Cloud-hosted applications are now mainstream, and as a result, compliance with SOC 2 industry standards and benchmarks is becoming more and more critical. If you are a SaaS company, getting a SOC report is one of the keys to growing your business, as it shows your clients that your organization is well-controlled. This Windes SOC 2 audit checklist will help your business kickstart your compliance journey.
Before we get into the SOC 2 audit checklist, you should understand the nuances of the SOC 2 framework, which will ensure better preparation.
Getting your organization audit-ready requires adequate preparation, planning, and defining the critical areas you must review. Before receiving a SOC certification, you must first determine your scope, choose the proper trust service criteria, implement internal risk identification, and assess controls. You must also understand what each step of obtaining a SOC 2 entails.
The Windes SOC 2 audit checklist
The Windes SOC 2 audit checklist is a guide that helps organizations assess how customer data is collected, processed, stored, and accessed within the organization. It ensures compliance with the SSAE18 standards and helps organizations meet SOC 2 requirements by demonstrating adequate controls over customer information security, availability, processing integrity, confidentiality, and privacy.
Implementing a SOC 2 checklist
Implementing a SOC 2 checklist provides a standardized method to ensure that you are ready for the audit process. It showcases your commitment to security and reassures customers that their data is safeguarded and significantly diminishes business risks, enhances vendor management, and frequently streamlines operational efficiency.
SOC 2 audit checklist components
A SOC 2 requirement checklist that is designed well will provide actionable steps an organization needs to take to meet the security, availability, processing integrity, confidentiality, and privacy criteria needed for compliance. Based on our experience, Windes recommends the following 9-step checklist:
1. Choose Objectives
The first action item of the SOC audit checklist is to determine the objectives or purpose of the SOC 2 report. The specific answers to why SOC 2 compliance is essential to your organization would serve as the “goals and objectives” to achieve in your compliance journey.
A clear understanding of objectives ensures the SOC 2 process will address the organization’s reasons for pursuing compliance. Such clarity drives decision-making as you define the scope, assemble a cross-functional team, evaluate controls, undergo auditing, and take necessary actions to remediate gaps.
Here are some examples:
- It will improve our marketability by demonstrating that we are well-controlled and dedicated to ensuring the security and integrity of our client’s information
- It will add to the competitive advantage over other companies that do not have the certification by streamlining the third-party vendor process
- It will bolster the organization’s security posture to safeguard its reputation, helping to avoid data breaches and financial damage
It is not advisable to avoid SOC 2 compliance just because competitors do not have it or customers are not asking for it. Becoming compliant is a way to stay in front of your competitors and demonstrate that information security is essential.
2. Identify the SOC 2 Report Needed
There are two types of SOC 2 reports: Type 1 and Type 2. Based on your compliance goals, you can decide which is appropriate for your business.
While a SOC 2 Type 1 report may be faster and sometimes cheaper, it will only give your customers a brief snapshot of the design of the controls in place and does not provide any insight into the operation of those controls. The primary use case of a Type 1 report would be if you needed a report faster to prove to your customer that the overall design of your internal controls is appropriate and demonstrate that you are committed to preparing for a Type 2.
A SOC 2 Type 2 report will provide your customers with assurance that your internal controls have been working over an extended period (usually 6 months or a year) and are operating effectively to secure their information. However, a Type 2 audit report takes significantly longer to obtain because it must test the controls numerous times to be able to give assurance that they were working effectively for the period of the report.
3. Define the Scope
Defining the scope of your audit is crucial. It allows you to demonstrate to auditors your understanding of your data security obligations and optimizes the audit process by focusing on relevant areas. The core of scope definition is selecting the appropriate Trust Services Criteria (TSC) based on the nature of your business and the types of data you handle. The Security TSC is a fundamental requirement, and regulatory mandates may necessitate additional criteria based on the governing body.
Security, Availability, and Confidentiality are the core pillars of the SOC 2 process and often may provide adequate coverage for most SaaS companies. However, carefully consider the following:
- Availability: Include this if your customers prioritize system uptime and have concerns about potential disruptions.
- Confidentiality: This is crucial if you manage sensitive information protected by NDAs or if your customers have specific requirements for data secrecy.
- Processing Integrity: This criterion is essential for businesses that execute critical customer operations, such as financial transactions, payroll, or tax processing.
- Privacy: Incorporate this if you store Personally Identifiable Information (PII), like healthcare data, birthdays, or social security numbers.
Omitting relevant TSCs within your scope can lead to not only significant cybersecurity vulnerabilities and broader business risks, but you may not cover your clients’ concerns and, therefore, not provide the assurance that they seek. It is strongly recommended that you work together with your potential clients and your auditor to help ensure that you are scoping your report right the first time.
4. Internal Risk Assessment
Achieving SOC 2 compliance requires a robust risk assessment process, which includes systematically identifying and documenting all potential risks and vulnerabilities relevant to your organization’s systems and data. Once your risk assessment is complete, you should conduct a quantitative assessment assigning a likelihood score (the probability of the risk occurring) and an impact score (the potential severity of the risk) to determine the most critical to your environment. Try to utilize industry benchmarks to determine each risk’s likelihood and impact objectively, and do not use subjective intuition for risk scoring as they tend to be biased and often lead to focusing on the wrong areas.
5. Gap Analysis and Remediation
After reviewing your risk assessment, you must perform a proper gap analysis to identify the root causes, as well as implement controls that will properly remediate the areas of concern. Appropriate responsibilities should be assigned, and meetings should be conducted on a weekly basis to monitor the progress as well as ensure that the remediation is performed properly.
If you are unsure what controls need to be implemented to resolve the gaps, contact your auditor (such as Windes) for advice.
6. Implement Controls and Test
Once you have implemented your remediated controls, you need to test their effectiveness by testing multiple instances of the control working effectively. Do not overlook discrepancies or provide explanations for them. Auditors rarely accept explanations of discrepancies and, unfortunately, will most likely lead to the conclusion that the control it protects is possibly not working effectively.
This is a critical part of the SOC process because the auditor will check whether the controls are working as they should, and if discrepancies are found, the process will most likely have to start over to identify the root cause of the discrepancies and ensure that the controls will be working effectively.
7. Readiness Assessment
Before you move forward with the SOC reporting process, ask your auditor to undertake a readiness assessment to see if you meet the SOC compliance requirements for an audit. Once the SOC reporting process starts, your auditor must indicate any issues or discrepancies that they find within their audit report, which may lead to a qualified opinion on the report.
8. SOC 2 Audit
Authorize an independent certified business compliance service provider to complete your SOC 2 audit checklist and generate a report. Select an established, credentialed auditor like Windes, who has experience auditing businesses in your industry. In your Type 2 audit, you may expect a long-drawn exchange of information with the auditor as you answer their questions, provide evidence, review your internal samples, and discover non-conformities.
Here are some questions the auditor may ask:
- Can you share evidence to show that all your employees undergo background verification?
- Can you prove that the changes in your code repositories are peer-reviewed before they are merged?
- Can you demonstrate with evidence that you remove access to emails and databases once an employee resigns from your organization?
- Can you provide proof that you have run background checks on all your employees?
- Can you share evidence of how you maintain the endpoint security of all systems?
In comparison, the audit for Type 1 does not require a monitoring period; it is less intrusive and requires you to give a snapshot (with evidence) of the various checks and systems (read as controls) you have put in place to meet the SOC compliance checklist requirements. Note that after you clear your SOC 2 Type 1 audit, you must undergo an observation period of three to six months before applying for Type 2.
9. Establish Continuous Monitoring
Getting your SOC 2 compliance report is not a one-time event. The report is just a start, as security and compliance are ongoing efforts. A robust continuous compliance monitoring practice is essential, as SOC 2 audits must occur annually.
Continuous compliance makes future audits and scaling the scope of compliance easy. When you operate with the assurance of compliant practices, you can add more frameworks without disrupting the practice or the organization.
Your monitoring practices should be scalable to grow with your organization, simplify evidence collection, not hamper employee productivity, alert you of non-compliant activities, and paint an accurate picture of an entity-level granular overview of your information security health at any time.
Additional Tips to Align Your Checklist with SOC 2 Trust Service Criteria
Here are some tips for aligning your SOC 2 readiness checklist with the TSC:
1. Security
Security is the standard criteria and must be included in every SOC 2 audit. To protect your data and applications, you must enable access control, network firewalls, and other operational/governance controls. You must also allow entity-level controls that establish baseline security policies.
2. Availability
You must demonstrate that your systems meet operational uptime and performance standards. Therefore, monitoring for system uptime and performance should be implemented. Also, disaster recovery and incident response processes should be ready.
3. Confidentiality
This section shows how to safeguard sensitive data throughout its lifecycle. For example, you can implement access controls so that only authorized users can access the data.
4. Processing Integrity
Have quality assurance checks to validate the accuracy and reliability of data processing. Monitor systems to ensure timely processing and intended outcomes. It includes quality assurance procedures and SOC tools to monitor data processing.
5. Privacy
Privacy requires protecting personally identifiable information (PII) from breaches and unauthorized access through rigorous access controls, two-factor authentication, and encryption.
Make your SOC 2 journey easy and error-free
Windes provides expert guidance and support throughout your SOC 2 journey, ensuring a smooth and efficient process. Our experienced team can help you with the following:
- Understand the SOC 2 requirements and how they apply to your organization
- Develop and implement the necessary controls
- Prepare for your SOC 2 audit
- Maintain ongoing compliance
Windes can help. Talk to our GRC experts today!
Additional FAQs
What is SOC 2 compliance?
SOC 2 is a voluntary information security compliance standard developed by the American Institute of CPAs (AICPA) for cloud-hosted organizations. The compliance framework is based on the Trust Services Criteria of security, availability, processing integrity, confidentiality, and privacy.
Who must be SOC 2 compliant?
Companies that capture and/or handle information for another party should consider becoming SOC 2 compliant. This is because SOC 2 compliance demonstrates that you have a robust security posture and practice to keep data safe and secure. It helps to prove that your organization provides customers and prospects with a secure, available, confidential, and private solution.
Do I have to use all 5 basic trust principles?
No, the only mandatory principle is security for all organizations undergoing a SOC 2 audit, while the rest can be selected based on the data type.
Is SOC 2 compliance mandatory?
No, SOC 2 is not a mandatory framework. However, due to growing concerns over data privacy and security, organizations require their vendors to demonstrate that they handle data securely and ask for proof in the form of a SOC 2 audit report.
How hard is it to achieve SOC 2 compliance?
SOC 2 compliance has nuances and complexities, such as compliance standards. Windes is here to help you navigate those complexities and achieve SOC 2 compliance efficiently and effectively. Contact us to learn more.
