services Criteria to meet business needs 
• Choosing an accredited CPA firm to perform the audit 
• Forming a cross-functional team for execution 

Careful planning helps streamline the certification process. 

Pre-Certification Phase 

The pre-certification phase focuses on: 

• Evaluating existing controls against criteria 
• Identifying gaps and areas for improvement 
• Implementing new controls to achieve compliance. 
• Providing documentation, policies and evidence 

Thorough execution prepares the organization for SOC 2 testing. 

Certification Phase 

During the certification phase: 

• For Type I – the auditor validates point-in-time compliance 
• For Type II – the auditor examines controls over an extended period 
• Management provides a formal assertion to the auditor 
• The final report is issued with the auditor’s opinion 

Formal certification demonstrates compliance to stakeholders. 

Maintenance Phase 

After earning certification, ongoing maintenance involves: 

• Monitoring control effectiveness 
• Updating controls for system changes 
• Staying current with evolving best practices 
• Scheduling recertification audits 

The maintenance phase sustains achieved compliance over time. 

Obtaining and keeping SOC 2 compliance requires ongoing commitment across these phases. 

Benefits of SOC 2 Certification

Achieving SOC 2 certification delivers many advantages that make the investment in people, processes and technology worthwhile. 

1. Validates Security and Compliance Controls – The core benefit of SOC 2 is independent validation that your controls meet strict security, availability, processing integrity, confidentiality and privacy standards. Customers gain assurance that you take trust seriously.
2. Builds Stakeholder Trust and Confidence – By publishing your SOC 2 report, you transparently demonstrate adherence to best practices. The CPA seal of approval builds immense trust and credibility. 
3. Demonstrates Commitment to Operational Excellence – Attaining and maintaining SOC 2 shows you are committed to world-class operations, not just security checkbox compliance. It signals business rigor. 
4. Prepares for Audits and Compliance Requirements – SOC 2 maps to many legal and regulatory frameworks like HIPAA, GDPR, PCI DSS, etc. It demonstrates readiness for additional audits. 
5. Identifies Potential Risks and Gaps – The SOC 2 process helps uncover gaps in controls for remediation. You bolster defenses and resilience against threats. 

For today’s data-driven organizations, SOC 2 has become a must-have certification to compete and earn stakeholder confidence in the digital economy. 

Why SOC 2 Certification Matters 

With data breaches on the rise and cloud adoption accelerating, earning SOC 2 certification has become a critical imperative for service organizations of all types. 

1. Increased Customer Trust – SOC 2 provides transparent proof to customers that you take security and compliance seriously. It demonstrates that you can be trusted with their sensitive data. 
2. Supports Data Protection Responsibilities – The extensive auditing ensures you have controls in place to protect personal data and uphold privacy commitments in compliance with regulations. 
3. Preparedness Against Threat Landscape – Achieving SOC 2 readiness significantly hardens defenses against both external cyber threats and insider risks, bolstering resilience. 
4. Competitive Differentiator – SOC 2 certification gives organizations an edge against competitors via built-in trust assurances that remove purchase barriers and friction. 
5. Industry Norm and Expectation – Serving enterprise clients, especially SOC 2, is now an expected norm. Lacking certification can disqualify providers during procurement. 
6. SOC 2 has emerged as an often mandatory prerequisite for obtaining the strongest cyber insurance protection. The extensive auditing and certification process provides insurers with proof of stringent controls to mitigate and respond to threats. As attacks surge, cyber insurers are turning to SOC 2 reports to assess vulnerabilities, demonstrate due diligence, and set coverage and premium levels.

In today’s high-risk landscape, SOC 2 is a must, not just a nice-to-have. It’s a new cost of doing business. 

Considerations for SOC 2 Success 

While critical, attaining and maintaining SOC 2 certification requires thoughtful planning and diligent cross-functional coordination. 

1. Obtain Executive Buy-In – Gaining leadership approval and budget ensures SOC 2 gets the required attention and resources. 
2. Conduct Initial Control Gap Assessment – Understand current state vs. the Trust Services Criteria to inform the roadmap and areas of focus. 
3. Foster Internal Alignment – IT, security, compliance, legal and other groups must collaborate to embed controls into processes. 
4. Dedicate Ongoing Resources – Sustaining compliance requires continuous staffing and funding for training, monitoring, testing and audits. 
5. Embed Security Into Culture – SOC 2 success stems from org-wide commitment to security, availability, processing integrity, confidentiality and privacy. 
6. Measure and Report – Tracking control metrics provides visibility into operational status and risk to maintain certification. 
7. Update for System Changes – Any technology or infrastructure changes require re-evaluation of controls to avoid compliance gaps. 

With cross-functional coordination and continuous commitment, organizations can reap the full benefits of SOC 2. 

SOC 2 has become the gold standard by which modern organizations demonstrate trust in today’s digital economy. Created by the AICPA, it provides a principles-based framework centered around security, availability, processing integrity, confidentiality and privacy. 

Final Thoughts

SOC 2 emerged from earlier auditing standards as cloud computing gained adoption. It now serves as an industry benchmark for service organizations handling sensitive data to showcase adherence to rigorous best practices via independent audits resulting in CPA-issued reports. 

Pursuing SOC 2 certification signals an organization’s commitment to world-class governance. The extensive auditing and testing better secures defenses in depth. An unbroken chain of assurance is established by the CPA firm to management to customers. 

While requiring cross-functional diligence, the benefits of trust transparency and risk mitigation outweigh the investments for SOC 2 readiness. As data protection regulations multiply and threats abound, earning customer confidence through SOC 2 certification has become a critical imperative.

If you need assistance to achieve SOC 2 certification, reach out to us and together, we can forge your path to success.