In the face of rising concerns of a recession in the United States, companies may want to reassess their business needs and focus on all the services they are provided by different vendors. One such service provided by many accounting and other firms is the issuance of a SOC 2 Report. Is the report they currently receive truly a necessity or a luxury that they can do without in the short term under a tightening of the economy? Rest assured a SOC 2 report can only help to benefit the company, grow businesses, and establish credibility when it comes to industry, IT, and security standards. What are the different SOC Reports your company may be receiving right now? What exactly does it provide for a company? What are the major benefits of having a SOC 2 Report, and how does it compare to the other SOC Reports? We will provide a high-level overview of the major SOC reports your company might currently have or be looking at, and the benefits received from a SOC 2 Report.
SOC 1 Report
SOC 1 Reports are typically used by financial service providers, such as claims processing or payroll management firms. However, they can also be applicable to different portions within a company that provides various services to clients. For example, if a SaaS company provides cloud hosting and financial services, it may want to issue a SOC 1 Report. This report will assess the suitability of the system controls for achieving control objectives and the description on a specified date. It is key to note that the controls assessed by the SOC 1 Report only relate to financial reporting data (i.e. systems that provide amounts which will directly flow into their customers’ financial statements).
SOC 2 Report
Unlike the SOC 1, SOC 2 Reports on a service organization’s general security via system and organizational controls. This information can include PII (personally Identifiable information), such as social security numbers, and e-PHI (electronically protected health information). As a result, SOC 2 Reports are utilized by a broader range of service organizations, including SaaS, data centers, and cybersecurity providers. The SOC 2 Report is a way for a service organization to affirm with their clients that valuable data is being secured and appropriately handled. A SOC 2 report is generally written for a specific, limited audience. A service organization may provide a SOC 2 Type 1 or Type 2 report to its clients or other auditing authorities. The difference between a Type 1 and a Type 2 Report is that a Type 1 Report establishes that specific controls and control objectives are in place as of a specific date, while a Type 2 establishes that not only were the controls in place, but they were also operating effectively. The Type 2 report also covers a period of time versus a point in time. An important note is that a SOC 2 Report is not intended for public use and is sent to clients upon request of confirmation of the service organizations existing control environment.
SOC 3 Report
SOC 3 Reports use the same framework as the SOC 2, Type 1 or Type 2, and confirms the same information, but the SOC 3 does not provide specific details about a company’s security controls. The main reason for obtaining a SOC 3 Report is, unlike the SOC 2, it can be used for the general public. Companies will typically obtain a SOC 3 Report and post it on the information portion of their website for anyone to see.
Benefits of a SOC 2 Report
Now that a very basic overview of each of the different SOC reports has been established, here are some of the reasons that obtaining a SOC 2 report could benefit your company:
- Customer demand – Protecting data from unauthorized access and theft is a priority for customers. Without a SOC 2 attestation, customers can question the security around the data that the service organization has been provided.
- Competitive advantage – Obtaining a SOC 2 Report shows other companies that the service organization takes security and compliance seriously and establishes items like data protection are extremely important. In today’s growing digital age, companies are beginning to demand this more and more and will often side with the more secure service provider.
- Differentiation – As stated previously, service organizations can show how much they value the importance of security when they obtain a SOC 2 and are more likely to become the service provider for other companies. The SOC 2 Report lends credibility to the organization and shows that the highest standard practices and processes are implemented and reported on. Due to the amount of time it can take to produce a SOC 2 report, it will also show companies that the service organization is willing to invest resources to affirm their control environment and the security of data they provide.
- Regulatory compliance – SOC 2 Report requirements are similar to other frameworks including HIPAA and ISO 27001 and attaining certification can speed your organization’s overall compliance efforts to those frameworks.
- Value Add – A SOC 2 Report provides valuable insights into your organization’s risk and security position, vendor management, internal controls governance, regulatory oversight, and more.
Although there are costs to issuing a SOC 2 Report, the benefits are clear and help to establish the company is compliant with industry standards, upholds data security as an extremely high priority, and can be trusted by companies to handle the services for which they provide. If your company is interested in determining which SOC report is right for you, or if you have questions related to SOC reporting, please contact us. For more information on these services, please visit our SOC services pages.