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A SOC 2 (Service Organization Control 2) audit is a type of audit report that assesses a service organization’s controls over its customers’ data. The audit is conducted by an independent third-party auditor and is based on the AICPA (American Institute of Certified Public Accountants) Trust Services Criteria. SOC 2 audits are essential for service organizations that handle sensitive data, such as financial or personal information. The audit report is used to demonstrate the effectiveness of the organization’s controls and is often requested by customers as part of their due diligence process.
The audit report includes a description of the organization’s systems and processes, an evaluation of the design and operating effectiveness of the controls, and any identified control deficiencies or areas for improvement. The report is intended to be used by the organization’s customers and stakeholders to assess the security and reliability of the services provided.
It’s important to note that SOC 2 audits are specific to the service organization being audited and the services provided. For example, a cloud service provider may undergo the audit for its cloud infrastructure services, but not for its HR or accounting services. Additionally, the scope of the audit can be customized to meet the needs of the organization and its customers.
These audits are an important tool for service organizations to demonstrate their commitment to data security and provide assurance to their customers that their data is being handled in a secure and reliable manner. By undergoing a SOC 2 audit and receiving a favorable audit report, service organizations can gain a competitive advantage and build trust with their customers.
Five Pillars of SOC 2
Benefits of SOC 2
- Increased customer trust: A SOC 2 assessment shows customers that the service organisation takes data security seriously and has sufficient measures in place to protect their data. This might boost client trust and confidence in the company’s offerings.
- Competitive advantage: The audit report can provide a competitive advantage in the marketplace for service organisations. Many customers and potential clients may demand a SOC 2 audit report as part of their due diligence process, and having one on hand can help the organisation earn new business.
- Improved internal controls: The audit process can assist service organisations in identifying areas for improvement in their internal controls. This can result in improved data security and more efficient corporate procedures.
- Reduced risk of data breaches: By implementing the controls recommended in the SOC 2 audit report, service organizations can reduce the risk of data breaches and other security incidents. This can protect the organization’s reputation and prevent costly legal and regulatory issues.
- Increased transparency: The audit report provides transparency into the organization’s data security practices and can help build trust with stakeholders. This can be particularly important for service organizations that handle sensitive data or are subject to regulatory requirements.
Types of SOC 2 Report
SOC 2 audits are conducted to evaluate a service organization’s controls related to security, availability, processing integrity, confidentiality, and privacy. There are two types of services that can be audited under SOC 2: Type 1 and Type 2.
SOC 2 Type 1: A SOC 2 Type 1 report evaluates the design and implementation of controls at a specific point in time. The auditor will review the controls and provide an opinion on whether they are suitably designed to meet the relevant criteria.
SOC 2 Type 2: A SOC 2 Type 2 report evaluates the design, implementation, and operating effectiveness of controls over a period of time (usually six months to a year). The auditor will review the controls and provide an opinion on whether they were suitably designed and operating effectively throughout the period under review.
Both Type 1 and Type 2 reports are useful for service organizations, depending on their needs. A Type 1 report can provide assurance to customers that the service organization has designed its controls appropriately to meet their needs. A Type 2 report provides additional assurance that the controls are operating effectively over time.
- Planning: The auditor works with the service organization to determine the scope of the audit, including the systems and processes to be evaluated, and the relevant trust service categories (security, availability, processing integrity, confidentiality, and privacy). The auditor also reviews the service organization’s documentation and policies related to the controls being evaluated.
- Testing: The auditor performs testing to evaluate the design and effectiveness of the controls in place. This can include reviewing documentation, interviewing personnel, and performing system walkthroughs.
- Reporting: The auditor provides a report that includes an opinion on the effectiveness of the controls based on the relevant trust service categories. The report also includes any identified control deficiencies and recommendations for improvement.
- Follow-up: The service organization addresses any identified control deficiencies and implements the auditor’s recommendations for improvement. The auditor may perform follow-up testing to verify that the deficiencies have been remediated.