101
0/273
Loading content...
Service Organization Control 2 (SOC 2) has become the de facto standard for demonstrating security and operational excellence in the B2B software industry. Developed by the American Institute of Certified Public Accountants (AICPA), SOC 2 provides a framework for service organizations to prove they can be trusted with customer data.
Unlike regulatory frameworks (GDPR, HIPAA) that impose legal requirements, SOC 2 is a voluntary attestation. However, 'voluntary' is somewhat misleading—in practice, SOC 2 compliance has become a prerequisite for many enterprise sales. When an enterprise evaluates a SaaS vendor, a SOC 2 report is often on the mandatory requirements list alongside pricing and features.
For SaaS and cloud companies, SOC 2 compliance directly impacts revenue. Enterprise customers increasingly require SOC 2 reports during vendor evaluation. Lacking SOC 2 can delay or block sales cycles, while having it accelerates trust-building and reduces customer due diligence burden.
SOC 2 is one of several SOC reports defined by the AICPA. Understanding how it differs from related reports clarifies its specific purpose and value.
| Report Type | Scope | Audience | Common Use Case |
|---|---|---|---|
| SOC 1 | Controls relevant to user entity's financial reporting (ICFR) | Auditors of user entities, management | Payroll processors, financial services, billing platforms |
| SOC 2 | Controls based on Trust Services Criteria (security, availability, etc.) | Management, regulators, customers, prospects | SaaS companies, cloud providers, data centers, IT service providers |
| SOC 3 | Same criteria as SOC 2, but a summarized, public report | General public, marketing materials | Public trust seal, website badge, broad distribution |
Type I vs Type II: The Critical Distinction
Within SOC 2, there are two report types that represent fundamentally different assurance levels:
Type I Report:
Type II Report:
The Audit Period Consideration
A Type II report covering 12 months provides stronger assurance than one covering 6 months. Organizations typically start with a 6-month Type II for their first audit, then move to annual 12-month audits. The audit period must be continuous—if you let your report lapse, you may need to restart with another Type I.
The gap between when your last audit period ended and today can concern customers. Organizations often provide 'bridge letters'—management assertions that controls have continued operating effectively since the audit end date. Some auditors also offer 'gap attestations' covering interim periods.
SOC 2 reports evaluate controls against the AICPA's Trust Services Criteria (TSC). There are five categories, though only Security is required—the others are selected based on business relevance.
Selecting Your TSC Categories
Most organizations start with Security—it's required and establishes foundational controls. The decision to include additional categories depends on:
The Control Criteria Structure
Each TSC category contains specific criteria organized into control families. The 2017 TSC revision aligned significantly with the COSO framework, making mapping to other frameworks easier.
Example Security criteria groups:
The AICPA provides mappings between TSC and other frameworks: ISO 27001, NIST Cybersecurity Framework, COBIT, and HIPAA Security Rule. If you're pursuing multiple compliance frameworks, these mappings help identify overlapping controls and reduce redundant work.
SOC 2 is not prescriptive about specific technologies or processes—it requires you to define your own controls appropriate to your organization and demonstrate they meet the criteria. This flexibility is both a strength (you design what works for you) and a challenge (you must articulate and evidence your approach).
Controls fall into several categories:
| Category | Description | Examples |
|---|---|---|
| Preventive | Stop issues before they occur | Firewall rules, access controls, input validation, encryption |
| Detective | Identify issues when they occur | Log monitoring, intrusion detection, anomaly detection, auditing |
| Corrective | Fix issues after detection | Incident response, backup restoration, patching |
| Compensating | Alternative controls when primary isn't feasible | Manual reviews when automated controls unavailable |
Key Control Areas for SaaS Organizations
While controls vary by organization, certain areas are nearly universal for cloud and SaaS providers:
Auditors evaluate your controls as you describe them. Write control descriptions precisely—vague controls are harder to evidence and may lead to findings. 'Access reviews are performed' is weak; 'Quarterly access reviews are performed by department managers for all active users, with remediation tracked to completion' is specific and auditable.
For Type II audits, you must provide evidence that controls operated effectively throughout the audit period. This evidence requirement fundamentally impacts how organizations operate—you cannot demonstrate retroactively that controls worked if you weren't collecting evidence at the time.
The Sampling Methodology
Auditors don't examine every instance of every control—they use sampling to assess control effectiveness. The sample size is based on frequency:
| Control Frequency | Typical Sample Size |
|---|---|
| Annual | 1 (must see it occurred) |
| Quarterly | 2 (auditors typically test more) |
| Monthly | 3-5 |
| Weekly | 10-15 |
| Daily or per-occurrence | 25+ (depending on population) |
This means:
Exception Management
Auditors will find exceptions—instances where controls didn't operate as designed. Not all exceptions result in report findings:
When exceptions occur, be transparent with auditors. A documented exception with management response is better than trying to hide gaps, which can undermine the entire audit relationship.
SOC 2 readiness isn't a month-long project before audit—it's year-round operational discipline. Establish evidence collection processes from day one: automated log aggregation, ticket systems that preserve history, document management with version control. The audit is a snapshot of ongoing practices.
Understanding the audit process helps organizations prepare effectively and set appropriate expectations for timeline and resource requirements.
Choosing an Auditor
SOC 2 audits must be performed by licensed CPA firms. When selecting an auditor:
Timeline Expectations
| Audit Type | Typical Timeline |
|---|---|
| Type I (first audit) | 3-6 months total |
| Type II (first, 6-month period) | 8-12 months (including audit period) |
| Type II (renewal, 12-month period) | Continuous; report 2-3 months after period end |
For renewals, organizations typically run their audit period continuously (e.g., January 1 - December 31), with auditors testing throughout and issuing the report 2-3 months after period end.
Modern organizations move toward continuous audit approaches: auditors access systems throughout the year (read-only), automatically collect evidence, and perform rolling assessments. This reduces year-end crunch and catches issues earlier.
When you receive a SOC 2 report—whether your own or a vendor's—understanding its structure helps you interpret the findings correctly.
Reading a SOC 2 Report: What to Look For
When evaluating a vendor's SOC 2 report:
The Carve-Out vs. Inclusive Method
When service organizations rely on subservice providers (like cloud providers):
Most SaaS providers use the carve-out method for cloud infrastructure, referencing AWS/Azure/GCP's own SOC reports for underlying controls.
Complementary User Entity Controls are controls you must implement for the vendor's security to be complete. If a SOC report lists 'User entity is responsible for MFA on accounts' and you haven't configured MFA, you have a gap—regardless of how clean the vendor's report is.
Modern compliance approaches leverage automation to reduce manual burden, improve accuracy, and enable continuous compliance rather than point-in-time audits.
What Automation Enables
Continuous Evidence Collection
Automated Control Monitoring
Audit Preparation Streamlining
Multi-Framework Mapping
Build vs. Buy Considerations
Organizations can build their own compliance automation (custom dashboards, scripted evidence collection) or use commercial platforms. Considerations:
For most organizations, the time savings from commercial platforms justify the cost, especially given the engineering opportunity cost of building in-house.
Automation handles mechanics, but culture determines success. When security practices are embedded in daily work—not bolt-ons for audit season—SOC 2 becomes a natural byproduct of good operations rather than a special project.
SOC 2 represents more than compliance checkbox—it's a framework for building and demonstrating operational excellence. Key insights:
Moving Forward
With SOC 2's framework for service organization controls understood, we'll examine PCI DSS—the Payment Card Industry Data Security Standard. Where SOC 2 is broad and flexible, PCI DSS is prescriptive and specific, designed to protect cardholder data in payment processing systems.
You now understand SOC 2's structure, the Trust Services Criteria, control design and evidence requirements, the audit process, and modern automation approaches. These concepts apply beyond SOC 2 to operational excellence generally—good security operations naturally produce SOC 2 compliance.