ZenGRC

Simply Powerful GRC

The Fine Art of Scoping a SOC 2 Audit

· ·

Home » The Fine Art of Scoping a SOC 2 Audit

Once upon a time, performing a SOC 2 audit was a rite of passage for service companies: “Wow, we’re so successful now that big clients want us to do important things, and we need a SOC 2 audit to prove our street cred!”

Times have changed. In today’s cybersecurity world, the SOC (Systems and Organizations Controls) 2 audit is more like a fact of life: “Yikes, if we can’t pass a SOC 2 audit to document our security controls, nobody will give us the time of day.”

If your company is a service organization and your customers trust you with their data, you’ll likely need to pass a SOC 2 audit to prove that you have the internal controls necessary to protect that data. This comprehensive guide will help you understand SOC 2, determine if it applies to your organization, and navigate the audit process successfully.

What is SOC 2?

SOC 2 is a set of standards developed by the American Institute of Certified Public Accountants (AICPA) for managing client data based on five “trust service principles” (TSPs):

  1. Security: Information and systems are protected against unauthorized access, unauthorized disclosure of information, and damage that could compromise the availability, integrity, confidentiality, and privacy of information or systems.
  2. Availability: Information and systems are available for operation and use to meet the organization’s objectives.
  3. Processing Integrity: System processing is complete, valid, accurate, timely, and authorized to meet the organization’s objectives.
  4. Confidentiality: Information designated as confidential is protected to meet the organization’s objectives.
  5. Privacy: Personal information is collected, used, retained, disclosed, and disposed of correctly to meet the organization’s objectives.

SOC 2 reports are unique to each company, unlike the Payment Card Industry Data Security Standard (PCI DSS), which has strict criteria. Each organization builds its controls to comply with one or more trust principles following its specific business practices.

Is SOC 2 Required For My Industry?

SOC applies to the majority of service companies. The most prevalent types of service organizations that typically require SOC 2 include, but are not limited to:

  • Software as a Service (SaaS) businesses
  • Cloud Service Providers (CSPs)
  • Data Centers
  • IT Managed Services providers
  • Providers of corporate intelligence, analytics, and management services
  • Financial services companies
  • Healthcare service providers
  • Payment processors
  • HR and payroll processors
  • E-commerce platforms
  • CRM platforms
  • Companies that provide customer service and other client-facing services

If your business falls under any of these classifications or is similar to these service organizations in general, you may need to comply with SOC 2. While compliance isn’t mandated by law in the same way as regulations like HIPAA, it’s often driven by business needs—clients or partners might request or expect a SOC 2 report before doing business with your organization.

Benefits of SOC 2 Compliance

The benefits of SOC 2 compliance include:

  • Organizational oversight: Better governance and management of your systems and data
  • Improved vendor management: Enhanced ability to select and monitor service providers
  • Stronger risk management: More robust processes for identifying and mitigating risks
  • Regulatory alignment: Better positioning to meet other regulatory requirements
  • Competitive advantage: Ability to differentiate your organization in the marketplace
  • Enhanced customer trust: Proof that you’ve properly secured your clients’ data
  • Operational improvements: Insights that can help you operate more efficiently and securely
  • Stronger financial stability: Documentation, evaluation, and improvement of internal controls

Types of SOC 2 Reports

There are two types of SOC 2 reports:

  • SOC 2 Type 1: Attests to the design and documentation of a service organization’s internal controls and procedures as of a specific date. This report doesn’t include the actual operation of the controls.
  • SOC 2 Type 2: Provides evidence of how a company operates its controls over a certain period (usually between six months and a year).

A SOC 2 Type 1 report is a fast, efficient method to assess the design of your controls. However, a SOC 2 Type 2 report offers greater assurance by more rigorously examining your internal controls for extended periods.

The Fine Art of Scoping a SOC 2 Audit

What Is Audit Scoping?

Audit scoping is the process of determining the nature, type, and timeliness of procedures that will be carried out during an audit. Typically, you perform a risk assessment to determine the audit’s scope. The greater the risk of errors or weaknesses in the processes you’re auditing, the more extensive your audit procedures should be.

Why Is Audit Scoping Important?

Proper audit scoping is crucial for several reasons:

  1. Efficiency and effectiveness: Clear scoping helps auditors focus efforts and resources on the most relevant areas.
  2. Meeting objectives: Proper scoping ensures that the audit achieves its intended goals.
  3. Managing expectations: A clearly defined scope provides transparency about what the audit will and will not cover.
  4. Resource optimization: Setting the scope correctly helps avoid wasting money auditing unnecessary processes while ensuring you don’t miss critical areas.

Define the scope too narrowly, and you might not give the assurance your customers want—prompting more SOC 2 audits in the future. Define it too broadly, and you waste money auditing more processes than necessary (while disrupting daily operations, too).

How to Scope Your SOC 2 Audit

When determining which Trust Service Principles to include in your SOC 2 audit, consider:

  1. Client needs: What do your customers want to learn from your SOC 2 audit?
  2. Business model: Which principles align with the services you provide?
  3. Risk assessment: Where are the greatest security risks in your organization?
  4. Resource limitations: What is feasible given your time, personnel, and tools?

Not every SOC 2 audit must consider all five principles. Deciding which TSPs satisfy your client’s concerns about security is key to determining the scope of your audit. Include only those TSPs that are necessary and no more.

For example:

  • If you provide data storage in a data center, and clients do all processing on their systems, then you need to include the Security and Availability principles, not Processing Integrity.
  • If you store personal data about individuals, the Privacy principle should be included.
  • If you only hold product design plans, the Confidentiality principle is in scope, but the Privacy principle may not be.

One starter question is: “If we can’t guarantee this principle, does that harm our relationship with the customer?” If the answer is yes, then the principle is probably in scope.

SOC 2 Compliance Checklist

1. Develop a SOC 2 Audit Framework

Determine what you will test for and why. Establish a framework that meets your customers’ needs and guarantees that you meet the necessary SOC 2 requirements.

2. Define the Objectives of Your SOC 2 Audit

Determine what your clients want to learn from your SOC 2 audit. If they want to know something specific about your internal financial controls, you’ll likely need a SOC 1 audit. If they’re worried about cybersecurity, prepare materials for a SOC cybersecurity audit.

3. Determine the Scope of Your SOC 2 Audit

The scope of your SOC 2 audit typically addresses:

  • Infrastructure
  • Software
  • Data
  • Risk management
  • Procedures
  • People

Work with senior executives to define the firm’s products, services, and strategy as clearly as possible:

  • Who are the target customers?
  • What do they need?
  • What benefit does your firm provide?
  • What else will you provide in the future?

The answers will define the TSPs your firm needs to provide to customers, which will drive the scope of your SOC 2 audit.

4. Select the Trust Services Criteria/Principles to Include

The only criterion the AICPA requires for SOC 2 audits is security. The other four are optional, so when preparing for a SOC 2 audit, you can decide which criteria to apply and how.

You should talk with your customers to identify which trust services criteria to test for in addition to security. Consider the trust services principles in relation to your client’s requirements.

5. Perform a Readiness Assessment

Preparing for a SOC 2 audit can be daunting, especially if it’s your first one. A readiness assessment can enhance the effectiveness of your SOC 2 report by helping you find problems in your control framework before the official audit.

You can perform a readiness assessment independently or hire an auditing firm to fulfill your assessment.

6. Perform a SOC 2 Gap Analysis

Once you’ve completed your audit preparation, perform a gap analysis. This process typically takes about two months and will help you identify problems and risky areas in your cybersecurity practices.

Common Challenges of Implementing SOC 2

  • Lack of resources and expertise: SOC 2 implementation requires dedicated staff and expertise in information security controls, which many organizations lack.
  • Complexity of requirements: The criteria for SOC 2 are complex and evolving, making it difficult for organizations to interpret and implement security controls over a long period.
  • Cost: SOC 2 audits and ongoing compliance maintenance can be expensive, especially for smaller organizations without adequate resources.
  • Over-reliance on auditors: Organizations often rely too heavily on auditors to guide their compliance efforts rather than taking ownership of the compliance program.
  • Fixing issues post-audit: Many organizations scramble to fix control issues after the audit rather than proactively managing the compliance program, leading to audit failures.

Best Practices for a Successful SOC 2 Audit

  • Start early and maintain compliance continuously: Implement access controls before the audit. Manage the compliance program proactively.
  • Involve leadership and get buy-in: Executives and management need to be engaged in the audit process for it to succeed.
  • Review and update policies frequently: Policies and procedures should align with TSC criteria and be updated regularly.
  • Train employees continuously: Educate staff on the importance of compliance through training to embed a culture of data security.
  • Maintain thorough documentation: Document controls extensively to demonstrate compliance. Organize documents effectively.
  • Work closely with your auditor: Maintain open communication with your auditor for a smooth audit process. Be responsive to their requests.

How to Check Your SOC 2 Compliance

Validating SOC 2 compliance requires continuous monitoring and evidence collection from multiple sources:

  1. Review your policies, processes, and controls against TSC criteria using questionnaires and checklists. Identify any gaps.
  2. Interview personnel to ensure they understand and follow security controls consistently over time.
  3. Examine system logs, access records, and change management docs to validate controls.
  4. Perform internal audits and vulnerability assessments to test the effectiveness of security controls.
  5. Hire an external auditor to assess your compliance with SOC 2 independently.
  6. Request attestation reports from vendors to ensure their compliance with SOC 2.
  7. Continuously monitor internal systems and processes to ensure ongoing compliance.
  8. Conduct tabletop exercises to validate incident response and other processes.

Conclusion

SOC 2 compliance is increasingly becoming a business necessity for service organizations that handle customer data. By understanding the requirements, properly scoping your audit, and implementing effective controls, you can not only meet compliance requirements but also enhance your organization’s security posture and build greater trust with your customers.

Remember, the goal isn’t just to pass an audit—it’s to establish and maintain a robust security program that protects your customers’ data and supports your business objectives.

Compliance tools like ZenGRC can help streamline the process by providing a platform for managing controls, collecting evidence, and maintaining ongoing compliance. With the right approach and resources, achieving and maintaining SOC 2 compliance can be a manageable and valuable part of your business strategy.

To find out more, schedule a demo today!

×