SOC 2 is a common compliance requirement that tech companies, service providers, and their sub-contractors should meet to remain competitive in their respective markets.

The American Institute of Certified Public Accountants (AICPA) came up with the Service and Organization Controls (SOC) audits to test service organizations’ internal controls and provide a report of the necessary assurances for relevant stakeholders.

AICPA based the SOC 2 requirements on the Trust Services Criteria (TSC), with each TSC divided into points of focus that can either be one or a combination of security controls or linked to them.

This post makes a quick run-through of SOC 2 Compliance and its essence as well as who needs it.

What is SOC 2?

SOC 2 is about a service organization’s ability to report on its design of controls as well as their testing and operating effectiveness. The report helps determine whether a service organization’s practices and controls are effective at safeguarding the security and privacy of its client and customer data.

SOC 2 is somewhat like ISO 27001 that allows more flexibility for companies on how to meet the set criteria. Whereas, HIPAA, PCI DSS, and most other frameworks have well-defined standards with specific requirements.

For instance, PCI DSS requires password complexity while ISO 27001 and SOC 2 leave the details of such technical security controls to the user’s discretion.

Who Needs SOC 2 Compliance?

All service providers or service organizations that store, process, or transmit any type of customer information need SOC 2 compliance reports to remain competitive in the market and adhere to set industry regulations. If any of these entities outsource their work, then their sub-contractors should also be SOC 2 compliant.

SOC 2 compliance helps demonstrate your business’s commitment to protecting the security and privacy of your customer’s data, which is increasingly essential in today’s connected digital age.

A large number of technology and cloud computing entities now prepare these reports and provide them to potential customers upon request.

Industries that need SOC 2 include Cloud computing, software-as-a-service (SaaS) vendors, accounting and auditing, human resources, IT security management, legal, and pharmaceutical.

SOC 2 Trust Categories

In 2011, AICPA introduced the Statement on Standards for Attestation Engagements Number 16 (SSAE 16). It later updated these standards to SSAE 18, and companies use them today to emphasize data security.

SOC 2 has five trust services categories (previously known as Trust service principles). These categories are a combination of Security and Privacy since the former covers the other three: availability, confidentiality, and integrity in a classic security triad model.

  1. Security: Refers to the effectiveness of the policies that govern how service organizations protect themselves against any unauthorized access, security breaches, and data loss.
  2. Availability: A service organization must ensure that its information and systems are available and ready for operation and use to meet its objectives.
  3. Confidentiality: Any data that the entity designates as confidential is sufficiently protected from unauthorized access.
  4. Processing Integrity: Organizations must ensure that their system processing is complete, valid, timely, accurate, and authorized to meet set objectives.
  5. Privacy: All personally identifiable information is collected, used, stored, disclosed, and disposed of securely.

Do You Need Type 1 or Type 2?

SOC 2 compliance has two different types. Type one reports cover the description of your systems and the suitability of design controls relating to either one or all five Trust Service Criteria.

Type two reports include everything contained in type one reports plus their effectiveness over a particular period. Therefore, type two SOC 2 reports are more useful since the auditor can verify that the controls therein work over a specified period.

Reasons Why Service Organizations Need SOC 2 Compliance

  • Customer demand. Protecting customer data from losses, breaches, and theft is a top priority for your clients. Therefore, without a SOC 2 attestation, you stand to lose business. While it is not mandatory to produce a SOC 2 audit report since it contains sensitive internal controls, many clients presently demand them before making a purchasing decision.
  • Cost-effectiveness. If you think audit costs are high, then you have not suffered a data breach nightmare that in 2018 cost $3.86 million on average. In this case, prevention is cheaper than cure.
  • Competitive advantage. A favorable SOC 2 report gives you an edge over competitors who cannot prove compliance. It also enhances your reputation as trustworthy.
  • Regulatory compliance. SOC 2 requirements splice with other frameworks such as PCI DSS and HIPAA. Thus attaining certification means your organization is on track to achieving its overall compliance efforts.
  • Peace of mind. Passing a SOC 2 audit is an assurance that your networks and systems are secure.
  • Value: SOC 2 reports provide insights into your organization’s security and risk posture, internal governance, vendor management, regulatory oversight, and more.

Summing Up

You cannot overstate the role and relevance of SOC 2 compliance in securing sensitive data even though its requirement is not mandatory. Service providers and their sub-contractors or other third-party technology services need the SOC 2 audit reports to satisfy their customers, regulatory requirements and remain competitive in their market.


Sumit is a Tech and Gadget freak and loves writing about Android and iOS, his favourite past time is playing video games.

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