Article

SOC Report FAQs

May 12, 2023
The Compass:

There are many questions around SOC 2® (System and Organization Controls) Reports that an auditor should answer, but there are other frequently asked questions (FAQs) that are widely accepted and don’t require an auditor. For those FAQs, we asked ChatGPT to answer them, and our auditors reviewed the answers, checked for accuracy, and made updates.

Q: What is a SOC 2 report, and why is it important?

SOC 2 is a reporting framework that provides service organization management, user entities, business partners, and other parties with information related to an evaluation of the controls of service providers to ensure that they meet specific security, availability, processing integrity, confidentiality, privacy commitments, and system requirements. SOC 2 reports provide customers with the assurance that their data is being handled securely and with appropriate controls. It is important because it helps organizations demonstrate their commitment to security and gives customers the information they need to evaluate their own systems of internal control.

Q: What is the difference between SOC 2 and SOC 1® reports?

SOC 1 is a reporting framework that provides management of the service organization, user entities, and the independent auditors of user entities’ financial statements with information and a services auditor’s opinion about controls at a service organization that are likely to be relevant to user entities internal control over financial reporting. SOC 2, on the other hand, provides service organization management, user entities, business partners, and other parties with information related to an evaluation of the controls of service providers to ensure that they meet specific security, availability, processing integrity, confidentiality, and privacy commitments and system requirements.

Q: What is the difference between SOC 2 Type 1 and Type 2 reports?

The key difference between SOC 2 Type 1 and Type 2 reports lies in the duration of the audit period and the underlying assertions evaluated.

SOC 2 Type 1 report: This report evaluates the design of an organization's controls as of a specific point in time. It provides an opinion on whether the organization's controls are suitably designed to meet the specified criteria. 

SOC 2 Type 2 report: This report evaluates both the design and operating effectiveness of an organization's controls over a period of time (with a duration selected by management). It provides an opinion on whether the organization's controls are suitably designed and operating effectively to meet the specified criteria. 

In summary, a SOC 2 Type 1 report assesses the design of controls at a specific point in time, while a SOC 2 Type 2 report assesses both the design and operating effectiveness of controls over a period of time.

Q: Who needs a SOC report?

A SOC report is typically needed by organizations that provide services to other organizations and handle sensitive data or financial transactions.

These could include, but are not limited to:

  • Data centers and hosting providers
  • Cloud computing providers
  • Software as a Service (SaaS) providers
  • Payment processors
  • Third-party administrators (TPAs)
  • Healthcare providers
  • Financial institutions

In general, any organization that is responsible for handling sensitive or confidential information on behalf of another organization will likely be required to provide a SOC report to user entities or other stakeholders to demonstrate its control environment and security measures.

Q: What is included in a SOC 2 report?

A SOC 2 report includes a description of the service provider's system, a list of the controls in place, and, in the case of Type 2 reports, an assessment of how well those controls meet the criteria outlined in the SOC 2 framework. The report also includes the auditor's opinion on whether the controls are suitably designed and, in the case of a Type 2 report, operating effectively.

Q: How long does it take to get a SOC 2 report?

The timeline for obtaining a SOC 2 report can vary depending on a variety of factors, including the readiness of the organization, the complexity of the systems being assessed, and the workload of the auditing firm.

Generally, the process of preparing for and conducting a SOC 2 audit can take several months, with the actual audit taking anywhere from a few days to a few weeks. Once the audit is complete, the auditor will typically issue a draft report for the organization to review and provide feedback on.

Once any necessary revisions have been made and the report has been finalized, the auditor will issue the official SOC 2 report to the organization. This can take an additional few weeks or even longer, depending on the specific circumstances.

In summary, the entire process of obtaining a SOC 2 report can take several months, with the actual audit typically taking several days to several weeks and the report issuance process taking an additional few weeks or longer.

Q: How often do organizations need to get a SOC 2 report?

SOC 2 reports are typically issued annually, but the frequency of reporting may depend on the needs of the service provider and their customers. 

Q: What are the trust services criteria (TSC) for SOC 2 reports?

The trust services criteria (TSC) are a set of principles and criteria used in SOC 2 audits to evaluate an organization's controls related to security, availability, processing integrity, confidentiality, and privacy. The TSC are designed to provide a comprehensive framework for assessing an organization's ability to protect the security, availability, and privacy of customer data.

  1. Security: Addresses the security of an organization's systems and data, including access controls, encryption, and physical security measures.
  2. Availability: Addresses an organization's ability to provide timely and reliable access to its services, including system uptime, disaster recovery, and business continuity planning.
  3. Processing Integrity: Addresses the accuracy, completeness, and validity of an organization's data processing, including data input, processing, output, and storage.
  4. Confidentiality: Addresses an organization's ability to protect confidential information, including sensitive customer data, financial information, and intellectual property.
  5. Privacy: Addresses an organization's collection, use, retention, disclosure, and disposal of personal information in accordance with its privacy policies and applicable laws and regulations.

Q: What is a SOC 3 report?

A SOC 3 (Service Organization Control 3) provides an easy-to-read, summary-level report on controls that follows a similar framework as a SOC 2 report. The audit work necessary to complete a SOC 3 is comparable to SOC 2, but the final deliverable is presented without the more sensitive and specific details regarding the controls and audit results, which allows the document to be freely distributed and is primarily utilized for marketing purposes.

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