What is SOC 2?

SOC 2 (System and Organization Controls 2) is a framework and auditing standard designed to help service organizations demonstrate the security, availability, and integrity of their systems and data. Developed by the American Institute of CPAs (AICPA), SOC 2 has become the gold standard for verifying that service providers securely manage customer data and systems, particularly for cloud-based services and SaaS companies.

Before SOC 2, organizations struggled to consistently evaluate and communicate their security practices to customers and partners. This created challenges when assessing the risk of working with third-party service providers. SOC 2 emerged as a standardized framework that provides valuable assurance about an organization’s controls relevant to security, availability, processing integrity, confidentiality, and privacy.

In this comprehensive guide to SOC 2, we’ll explore:

• What is SOC 2 and why is it important?
• The five trust service criteria of SOC 2
• Types of SOC 2 reports and their differences
• The SOC 2 compliance process
• Common challenges and best practices
• Frequently asked questions about SOC 2

Definition and importance

SOC 2 is an auditing framework developed by the AICPA that verifies service providers have established robust controls to ensure the security, availability, processing integrity, confidentiality, and privacy of customer data. It is specifically designed for service providers that store customer data in the cloud.

SOC 2 compliance has become increasingly important for several compelling reasons:

• Customer trust - Provides independent verification that a service provider prioritizes security and data protection
• Competitive advantage - Many enterprise customers now require SOC 2 compliance from their vendors
• Risk management - Helps organizations identify and address security gaps before they lead to incidents
• Regulatory framework - Offers a structured approach to security across the organization
• Third-party validation - Provides credible, third-party assessment of security practices
• Operational improvements - Often leads to better security processes and controls

As more companies rely on cloud services to store and process sensitive information, SOC 2 has become a crucial framework for evaluating and communicating security practices, particularly in industries handling sensitive data. For more information on securing cloud environments, see our guide on cloud security.

Trust service criteria

The SOC 2 framework is built around five trust service criteria, though organizations can choose which criteria to include in their assessment:

Security (required)

The security principle, also known as the “common criteria,” is the only required component of SOC 2. It addresses how the organization protects information and systems against unauthorized access:

• Access controls (both logical and physical)
• Firewalls, intrusion detection, and other security technologies
• Vulnerability management
• Security incident handling
• Employee security awareness

Availability (optional)

This principle addresses whether systems and services are available for operation and use as committed or agreed:

• Performance monitoring
• Disaster recovery procedures
• Business continuity planning
• Incident response capabilities
• Environmental controls

Processing integrity (optional)

This principle focuses on whether systems process data completely, accurately, and in a timely manner:

• Quality assurance procedures
• Process monitoring
• Data processing integrity checks
• Error handling and correction
• End-to-end transaction validation

Confidentiality (optional)

This principle addresses how the organization protects information designated as confidential:

• Encryption technologies
• Access controls specific to confidential information
• Confidentiality agreements
• Secure data disposal
• Vendor confidentiality management

Privacy (optional)

This principle focuses on how the organization collects, uses, retains, and discloses personal information:

• Privacy notice
• Choice and consent mechanisms
• Personal information collection limitations
• Monitoring of privacy compliance
• Privacy incident response

Organizations typically select the trust criteria most relevant to their business model and customer needs. For SaaS companies, security and availability are often the most critical, while financial service providers may focus more on processing integrity and confidentiality.

Report types

SOC 2 offers different types of reports to meet various business needs:

Type I vs. Type II

SOC 2 Type I:

• Evaluates the design of controls at a specific point in time
• Determines whether controls are suitably designed to meet the relevant trust criteria
• Provides a snapshot assessment
• Typically takes less time and resources to complete
• Often used as a stepping stone to Type II

SOC 2 Type II:

• Evaluates both the design and operating effectiveness of controls
• Tests controls over a period (usually 6-12 months)
• Provides historical evidence that controls work consistently over time
• Considered more rigorous and valuable
• Generally preferred by enterprise customers

SOC 2+ reports

Organizations can expand their SOC 2 reports to include additional frameworks:

• SOC 2 + HITRUST - Combines SOC 2 with the HITRUST CSF for healthcare organizations
• SOC 2 + HIPAA - Includes HIPAA security requirements for healthcare service providers
• SOC 2 + ISO 27001 - Combines SOC 2 with international information security standards
• SOC 2 + CSA STAR - Includes cloud-specific security requirements

These combined reports can reduce audit fatigue by addressing multiple compliance frameworks in a single assessment. For more information on how combined frameworks work, see our guide on compliance frameworks.

Compliance process

Achieving SOC 2 compliance involves several key phases:

1. Readiness assessment

Before beginning a formal audit, organizations typically:

• Determine which trust criteria to include
• Document existing policies and procedures
• Identify gaps in current controls
• Develop a remediation plan for identified gaps
• Estimate timeframes and resources needed

2. Control implementation

Based on the readiness assessment, organizations then:

• Develop or enhance security policies
• Implement necessary technical controls
• Document processes and procedures
• Train employees on security requirements
• Establish monitoring and logging systems

Implementing consistent, well-documented infrastructure practices is crucial for SOC 2 compliance. Infrastructure as code can play a significant role in enforcing consistent configurations and maintaining evidence of controls.

3. Formal audit

The formal audit is conducted by a licensed CPA firm and involves:

• Selection of an independent auditor
• Scoping the assessment
• Evidence collection and testing
• Control evaluation
• Findings documentation
• Report generation

4. Ongoing compliance

SOC 2 compliance is not a one-time achievement but requires continuous maintenance:

• Continuous monitoring of controls
• Regular testing and assessment
• Periodic internal audits
• Timely remediation of control failures
• Annual recertification

Challenges and best practices

Organizations often face several significant challenges when pursuing SOC 2 compliance:

Common challenges

• Resource requirements - SOC 2 audits require significant time and personnel resources
• Evidence collection - Gathering comprehensive evidence across systems can be labor-intensive
• Control consistency - Maintaining consistent controls over time can be difficult
• Policy implementation - Ensuring policies translate into actual practices
• Technology changes - Keeping controls current as technology evolves
• Stakeholder coordination - Requiring cooperation across multiple departments

Best practices

Based on successful implementations, these best practices can help streamline SOC 2 compliance:

Automate evidence collection

Manual evidence gathering is time-consuming and error-prone:

• Implement automated logging and monitoring systems
• Use tools that automatically collect and organize compliance evidence
• Establish continuous control monitoring
• Consider compliance automation platforms

Implement infrastructure as code

Consistent infrastructure management is crucial for SOC 2:

• Use infrastructure as code to enforce standardized configurations
• Implement automated testing of security controls
• Maintain version control for all infrastructure changes
• Document infrastructure changes through automated systems

Establish clear responsibilities

SOC 2 compliance requires organization-wide engagement:

• Clearly define compliance roles and responsibilities
• Create cross-functional compliance teams
• Train employees on their security responsibilities
• Integrate compliance responsibilities into job descriptions

Start with a readiness assessment

Before diving into a formal audit:

• Conduct a thorough gap analysis
• Prioritize remediation based on risk
• Consider working with experienced consultants
• Develop a realistic compliance roadmap

Choose the right scope

Carefully selecting the scope can streamline the process:

• Start with only the necessary trust criteria
• Clearly define system boundaries
• Focus on the most critical services first
• Consider phasing compliance efforts

Frequently asked questions

What’s the difference between SOC 1, SOC 2, and SOC 3?

While they share similar names, these SOC reports serve different purposes:

SOC 1 focuses on internal controls over financial reporting. It’s designed for service organizations that impact their customers’ financial statements, like payment processors or payroll providers.

SOC 2 focuses on information security controls based on the five trust criteria. It’s designed for service organizations that store, process, or transmit customer data, particularly cloud service providers and SaaS companies.

SOC 3 contains similar information to SOC 2 but is designed for general public distribution. It provides a high-level summary without the technical details found in SOC 2 reports.

Most technology companies focus on SOC 2, as it directly addresses information security concerns for cloud-based services.

Is SOC 2 certification required by law?

SOC 2 is not legally mandated in most jurisdictions. It’s a voluntary framework that organizations choose to adopt. However, it may become effectively required for businesses in certain scenarios:

• When contractual obligations with customers require it
• When serving specific industries with stringent security requirements
• When competing in markets where SOC 2 has become a de facto standard

For organizations required to comply with regulations like HIPAA or GDPR, SOC 2 can complement these legal requirements by providing a framework for implementing appropriate security controls.

How much does SOC 2 compliance cost?

The cost of SOC 2 compliance varies widely based on several factors:

• Organization size and complexity
• Number of trust criteria in scope
• Current state of security controls
• Type of report (Type I vs. Type II)
• Use of consultants and compliance tools
• Audit firm selected

For small to medium-sized businesses, costs typically range from $30,000 to $100,000 for the first year, including readiness assessment, remediation, and audit fees. Subsequent years usually cost less, as organizations have already established the necessary controls and processes.

Investing in automation and continuous compliance tools can reduce long-term costs by streamlining evidence collection and ongoing monitoring.

Learn more

SOC 2 compliance is an important investment for organizations that handle customer data, particularly for cloud-based service providers. By demonstrating a commitment to security, availability, and data protection, organizations can build trust with customers and partners while implementing robust security practices.

The journey to SOC 2 compliance often leads to improved security practices, better risk management, and more consistent operations. While achieving compliance requires significant effort, the resulting security posture and competitive advantages typically justify the investment.

For more information about related security and compliance topics:

• What is Infrastructure as Code?
• What is Configuration Management?
• What is HITRUST?
• What is HIPAA?