SOC 2 Type 2 Report (All You Need To Know in 2024)

As an organization working with sensitive customer data, you would agree that security is paramount. Besides, potential enterprise customers will need assurances that you have systems and controls to safeguard their information. One way to provide this assurance is through a SOC 2 Type 2 Report.

A SOC 2 Type 2 report is not a simple checklist. Rather, it’s an intricate and expensive process that requires a thorough evaluation of principles.

In this blog post, we’ll get into the specifics of a SOC 2 Type II report. By the end, you’ll understand how it differs from other SOC reports, how often to schedule a SOC 2 Type 2 audit, and why this report is more vital than ever for SaaS and IT vendors.

What is a SOC 2 Type 2 report?

SOC 2 Type 2 report is an internal control report that helps the company to safeguard customer data based on the controls implemented. It is an in-depth evaluation of a company’s security controls and processes against the framework’s requirements over 3-12 months. Developed by the AICPA (American Institute of Certified Public Accountants), the Type 1 report, on the other hand, only evaluates the design of your internal controls. 

In simple words, SOC 2 Type II report captures how a company safeguards its customer data and how well the controls are operating. Usually, companies that use cloud service providers use SOC 2 Type 2 reports to assess and evaluate the risks associated with third-party technology services. The report is usually issued by an independent third-party auditor, which covers the 5 Trust Service Criteria (TSC)  listed below:

• Security: Security principle protects data and systems against unauthorized access. 
• Confidentiality: Confidential cyber security data refers to any information that should only be accessed by a specific group of people. This may include items such as application source code, usernames, and passwords. For example, encryption is often used for data that should only be accessible to company personnel or internal price lists.
• Availability: All systems should always adhere to the availability SLA (Service Level Agreement). This can be accomplished by constructing fault-tolerant systems that will not fail under high traffic or network congestion.
• Processing Integrity: All systems must be designed to function smoothly, without any delays, vulnerabilities, errors or bugs.
• Privacy: Any cyber security information that could be used to identify an individual like PHI must be handled according to the company’s data usage and privacy policy.

SOC 2 Type 2 report has no rigid requirements. The report is unique to each organization with its designs and complies with one or more trust principles.

For example, security is a mandatory SOC 2 need, while others, like privacy or confidentiality, aren’t. You can just choose to go with TSC’s that rely on your organization. Most SaaS businesses choose to go on a combination of Security, Availability, and Confidentiality.

There are two types of SOC reports:

• Soc 2 Type 1 describes a vendor’s systems and whether their design suits relevant TSC.
• Soc 2 Type 2 provides details on the operational effectiveness of those systems and controls.

Here, controls are a set of procedures and policies you put in place to prevent any data security mishaps and have a strong cyber incident response. 

Overall, a clean SOC 2 Type 2 report is important for any organization that wants to prove its commitment to data security and privacy. It also assures customers and clients that their data is safeguarded following the highest standards.

Why do companies need SOC 2 Type 2 report?

Just about anywhere you look, companies are using the cloud to store information, and they are not just your typical large organizations. When a company stores sensitive customer data, it needs to ensure that it is secure. One way to do this is to get a SOC 2 Type 2 report. 

A SOC 2 Type 2 report is essential for both security and profitability. First, the type 2 assessment offers compelling evidence that an organization is implementing proper security controls and whether it protects sensitive customer data. 

This is because eyes and ears across the cloud are necessary to assess how secure your information will be in the hands of a third-party vendor. This is why a SOC 2 Type 2 report provides peace of mind. 

But not only data-sensitive cloud reliable companies, but SOC 2 compliance can help other companies too. Here are some reasons companies usually leap to get SOC 2 Type 2 attestation.

• Customer Demand: If you want to successfully lure in customers, then safeguarding their data from illegal access should be one of your top priorities. If you don’t have a SOC 2 attestation, businesses with the certification will snatch up potential clients.
• Competitive advantage: Staying ahead of the competition is crucial for any business, and having compliance in place will give you the upper hand. Customers and others who see your commitment to data security will be more likely to trust doing business with you.
• Cost-effectiveness: In 2021, the average cost of a breach reached a new high of $4.2 million. But don’t worry; there is a way to help prevent your company from becoming another statistic. A SOC 2 Type 2 audit attestation can minimize the risk of breaches and their costly consequences.
• Improve internal data security processes: SOC 2 reports provide insightful feedback on the efficacy of your organization’s internal data security measures, encryption, and support. You can assess and improve your risk and security posture with this information.

As a result, you need a SOC 2 Type 2 report to show that you are committed to data security and to gain the trust of your customers. 

What must your SOC 2 Type 2 report contain?

A SOC 2 Type 2 report usually contains the following four main sections. Let’s take a deep dive into what they include:

Applicable trust service criteria

If you’ve decided to go for SOC 2 Type 2 certification, one vital next step is choosing which of the five TSPs (Trust Services Principles) must be included in your SOC 2 attestation. Only the security principle is required by law to be included in the report–the other principles are only necessary if they correspond with services you offer.

For example, if your organization deals with confidential data, such as Personally Identifiable Information (PII), the Confidentiality principle should be mentioned in your SOC 2 Type 2 audit report.

Management assertion

The following section contains verifiable information, claims, and facts provided by the audited organization regarding their system under audit. The organization writes this as an acknowledgment that the management believes this information to be accurate and relevant. It summarizes the organization’s services, products, structures, systems, and controls but omits technical details.

Here’s a gist of what this section contains:

• Components of systems – Infrastructure, System, People, Procedures and Data
• Aspects of systems
• Types of services provided
• How the systems capture and address important events and conditions
• The methods you use to develop and distribute reports
• Any applicable TSC not being met by controls, along with explanations for why this is the case.

Independent auditor’s report

The importance of this section rivals that of your university grade card as it displays the auditor’s rating of your compliance. This decides if you passed or failed the assessment, making it one of the most crucial aspects of the report.

This section allows the auditor to voice their opinion on your SOC 2 audit readiness. It includes a description of what is being audited, the organization’s responsibilities, and what the auditor is responsible for. This assessment also has some limitations that should be considered, such as human error or circumvention of controls.

There are four categories of auditor opinions. Here’s what they mean:

• Unqualified – You pass! 
• Qualified – Close, but not quite
• Adverse – You failed
• Disclaimer of Opinion – No comments

Infrastructure services and systems

This section details the organization’s systems, scope & requirements, components, controls, sub-service organizations, and other systems information. It is essential to read to understand how the organization functions.

This article includes information on human resources, roles and responsibilities, and a list of system components and controls relevant to common criteria.

This section provides an in-depth look at the control environment, control activities (policies and procedures), information and communication system, monitoring includes penetration testing and vulnerability scans to assess internal control performance), and risk assessment.

How long is a SOC 2 Type 2 report valid?

A SOC 2 report is only valid for 12 months after it is issued officially. For example, if a SOC 2 Type 2 report was issued on December 15, 2022, the opinion would be valid until December 14, 2023. Beyond that, the validity of the opinion stated in the report can not be guaranteed. 

This is because during the time between when the report was issued and when it expires, changes may have been made to the system that is not reflected in the report. 

As a result, it’s important to ensure you’re always using the most up-to-date version of any SOC 2 report.

How much will it cost to prepare for SOC 2 Type 2 report?

SOC 2 compliance can be costly, and the pricing typically runs between $20000 and $50000. The price depends on the organization’s size and complexity, the readiness of your systems and controls, and the type of auditor you choose. 

In addition to the actual report, you may also need to pay for readiness assessments and other overhead costs. However, SOC 2 compliance is important for ensuring the security of your customer data. Investing in a SOC 2 report can give your customers peace of mind that your information is safe with your organization.

Find out how Sprinto can help you prepare SOC 2 Type 2 Report

Wouldn’t it be nice to walk into your next audit knowing that you’re SOC 2 compliant? Sprinto can help make that a reality with its easy-to-use dashboard and control mapping. The dashboard provides a complete overview of your compliance readiness, both at a high and granular level.

In addition, Sprinto automates repeatable tasks and makes it easier to show SOC 2 compliance with evidence. Automated procedures for evidence collection and continuous monitoring ensure you have proof for every control and reduce the back and forth with the CPA.

So why wait? Get started with Sprinto today and be confident in your security posture.

FAQs

How long does it take to prepare for SOC 2 Type 2 report?

The SOC 2 audit usually lasts five weeks to three months, depending on aspects such as the scope of your audit and how many controls are necessary.

Smaller organizations with fewer customers and less complex systems will require less time to prepare their reports. Larger organizations with more customers and more complex systems will require more time.

How often do we need to renew SOC 2 Type 2 reports?

Depending on the client’s preference and any current concerns with operational controls, most SOC 2 reports are completed every 12 months. Some service organizations choose to do this audit every six months. 

When renewing your SOC 2 Type 2 report, working with an experienced firm like Sprinto will help ensure a timely and hassle-free process. Our team will work with you to understand your organizational needs and develop a reporting schedule that meets your requirements.

Is it compulsory to have SOC 2 Type to report?

No. SOC 2 is not mandatory, and attestation isn’t required by law. Most business-to-business (B2B) and Software-as-a-system (SaaS) vendors must seriously consider being certified (if you haven’t already) because SOC 2 is often a requirement in vendor contracts.

When is a SOC2 Type 2 report required?

A SOC 2 report is essential for companies like cloud service providers and SaaS providers, who store client data on the cloud. The report establishes that the client’s information is safe from malicious intent. 

Cloud service providers needing a SOC 2 report must demonstrate that their systems meet the five trust principles of security, availability, processing integrity, confidentiality, and privacy.