How to Get Your SaaS Company SOC2 Compliant

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System and Organization Controls 2 (SOC 2) is a report that SaaS companies provide to clients as proof of their ability to provide secure services. SOC 2 compliance bears even greater importance for SaaS providers that handle data in heavily regulated industries or in jurisdictions that have strict rules on data privacy and security. That said, a report indicating that the company has up-to-date security measures in place offers several benefits to all SaaS providers. 

  • Proving the effectiveness of security controls helps establish credibility and win trust
  • Having a strong security posture makes the company look more reliable against competitors
  • Formally defining security policies and procedures strengthens the company’s security program
  • A clean SOC2 report lowers the company’s risk profile for clients in highly regulated industries

This post provides an overview of the way in which you can go about preparing for a SOC 2 audit. It is worth reading even if you’re an early-stage SaaS company. We’d argue that it is easier to achieve SOC compliance in the start-up stage when the team is smaller and the business is able to handle auditing requests quickly. 

 

Scope and Types of SOC 2 Reports 

A SOC 2 report covers criteria related to security, availability, confidentiality, processing integrity and privacy. These five ‘controls’ or ‘requirements’ cover 64 individual criteria in total. It is not necessary for the report to include all the features. The most common criteria deal with data security measures. When considering scope, think about the common risk-related questions posed by clients from a particular industry and the nature of your service offering. 

There are two types of SOC 2 reports: Type 1 and Type 2. Type 1 contains a description of the company’s system and its implementation of security controls at a specific point in time. SOC 2 Type 2 covers the same controls but over a period of at least six months. 

Which type of SOC 2 report does a SaaS company need?

In the start-up stage, the Type 1 report is an effective way to show that you’re serious about developing your security program. But as the review is done at a single point in time, it can get outdated as time passes. 

Which makes SOC2 Type 2 a far better way to prove that you have established strong security measures. As the evaluation is done over a period of six months or longer, there is more to suggest the effectiveness of your internal controls. 

Here again, you have to consider which type of report your company needs, depending on what your clients usually ask for. This evaluation is necessary before you plan for an SOC audit for the first time. A company whose services may affect its client’s internal controls related to financial reporting will need an SOC 1 audit. Say, for example, your client is a publicly traded company that needs to perform an annual financial statement audit in compliance with the Sarbanes-Oxley Act. If the company outsources a key process impacting their financial statements to you, then a SOC 1 report will be necessary. 

Steps of SOC 2 Compliance

A logical order to preparing for a SOC 2 audit looks something like this:

Step 1

Decide the scope the audit should consider. There is no need to include all five trust principles. See which of your systems, procedures and policies support the chosen principles. 

Step 2

Evaluate the readiness of the control environment. This will help you identify gaps, if any, between the trust criteria and internal control environment. Map the control environment to the criteria to create a complete control structure. 

Step 3

Find a partner for the audit. Only a Certified Public Accountant (CPA) can perform a SOC2 audit. It is better to look for an experienced assessor that has worked with similar types of organizations and understands the needs of your industry. Check the assessor’s reviews and ratings, paying particular attention to whether or not they’re readily available to answer customers’ questions and communicate effectively. 

Step 4

Ensure continuous SOC 2 compliance. A solution that integrates governance, risk and compliance in a single package makes ongoing monitoring of internal controls easier. 

Every SOC audit yields a result. An unmodified/unqualified/clean opinion indicates that you can achieve your system requirements and service commitments. A qualified opinion means that the auditor found issues with the design or operation of some of the controls. An adverse opinion shows that the auditor found issues with the system descriptions, and/or the controls aren’t properly designed, and/or the controls did not operate effectively. 

Finally, you may wonder how much the audit will cost you. The SOC 2 certification cost runs from $5,000 to over $80,000. The fee depends on the size of your company, the trust criteria you include, scope of services, and the number of systems and processes forming a part of the audit.