SOC 2 Compliance for Startups: Everything You Need to Know and Do Before an Audit
Every year, businesses and regulators pay more and more attention to data privacy and confidentiality. And certification under such conditions is a great way to meet the latest and most effective information security requirements. In particular, SOC 2 reports are used as a standard, and we will talk about them in this article.
What is a SOC 2? Meaning and definition
SOC 2 (System and Organization Controls 2) is an audit system that is used to check how various enterprises in the field of IT services cope with the tasks of ensuring data protection and confidentiality. In general, this term refers to a report, a document that contains a description of the controls of your enterprise, as well as an assessment of the effectiveness of these controls. This certification is not mandatory, like, for example, PCI DSS, but this standard is used internationally as a confirmation that the company is adequately concerned about the security of confidential data.
Why is SOC 2 important? How to determine if you need certification?
On average, companies around the world use approximately 110 SaaS applications daily. To check each company-supplier of this or that service, the organization to which confidential information will be transferred is long and impractical. The user business simply needs to know who has access to that data and how that data is protected.
In other words, your potential business partners and clients want to know to some extent how safe it is to entrust this or that information to your company, and what risks will accompany this decision. Therefore, it is important for them to have documented and reasoned confirmation from third parties that your security measures are reliable and up to date.
And if your company is a software as a service provider, having this document, this certification, is extremely important. Especially if you intend to do business in regulated industries with serious representatives of medium and large businesses.
Some of the key benefits of obtaining SOC 2 certification include:
- Trust relationships with clients and business partners. Having a SOC 2 audit report shows that you adhere to the best and most reliable practices that guarantee data security.
- Competitive advantage and improvement of the company’s image. The fact that your company has received SOC certification proves that you have controls in place to protect sensitive information. This immediately sets your organization apart from others.
- The expansion of the customer base. The previous two benefits allow you to work with more companies.
- Reducing the time to conduct transactions. You do not need to go into the details of what security policies your company adheres to each time.
- Formation of a strong base for the security program in the company. Compliance with certain safety standards and requirements at an early stage of your company’s existence provides an opportunity to create a safety-oriented production culture.
Assessment systems and types of reports AICPA SOC 2
There are two types of SOC 2 reports: Type 1 and Type 2.
- Type 1 — evaluates the organization’s security system at a particular point in time.
- Type 2 — evaluates everything the same as Type 1, but over a period of time, usually 3 to 6, and sometimes up to 12 months.
What type of report to choose for a startup?
SOC 2 audit is carried out in accordance with the criteria — Trust Services Criteria (TSC):
- Security: your system and information is protected from unauthorized access. It checks how network and application firewalls work, as well as how two-factor authentication and intrusion detection work;
- Availability: your system and the information it contains are always available to users. Checks the performance of your system, how data is recovered in emergency cases, and how security incidents are handled;
- Confidentiality: all confidential information is securely protected. It checks how data is encrypted, as well as privacy and access control policies;
- Processing integrity: information is processed accurately, efficiently and in a timely manner;
- Privacy: all personal information is processed in accordance with established policies.
The Security category is the only main one. That is, any and every SOC 2 report must contain this category. All other categories are optional.
Since SOC 2 is a fairly flexible audit, development companies usually start with a Type 1 report in one or two categories. And then supplement it with other categories. In this way, the company can avoid significant costs, and at the same time demonstrate its interest and desire for a more reliable security system.
However, due to the fact that this type of the report is quite limited and can quickly become outdated, it is better for companies not to delay a Type 2 audit in all five categories. This check is significantly more complex, longer and more rigorous, but it is more reliable, gives a comprehensive result, and shows that you have been following security procedures for many months.
You need to clearly understand what exactly your customers and partners expect from you. Perhaps for an important transaction, at this point in time, it will be sufficient for you to conduct a Type 1 audit in several categories. But it may also be more beneficial for you to audit SOC 2 Type 2 right away and not spend money and time on Type 1 and incremental tests.
How to prepare your startup for SOC 2 compliance?
Remember that the better prepared you are for assessing your security system, the easier the audit process will be.
To prepare, you first need to determine the scope of the upcoming certification. The more verification criteria you choose, the more complex the audit will be. It is also advisable to consult with an audit firm so that you can be told exactly whether your standards, documentation and administrative policies meet the necessary conditions and requirements.
Assessing administrative security policies
Security policies are internal company documents, a kind of script that describes the actions of employees, technologies and daily workflow, as well as how various security controls are implemented in the infrastructure and applications of your company. Your employees need to understand these documents, so take care that they are not overly complex and are not overloaded with specific terms or complex legal language.
It is also desirable to prepare in advance a description of the information security processes. For example:
- how user access to the system and confidential data is granted and revoked;
- how backups are made and how system disaster recovery occurs;
- what do the employees of the information security department, in case of security events;
- how security risks are analyzed and what actions the company is taking to address security issues;
- what actions are taken to train employees on information security and work with confidential information.
Be prepared for the fact that almost the entire company will probably participate in the policy preparation process, and not just employees of the information security department. After conducting a preliminary SOC 2 readiness assessment, you may also need to review some of the details of your policies, as well as take the time to adapt them to the requirements, and implement them into the daily work of the company.
Collection of evidence supporting SOC 2 compliance
Once you have the security policies in place, you can move on to gathering evidence of SOC 2 compliance. The more evidence you collect, the faster the auditors can complete their work. Documentation may include, but is not limited to:
- technical documentation on information security;
- administrative security policies;
- cloud security information;
- contracts and agreements with third parties, contractors and suppliers;
- vulnerability scanning reports, etc.
We also draw your attention to the fact that ESKA is an expert in preparing startups for SOC audits. We use automated solutions — special software that greatly speeds up and reduces the cost of the preparation process.
How SOC 2 compliance works: audit process
The formal part of the audit is carried out after all preparatory work is completed. During the audit process, the auditing company requests specific evidence that relates to certain security processes, as well as infrastructure and systems. In general, auditors need to make sure that what you have written on paper is true and implemented in real life.
Remember also that in order to receive SOC 2 Type 2 certification, your company’s processes must be running flawlessly for a predetermined period. As we noted earlier, this is usually from 3 to 6 months. Also, consider that the SOC 2 audit has a sort of expiration date. That is, your company, in order to maintain its status, will have to undergo a regular audit every year. And to show that all processes are still performed efficiently, and the company as a whole complies with the requirements of the standard.
Automation of the process of preparing for the audit
Since the preparatory work for receiving the SOC report is a rather voluminous process that can stretch for months, it is advisable to automate it. As we have already noted, our company uses special software from Vanta. With us, your startup can prepare for a SOC 2 audit in just two weeks. Moreover, since automation eliminates much of the preparatory work for companies, our customers most often opt for SOC 2 Type 2, which results in a more advanced and versatile certificate that opens up more business opportunities.
If you need a SOC report, contact ESKA today. We will carefully prepare your company for the audit and help you work out all the requirements so that you can easily pass the audit and get the desired certificate the first time.