SOC 2 Standard: Risk Control Reporting System

In the digital age, as businesses increasingly rely on the internet and big data, protecting customer information has become a top priority. Not only do businesses need to secure their internal systems, but they must also ensure that external service providers comply with stringent security standards. SOC 2 – a standard developed by AICPA – was created to meet this requirement, helping to evaluate internal controls related to security, availability, data integrity, confidentiality, and privacy. This article from SQC Certification shares information about the SOC 2 standard and related content.

WHAT IS THE SOC STANDARD?

SOC, or Service Organisation Control, is a set of criteria for managing customer data, launched by the American Institute of Certified Public Accountants (AICPA) in 2011, based on five “trust principles of service.”

SOC certification is a certification of a provider’s compliance through existing systems and processes based on the five trust principles set forth by SOC.

The SOC standard is divided into three types: SOC 1, SOC 2, and SOC 3, to help businesses meet AICPA standards, build trust, and ensure regulatory compliance.

WHAT IS SOC 2 STANDARD?

SOC 2 (short for Service Organization Control 2) is an auditing standard developed by the AICPA (American Institute of Certified Public Accountants) to assess the level of internal control of organizations providing services, especially those related to information technology and cloud computing.

Essentially, the SOC2 standard includes five principles for evaluating the reliability of customer data management services. The goal of SOC2 is to ensure that data management service providers secure both the company’s own information and that of its customers.

WHAT IS SOC 2 COMPLIANCE?

The SOC 2 standard provides a framework for security and auditing to determine whether your company or organization complies with the requirements of SOC 2. SOC 2 defines the requirements for managing and storing customer data based on five Trusted Service Criteria (TSCs):

Protection
Availability
Processing Integrity
Security
Privacy

During the SOC 2 assessment, an independent auditor will evaluate the company’s security situation in relation to one or all of these Trusted Service Criteria. Each TSC has specific requirements, and the company will implement internal controls to meet those requirements.

The security TSC is always included in the SOC 2 assessment, while the other four TSCs are optional. Security is also referred to as a Common Criteria because many security criteria are shared among all Trusted Service Criteria.

WHAT IS SOC 2 ASSESSMENT?

This can be seen with several sets of information security standards that have quite stringent requirements, such as ISO 27001 and PCI DSS standards. The requirements of the SOC 2 standard are different:

The assessment and certification report is unique to each organization. Each company designs its own controls to comply with its Service Reliability Criteria.

Then, an independent auditor will be sent to the organization to verify whether the company’s controls meet the requirements of SOC 2.

After the assessment, an assessment report will be issued on the level of compliance of the company’s systems and processes with SOC 2. Every organization that completes an SOC 2 audit receives the report, regardless of whether they passed the audit or not. Depending on each business’s response, the assessment results will be as follows:

Not qualified: The company passed the assessment.
Satisfactory: The company passed, but there are some areas that need attention.
Poor: The company did not pass the assessment.
Disclaimer: The auditor does not have sufficient information to draw a fair conclusion.

DISTINGUISHING BETWEEN SOC I AND SOC 2

As we shared above, the SOC standard has three different types: SOC 1, SOC 2, and SOC 3. However, SOC 1 and SOC 2 are most commonly used. These two types have distinct differences as follows:

Type I: describes a vendor’s system and whether their design is suitable to meet the relevant reliability principles.
Type II: describes the operational performance of those systems. SOC 2 is the most common and widely required report today, requested by most domestic and international customers.

	SOC 1	SOC 2
Definition	An internal control report relating to a client’s financial reporting.	A report assessing the reliability of service organizations. Focuses on user management, organizational management, process controls, and services related to the security, availability, integrity, and confidentiality of the organization.
Objective	To process and protect client information throughout the entire business and IT process.	To ensure that the service provider manages data securely to protect the organization’s interests and client privacy. For businesses that prioritize security, compliance with SOC 2 is a minimum requirement when considering a SaaS provider.
Benefits	Helps companies understand the impact of the service provider’s control measures on their financial reporting.	It helps monitor service organizations, supplier management plans, internal corporate governance processes, risk management, and regulatory oversight.

TARGET AUDIENCE FOR SOC 2 STANDARD

The current SOC 2 standard is designed for businesses that provide services using or processing customer data, especially in the technology and digital services sector. Specifically, the following organizations are often required or should comply with SOC 2:

SaaS (Software-as-a-Service) Companies

Businesses based on platforms that provide software services over the internet, storing and processing large amounts of user data, can be assured by the SOC 2 standards that their systems are secure and reliable.

Cloud Computing Providers

Services such as cloud storage and data processing (Amazon Web Services, Microsoft Azure, Google Cloud, etc.) need to demonstrate the security and availability of their systems.

Businesses providing IT, BPO, or outsourced data processing services

For businesses that process data on behalf of clients, compliance with SOC 2 standards is considered evidence that data is managed securely and adheres to strict control principles.

Fintech, banking technology, and insurance companies

Organizations that process sensitive financial or personal information need to demonstrate their ability to protect security, integrity, and privacy.

Startups seeking large investments or partnerships

Obtaining SOC2 certification helps businesses build credibility early on, making it easier to attract corporate clients or large investment funds.

5 PRINCIPLES OF SOC2 COMPLIANCE

To obtain SOC2 certification, service providers must comply with 5 principles set by the auditors. These five principles include:

1: Security – the first principle of SOC2 refers to the extent to which the service provider’s data system is protected. A secure system must prevent unauthorized access by using access controls to combat system abuse, data theft, or alteration. Your organization’s compliance with SOC2 can be achieved by using tools such as two-factor authentication, web application firewalls (WAFs), and intrusion detection.

2: Availability – According to the AICPA, availability means that the system must be readily available for operation and use in accordance with the commitment or agreement. This commitment is usually in the form of a service level agreement (SLA) between the service provider and the customer. Essentially, this agreement is about the service provider fulfilling all the terms and conditions as stipulated in the contract. Furthermore, to meet availability requirements, providers must monitor network performance, handle security incidents, and provide reliable disaster recovery solutions.

3: Integrity Processing – Your organization needs to meet this principle by ensuring that data processing is complete, valid, accurate, timely, and authorized. However, to meet this requirement, service providers should monitor data processing and have a quality assurance policy.

4: Confidentiality – Your organization needs to keep data confidential by establishing a list of who or what organizations are allowed to access which information. For example, company intellectual property or customer financial information is often restricted to certain employees. Adherence to confidentiality principles is crucial for providers, as it helps ensure that data about a company and its customers is not shared with other customers or partners.

5: Privacy – Currently, providers need to ensure the privacy of organizations by adhering to the General Privacy Principles (GAPP), which include ten rules surrounding the collection, management, disclosure, and processing of highly sensitive information. Highly sensitive information can be understood as detailed customer data, including names, addresses, social security numbers, as well as personal information about religion, race, health, etc.

BENEFITS OF IMPLEMENTING SOC 2 FOR BUSINESSES

Currently, IT businesses that use many data systems can implement and comply with SOC 2. This brings many practical benefits to businesses, especially in today’s digital and data-dependent business environment. Here are the key benefits:

Increased trust from customers and partners

SOC 2 demonstrates that a business has robust internal controls to protect customer data. This is a crucial factor in building trust with customers, partners, and stakeholders.

Enhancing Competitive Advantage

For businesses involved in the IT industry such as SaaS, technology, finance, etc., having a SOC 2 report helps them stand out from competitors who haven’t achieved certification, especially in bidding processes or signing large contracts.

Minimizing Information Security Risks

The SOC 2 standard provides requirements for businesses to identify, manage, and improve security measures, and can help businesses detect and address vulnerabilities before they are exploited.

Legal and Contractual Compliance

Currently, many organizations and jurisdictions require service providers to comply with certain security standards. The SOC 2 standard can help organizations and businesses meet all legal terms or contractual requirements related to data protection.

Optimizing Processes and Internal Controls

Preparing for the SOC 2 standard helps businesses review their entire security process, thereby improving operational efficiency and minimizing errors in system administration.

Protecting Business Reputation

A data breach can cause millions of dollars in damage and destroy brand reputation. Complying with the SOC 2 standard helps minimize this risk, while also conveying the message that the business is serious about protecting customer data.

FREQUENTLY ASKED QUESTIONS ABOUT THE SOC 2 STANDARD

What is SOC 2?

The SOC 2 standard is one of the security and compliance standards developed by the American Institute of Certified Public Accountants (AICPA) to help service providers ensure that client data is protected against unauthorized access, security vulnerabilities, and data breaches. SOC 2 reports are often required by clients and partners of outsourced service providers as proof that the organization has implemented adequate controls to protect critical information.

What does an SOC 2 assessment include?

The SOC 2 assessment process is typically conducted by a certified CPA auditor and includes examining the suitability and effectiveness of the organization’s implemented controls. This process includes system testing, reviewing documentary evidence, and interviewing members of the organization. The final report will provide an assessment of the organization’s compliance with the criteria under the “Trusted Service” that the organization has chosen.

Is SOC 2 mandatory?

While the SOC 2 standard is not a legally mandated requirement like HIPAA or GDPR, many customers and partners will consider it a prerequisite for cooperation. Having an SOC 2 report not only helps build trust but also expands business opportunities in areas requiring high security standards.

Who needs to comply with SOC 2?

This SOC 2 standard applies to any business or organization that provides services related to storing, processing, and transmitting customer data systems, especially organizations and businesses providing cloud services, SaaS, data centers, and BPO organizations.

How long does an SOC 2 audit take?

The time required to complete a SOC 2 audit depends on several factors, such as the readiness of the internal control system, the audit firm’s schedule, and the service organization’s ability to allocate time. Ideally, the process can be completed in a few weeks; however, it typically requires approximately 40–80 hours of work (in the first year) for preparation and collaboration with the auditors.

How long is an SOC 2 report valid?

Type II SOC 2 reports are typically updated annually, with a 12-month review period. Some new organizations may start with a Type I SOC 2 report to demonstrate readiness and then move to Type II in subsequent audits – or may be directly required to report Type II upon client request.

How can the accuracy of an SOC 2 report be ensured?

Both the auditing firm and the audited organization need to verify the accuracy of the report before release. Business management should carefully review the process descriptions (Part III) and the content of the control measures (Part IV) to ensure transparency and consistency with the organization’s actual operations.

What are the consequences of not having a SOC 2 report?

The absence of a SOC 2 report can cause businesses to lose many collaboration opportunities – especially with industry partners who have high information security requirements. Furthermore, responding to security assessment questionnaires from clients can become complicated and time-consuming without a SOC 2 report as a basis for verification.

SOC 2 CERTIFICATION SERVICES AT SQC CERTIFICATION

SQC Certification Vietnam is a member of SQC Certification India and has a global presence, including Vietnam. At SQC Certification Vietnam is proud to certify organizations and foster a culture of continuous improvement through advanced management systems assessment and training programs, including SOC 2 certification.

REASONS TO CHOOSE US?

Dedicated Experts: Experienced and dedicated auditors provide expert support to our clients.
Personalized Support: At SQC Certification, we prioritize focusing on the needs of each individual client.
Comprehensive Services: We offer ISO certification for a wide range of industries.
Eliminate Intermediaries: Clients working with SQC Certification receive a simple, client-focused certification process.
Customer Satisfaction: SQC Certification ensures customer satisfaction through transparency and dedication that exceeds expectations.