With technology advancing at the speed of light, a lot of businesses have turned to outsourced technology services, leading to the exponential growth of SaaS offerings. Outsourcing definitely has compelling advantages but it also increases the attack surface through which hackers can gain access to confidential information.
With the growth of SaaS services, especially of the B2B variety, the demand for compliance certifications has exploded. Proof of security and operational compliance is a basic prerequisite of customer trust.
The most popular compliance framework is SOC 2, but it also has a counterpart on the financial reporting side of the house: SOC 1. Both of these frameworks were created by the American Institute of Certified Public Accountants (AICPA). Understanding the differences between SOC 1 and SOC 2 reports can help you determine which framework you need and assist you in designing a comprehensive security program that provides customers with the reassurance they want.
SOC 1: An Overview
A SOC 1 audit allows a service organization to evaluate its internal controls to assure its customers that their financial information is being handled safely and securely.
A service organization is responsible for identifying key control objectives for the services it provides to its clients when preparing for a SOC 1 audit. Control objectives apply to both business and information technology activities (for example, controls around processing customers’ information for accounts receivable).
A company that provides outsourced accounting services is an example of a service organization that requires a SOC 1 report. When customers ask for permission to perform an audit of their payroll processing and data security procedures, the outsourced provider may instead supply them with a completed SOC 1 audit report as proof of having effective internal controls that have been reviewed by an independent CPA firm.
Financial executives, compliance officers, and auditors are frequently viewers and users of SOC 1 reports.
SOC 2: An Overview
Unlike SOC 1’s financial focus, a SOC 2 report focuses on the controls that are important to a service organization’s operations and security.
A SOC 2 audit aids a service company in examining and reporting on internal controls related to client data security, availability, processing integrity, confidentiality, and privacy.
A service organization’s responsibility while preparing for a SOC 2 audit is to determine which Trust Services Criteria are applicable to the services it provides to its clients. Only the security category of criteria are required; the rest of the scope of compliance is up to the service organization. Because of the nature of their services and because of client requirements, some service businesses may have their SOC 2 audit cover only security and availability, for example. Others may elect to comply with all five Trust Services Criteria.
A SaaS firm that provides its customers with a secure storage service is an example of a service company that requires a SOC 2 report. Instead of customers having to conduct their own on-site inspections of the SaaS data center’s safeguards, the company may instead provide those customers with a SOC 2 report to validate that everything is locked down as it should be.
Customer executives, prospective customers, compliance officers, and auditors are frequent viewers and users of SOC 2 reports.
SOC 1 vs. SOC 2 Reports
The most notable differences between SOC 1 and SOC 2 are the following:
- SOC 1 is focused on financial reporting;
SOC 2 is about security and operations.
- SOC 1 is extremely flexible in allowing an organization to define its own control objectives and its own controls to achieve those objectives;
SOC 2 comes with a predefined set of control objectives (known as criteria) but is similarly flexible as to choosing appropriate controls to meet the objectives. Also, SOC 2 allows the organization to define the scope of the audit criteria, with only the security criteria being mandatory.
- The audience for SOC 1 reports is primarily a a financial one (CFOs, auditors …);
the audience for SOC 2 reports is mainly compliance officers, CISOs, CTOs, and other executives focused on security.
Type 1 vs. Type 2 SOC Reports
After determining whether a SOC 1 or SOC 2 report best suits its reporting requirements, a service organization has an additional choice to make: type 1 or type 2. These alternatives are contingent on how well-prepared the service organization is for the SOC audit and how quickly the SOC audit must be completed.
A type 1 SOC audit assesses and reports on the design of controls and procedures as of a specific date.
A type 2 SOC audit goes a step further by also covering the operational effectiveness of the controls over a period of time, typically 3-6 months for the first audit, and annually thereafter.
When a service organization 1) has never been audited and is facing customer demands for a completed SOC report; or 2) has recently carried out a major revamp of its internal controls, then a type 1 SOC audit may be a good option to prove compliance as quickly as possible. A SOC 2 report can be completed some months later.
SOC 1 vs. SOC 2: Are You Set to Begin?
Service organizations benefit from being able to assure current and potential clients that their data is being appropriately processed and safeguarded – so if you haven’t had a SOC audit before, you should definitely get on the bandwagon now.
Akitra can get you to your compliance objective as quickly, efficiently and cost-effectively as possible. With Akitra’s Andromeda Compliance automation solution, we make compliance simple for you. Akitra provides constant automated monitoring and evidence-gathering to ensure that you maintain continuous 24/7 compliance. With 95+ integrations with all the cloud platforms and SaaS applications you are already using, compliance evidence collection is both easy and very thorough.
Akitra’s compliance experts are also available to help you choose which compliance certifications you need and then to guide you through the end-to-end process to make sure you successfully obtain your SOC report.
Choose Akitra TODAY for both of your SOC 1 and SOC 2 compliance needs!
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