SOC is a recognized compliance standard developed by the American Institute of CPAs that specifies how organizations should handle customer data. SOC 2 reports are tailored to suit the organization’s unique business requirements.
SOC 2 Type 1 vs Type 2 compliance determines if an organization’s internal security controls function correctly and sufficiently protect customer data. A SOC 2 Type 1 report is the first step to fulfilling the Trust Services Criteria, and audits are conducted against the assurance standards ISAE (International Standard for Assurance Engagements).
SOC 2 Type 2 compliance evaluates the operational efficiency of security systems over time. It assesses the security, availability, confidentiality, processing integrity, and privacy controls and checks if security controls work as intended. SOC 2 Type 2 audits are more comprehensive, expensive, and have a more significant bearing on clients. Ensuring SOC 2 compliance ascertains that organizations enjoy a competitive advantage. Customers prefer to work with service providers that exhibit strong security practices across IT and cloud systems, and SOC 2 compliance makes up a critical foundation of these technology solutions. We will explain how to get started with SOC 2 Type 1 vs Type 2 compliance and share more information below.
Table of Contents:
- SOC 2 Type 1 vs Type 2 Compliance: 5 Critical Differences
- Guide to SOC 2 Type 1 Compliance for Organizations
- Guide to SOC 2 Type 2 Compliance for Organizations
SOC 2 Type 1 vs Type 2 Compliance: 5 Critical Differences
SOC 2 Type 1 vs Type 2 Compliance requires an independent CPA (Certified Public Accountant) or accounting firm to perform the audits. ACIPA has set professional guidelines to streamline the work of SOC auditors. All AICIPA audits need to undergo a mandatory peer review. Organizations can hire non-CPA professionals with the relevant security and technology expertise to prepare for and conduct these audits. However, final audits are reviewed by CPAs and disclosed at their discretion.
Below are the five critical differences between SOC 2 Type 1 vs Type 2 Compliance for organizations:
|SOC 2 Type 1 Compliance||SOC 2 Type 2 Compliance|
|Evaluates the design of security controls before they are implemented within the organization.||Reviews the efficacy and function of security controls already implemented within the organization.|
|SOC 2 Type 1 compliance is used for businesses that are just starting their compliance journey||SOC 2 Type 2 compliance is for businesses that want advanced compliance management and protection|
|SOC 2 Type 1 compliance assesses security controls over a shorter time and is quicker, ideal for new enterprises and SaaS service providers.||SOC 2 Type 2 compliance audits are exhaustive and cover core safety standards such as risk mitigation, change management, system operations, and access controls, ideal for large-scale organizations or any business with a good industry reputation.|
|Audits and reports can be completed within weeks||Audits and reports take months or even up to a year to complete|
|SOC 2 Type 1 compliance is more affordable to organizations but provides less assurance to clients about their security posture||SOC 2 Type 1 compliance is more expensive than SOC 2 Type 1 Compliance; however, it gives greater confidence to clients and solidifies the company’s security posture|
Guide to SOC 2 Type 1 Compliance for Organizations
Here are some steps to prepare for SOC 2 Type 1 compliance:
- Plan the Scope
- Implement Controls
- Conduct a Readiness Assessment
- Review and Certify the SOC 2 Type 1 Report
- SOC 2 Type 1 FAQs
1. Plan the Scope
Businesses should document all their existing security processes and make files presentable. Role-setting is essential, too, and teams should assign suitable leads from each department, like IT, sales, etc. Once the audit scope is defined, conducting the SOC 2 Type 1 compliance audit and generating the report becomes easier.
2. Implement Controls
Implement controls based on the five trust criteria principles, which are as follows:
- Security – Security in SOC 2 Type 1 Compliance includes the controls environment, risk assessments, communication and information, monitoring and design, and implementation of controls.
- Availability includes incident response planning (IDP), distributed denial of service (DDoS) protection, and real-time continuous availability of customer data and security services whenever requested.
- Confidentiality – SOC 2 Type 1 compliance internal controls include access control, network firewalling, and data encryption, collectively contributing to ensuring confidentiality.
- Processing integrity – SOC 2 Type 1 internal controls related to security procedures and policies for maintaining data accuracy and operational efficiency come under processing integrity. It also includes endpoint and server security, both critical for working with Cloud Service Providers (CSPs).
- Privacy refers to enforcing multifactor authentication, data management, security, data deletion, backup, and other data handling processes. Proper encryption and access controls are a prerequisite for meeting this condition.
3. Conduct a Readiness Assessment
A consultant will review all the documents, processes, and evidence collected. Organization leaders will get an understanding of what their overall security posture looks like. Companies will gain insights about security gaps and work towards addressing them to complete the SOC 2 type 1 audit. In addition, the review findings, observations, and suggestions will be forwarded to stakeholders. The organization may use its internal resources to assess readiness or hire an external vendor.
4. Review and Certify the SOC 2 Type 1 Report
An auditor has to be selected to review and certify your SOC 2 Type 1 report. The auditor will be responsible for setting dates for the report’s review and will request relevant documentation, evidence, and any other information about your controls. After the auditor reviews and certifies the report, the organization is officially SOC 2 Type 1 compliant.
SOC 2 Type 1 FAQs
Q. How long does it take to do a SOC 2 Type 1 audit?
A SOC 2 Type 1 audit takes approximately two weeks to 2 months and depends on the chosen auditor, the allocation of internal resources, and the project’s scope.
Q. What is the cost of a SOC 2 Type 1 audit?
The SOC 2 Type 1 audit pricing starts at USD 5,000 for meeting three Trust Service Criteria principles. For SOC 2 Type 1 audits that satisfy more than three principles, the cost can go up to USD 25,000 or higher.
Q. When to choose SOC 2 Type 1 Compliance?
SOC 2 Type 1 compliance should be chosen if the organization has a limited budget and lacks the proper internal security controls and procedures. Type 1’s requirements are straightforward, and it simply assesses the designs of the controls. A good time to choose SOC 2 Type 1 compliance is if stakeholders and customers request it before initiating any business dealings with the organization.
Guide to SOC 2 Type 2 Compliance for Organizations
The SOC 2 Type 2 compliance process for organizations is more comprehensive and detailed than SOC 2 Type 1 compliance preparation and certification. SOC 2 Type 2 compliance has become a mainstay for many SaaS vendors and involves months of planning.
Here is what each step of the SOC 2 Type 2 compliance journey involves:
- Choose an Objective
- Define Scope and Conduct a Readiness Assessment
- Perform Remediation and Gap Analysis
- Implement SOC 2 Type 2 Controls
- SOC 2 Audit
- SOC 2 Type 2 FAQs
1. Choose an Objective
The SOC 2 Type 2 compliance process will ask precise questions to the audience in its first step. Choosing an objective defines the purpose of the SOC 2 Type 2 report and ensures that compliance principles align with business objectives. Some examples of setting goals are – improving the organization’s security posture, preventing data breaches and reputational damages, locating new geographies, or conducting SOC 2 Type 2 compliance reporting and auditing because customers have asked for it.
2. Define Scope and Conduct a Readiness Assessment
This step is more comprehensive than the SOC 2 Type 1 compliance process. The SOC 2 Type 2 compliance scope will select the TSC that applies to the business. Most SaaS businesses require 3 out of 5 TSC in their SOC 2 Type 2 compliance journey.
Regarding the internal readiness assessment, key questions organizations should ask are:
- Has the business identified all potential threats?
- What is the significance of identified risks in association with the company?
- What are the top risk mitigation strategies to be used for addressing them?
- Can businesses identify critical systems within the organization based on the risks detected so far?
Organizations need to answer these questions and ensure no lapses in judgment or security oversights. Failing to identify critical risks and specify production endpoints can leave gaps in the SOC 2 Type 2 compliance journey, and that’s not an option.
3. Perform Remediation and Gap Analysis
Organizations will examine security processes and practices at this stage and compare them with the company’s overall compliance posture. It will match SOC 2 Type 2 checklist requirements with business goals and test the effectiveness of applied controls. Any gaps found during analysis are remediated by implementing newer controls. Risk ratings are also carried out to prioritize the remediation process.
4. Implement SOC 2 Type 2 Controls
The organization will implement stage-appropriate SOC 2 Type 2 Controls based on the TSC criteria chosen. Each organization will deploy internal controls around the selected TSC criteria and enforce policies into action.
The deployed controls will implement two-factor authentication, apply firewalls, and combine additional security measures. Organizations will have to undergo a readiness assessment after this, which covers four focus areas: client cooperation and profiling, gap analysis and vulnerability detection, objective mapping and controls identification, and auditor documentation.
5. SOC 2 Audit
An independent certified auditor will be hired to complete the SOC 2 audit. They will generate the report and highlight non-conformities. The certification process will be finalized based on their decision.
SOC 2 Type 2 FAQs
Q. How long does it take to do a SOC 2 Type 2 audit?
A SOC 2 Type 2 audit can typically take anywhere between 6 months to 12 months.
Q. What is the cost of a SOC 2 Type 2 audit?
SOC 2 Type 2 audit costs range from USD 7,000 to USD 50,000, depending on the auditor network and vendor. An auditor with established credentials and more years of experience may charge higher rates for larger businesses.
Q. When to choose SOC 2 Type 2 Compliance?
The best time to choose SOC 2 Type 2 compliance is when customers request it. The AICPA recommends that companies conduct SOC 2 Type 2 audits when customers want an in-depth understanding of internal controls and processes. Stakeholders may ask for this compliance type to gain the company’s trust and confidence in their security processes.
PingSafe enhances cloud security for organizations of all sizes by ensuring continuous SOC 2 Type 1 vs Type 2 compliance. The platform is designed to implement successful audits and define all security processes. Companies that deal with B2B clients and SaaS services find it critical to achieve SOC 2 Compliance, and PingSafe also supports over 20+ industry regulations. It covers HIPAA, NIST, ISO 27001, CIS Benchmark, and other frameworks. The Cloud-Native Application Protection Platform (CNAPP) ensures appropriate information management and allows organizations to protect assets and use their internal controls the most. PingSafe strengthens SOC 2 Type 1 vs Type 2 security by offering Cloud Security Posture Management (CSPM) and Kubernetes Security Posture Management (KSPM) services.
For organizations that are just starting their SOC 2 compliance journey, PingSafe’s managed cloud security services are beneficial.