For today’s B2B SaaS vendors, being compliant with security standards is a must — especially if you’re serving enterprise customers. One of the most common standards used for this purpose is SOC 2 Type 2. Having a SOC 2 Type 2 report 

In this post, we’re exploring what a SOC 2 Type 2 report is, and what the process for a successful audit looks like. 

What is a SOC 2 Type 2 Report? 

A SOC 2 Type 2 is one of the various reports crafted under the AICPA Service Organization Control program. Used primarily by PaaS, SaaS, and cloud computing vendors, it is an internal controls reports that outlines how a specific company protects customer data and how well those controls are working. The report is created following a third-party audit that’s conducted over a specific period of time. 

SOC 2 Type 2 reports differ from SOC 2 Type 1 reports in that they cover an extensive period of time, rather than a point-in-time review. It also not only covers the design of the controls, but also reviews their operating effectiveness. This means that the audit takes longer to complete, but it provides a more comprehensive view of how well the company manages and protects customer data.

When determining the scope of your SOC 2 Type 2 report, it’s important to review which of the five Trust Services Criteria (TSC) you want to use as a lens for your report. These include: 

• Security: How well your systems and data are protected against unauthorized access.
• Availability: How reliable your information and systems are.
• Processing integrity: That your system processing is complete, valid, accurate, and timely. 
• Confidentiality: How well confidential information is protected. 
• Privacy: That personal information is protected from unauthorized access.

Every SOC 2 Type 2 has to focus on the security-related controls; the rest are optional. Depending on your customer needs and interests, you may also consider proving compliance in one or more of the other four areas.

Why are SOC 2 Type 2 reports important?

Whether you’re a large enterprise with thousands of customers or a vendor that deals exclusively with enterprises, a SOC 2 Type 2 report has a number of benefits. For starters, it immediately assures customers and prospects of your security posture. SOC 2 Type 2 is a recognized standard, so individuals and companies are more likely to trust a company that has a report. SOC 2 Type 2 controls are also security best practices. By being compliant, companies can ensure that their data is safe and vastly reduce the chance of an expensive data breach. (Data breaches cost an average of $9.44 million in 2022.)

What does the SOC 2 Type 2 audit process look like? 

A SOC 2 Type 2 audit will look different from company to company depending on the complexity of their controls, the TSCs they want to focus on, how they handle customer data, and the type of technology they offer. 

That said, the process tends to have seven key steps that vary slightly from one organization to another. 

1. Defining the scope: While the security controls are a given, you’ll have to determine the scope of your audit by establishing which of the other TSCs (if any) are necessary for your report. 

2. Setting the time period for your report: Your SOC 2 Type 2 report period should cover anywhere from six months to a year. You need to establish when the audit period will start and end. 

3. Documenting systems and controls: Once you’ve identified the scope and the report period, you can start preparing for the audit itself. The first step here is to document all the systems and controls that will be reviewed as part of the audit. 

4. Conducting a gap analysis: A gap analysis will tell you what areas an auditor might flag as part of their review. This will give you a chance to proactively address any potential issues and increase your chances of a successful audit. 

5. Running a readiness assessment: A readiness assessment is basically like a practice run for the audit. This can be conducted by an internal auditor, a CPA firm, or a consulting company and typically requires three key steps: mapping existing controls to the framework, documenting any remaining gaps, and identifying remediation plans for each of those gaps.

6. Choosing an auditor: Once you’ve completed all the remediation steps from the readiness assessment, it’s time to choose your auditor. Your auditor should be a licensed CPA firm — but it’s important to note that not all CPA firms are the same. Take the time to review which firms your peers have used, check in with your network for recommendations. Ideally, you want a team that will act as more of a partner rather than a disciplinarian. 

7. Starting the formal audit: With all the previous steps complete, you can start the audit process. How long this takes will depend on the report period, and will result in a SOC 2 report that describes the state of your internal control environment. It will also include an auditor’s opinion regarding your compliance of either: unqualified (the passing grade), qualified, adverse, or disclaimer. 

Another important step to take as you get ready to conduct your SOC 2 Type 2 audit — especially if you don’t have compliance resources within your organization — is to hire an advisory team to coach you through the process. This will help you rapidly scale up your compliance knowledge and set you up for success as you embark on this process.

You have your SOC 2 report — now what? 

Once you have a SOC 2 Type 2 report, it is valid forever. That said, customers typically want vendors to renew their report on an annual basis to demonstrate ongoing compliance. As such, most companies plan for annual SOC 2 audits. 

‍From start to finish, it can take over a year to get your SOC 2 Type 2 report. The time to start your compliance journey is now — and we can help. Get in touch to learn how.