SOC1 & SOC 2: The fundamental difference
Here’s what you need to know.
Currently, there is an effective way to convince your customers and other stakeholders of a strong control environment – an independent assessment of control tools. But the question many companies face is also about the preparation of SOC report following SSAE 18, ISAE 3402, and ISAE 3402 standards and virtual CISO services is a simple answer to that question. SOC solves many tasks, and among them there are the following:
- rapidly responding to cyber threats;
- comprehensive protection of the computer networks;
- managing the organizational security in real-time.
There are two types of reports within the whole system namely SOC 1 and SOC 2. It is easy to confuse them, although they have different goals and objectives. They target different elements of an organization control. The choice usually depends on the services provided to the clients/users. Sometimes you may need to pass both SOC 1 and SOC 2 checks.
SOC: General Definition & Objectives
The SOC (Security Operations Center) brings people, processes, and technology together to achieve a global goal namely reducing risks by increasing cybersecurity in an organization. But above all, the SOC is a team of security experts armed with technologies to detect, analyze, report, and prevent cyber threats. SOC is similar to the work of an ambulance. Cyber specialists in the SOC help in emergency situations just like emergency personnel. They quickly appear in the right place, analyze threats, and take appropriate measures. They also have a common desire to prevent such incidents.
SOC 1: The Essence & Notions
SOC 1 or SSAE 16 reports focus on overseeing financial security and stability. They are used by organizations to provide financial statements. For clarity, you can give an example of the income processes` implementation. There are two types of SOC 1 reports:
- Type 1 SOC 1 helps manage service organizations and monitor controls. Also, this type of report helps to achieve control objectives following the designated dates;
- Type 2 SOC 1 sets the same goals, though it has several additional tools that help to improve operational efficiency to achieve goals within a strictly defined time frame.
Therefore, SOC 1 audits all financial reporting data processing control systems. Besides, this report is effective in organizing financial audit controls in a strictly reporting period. SOC 1 is in high demand among service organization owners and financial auditors.
SOC 2: The Aspects of Concept
SOC 2 Compliance concerns the customer data management under the five AICPA Trust Criteria (TSC):
- The security section includes criteria that relate to the protection of mechanisms and systems which are used to collect, create, store, use, process, and transmit data. Here we are talking about intrusion detection systems, firewalls, multi-factor authentication tools, client certificates, digital and physical access control;
- The accessibility section notes the data availability both for the organization systems and for the products/services which are provided to the customers. The auditor reviews the management tools to determine if they support such availability across operations, monitoring, and maintenance;
- The integrity of data processing is ensured by the completeness, reliability, and relevance of the data. They allow you to make sure that the data is processed by the provider exactly as it was authorized. An audit allows you to identify if there are any delays, omissions, errors, or manipulations (unintentional or unauthorized) in the data processing systems.
- The privacy category is designed to demonstrate that any sensitive data remains safe and secure. It includes any information from the personal data of the subject to its intellectual property. To achieve the security of the transmitted data, SSL / TLS certificates are used. Besides, there are digital signature certificates for email (personal authentication certificates);
- Confidentiality and privacy are different things in the TSC criteria. Confidentiality describes different categories of sensitive information, while privacy refers only to personal information.
Unlike stricter security standards such as PCI DSS, SOC reports are unique to each organization. It means that the controls of an organization can be designed under specific business practices following one or more of the trust service principles.
Who are SOC2 audits aimed for?
SOC 2 audits target organizations that provide services and systems to client organizations (cloud computing, software as a service, platform as a service). The client company may ask the service organization to provide an audit report that provides assurance, especially if confidential or personal data is transferred to the service organization. If the organization provides cloud services, a SOC 2 audit report will go a long way in building trust with customers and stakeholders. A SOC 2 audit is often a sine qua non for service organizations to collaborate. SOC 2 audits are an essential component of regulatory oversight, supplier management programs, internal governance, and risk management. SOC auditors are regulated and must adhere to particular professional standards set by the AICPA. They are also required to follow specific guidelines related to planning, performing, and overseeing audit procedures. AICPA members must undergo peer review to ensure that their audits are conducted according to accepted auditing standards. CPA organizations may hire non-CPA professionals with appropriate IT and security skills to participate in an SOC audit but the final report must be submitted and issued by the CPA.
The Main Reasons to Meet The SOC 2 Standard
A company should start preparing for the SOC2 audit as soon as possible. It will allow your company to lay a stable foundation for development in different directions. In short, SOC2 compliance provides the following benefits:
- Safety is improved. Meeting the SOC2 criteria helps mitigate potential attacks and build robust security mechanisms that better respond to existing risks. SOC2 pushes businesses to implement robust, scalable security systems;
- The corporate culture is maintained. Implementing security measures is always a complex process. People may complain that they take extra time to sign in to services by using multi-factor authentication. However, such minor problems are worth the result. Building a secure and standards-compliant corporate culture is easier to get started in a young organization. Many companies of even five people have successfully passed the SOC2 audit;
- The necessary documentation is formed. Tidying up the documentation is an important step for any business. Do you have any internal standards documentation? Corporate policies and procedures? Properly documenting these processes allows you to improve internal communication and data consistency, which will help you subsequently solve legal and regulatory problems, increase sales, and prepare for various financial changes such as mergers, acquisitions, a new round of attracting venture capital investments, etc.;
- Risk management is implemented. Preparing for a SOC2 audit provides a solid foundation for understanding and mitigating the risks involved. Many organizations that have never gone through a formal compliance audit are either unaware of the security risks or address them on the fly. A systematic approach to the problem allows you to identify any risks, even the most insignificant ones, in advance and eliminate them promptly.
Of course, it is often difficult for a small company to pass a SOC2 audit as there may not be enough resources for this. But it is even more complex to do this when the company is already developed as it will have to change the culture, processes, tools, etc. The sooner you do this, the better, as it will allow you to integrate all the tools and processes into your business from the start.