SOC 2 Type II companies have systems and policies designed to keep its clients’ sensitive data secure.
So, what is SOC and why is it important?
For starters, SOC stands for “system and organization controls.” Those controls are a series of standards designed to help measure how well a service organization conducts and regulates its information. The purpose of SOC standards is to provide confidence and peace of mind for organizations when they engage third-party vendors.
What is SOC Certification?
A SOC-certified organization has been audited by an independent, certified public accountant who determined the firm has the appropriate SOC safeguards and procedures in place.
SOC 1 vs. SOC 2 vs. SOC 3
SOC concerns the internal controls in place at the third-party service organization. For a company to receive SOC certification, it must have sufficient policies and strategies that satisfactorily protect clients’ data.
SOC 1, SOC 2, and SOC 3 certifications all require a service organization to display controls regulating their interaction with clients and client data.
- SOC 1 reports on the service organization’s controls related to its clients’ financial reporting.
- SOC 2 reports build on the financial reporting basis of SOC 1 and also require standard operating procedures for organizational oversight, vendor management, risk management, and regulatory oversight. A SOC 2-certified service organization is appropriate for businesses whose regulators, auditors, compliance officers, business partners, and executives require documented standards.
- SOC 3 reports are a simplified version of SOC 2 reports, requiring less documentation. SOC 3 reporting is appropriate for businesses with less regulatory oversight concerns.
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The SOC 2 protocol is designed for more advanced IT service providers. These can include managed IT service providers (MSPs), cloud computing vendors, data centers, and SaaS (software-as-a-service) companies.
The SOC 2 framework includes five key sections, forming a set of criteria called the Trust Services Principles. These include:
1. The security of the service provider’s system
2. The processing integrity of the service provider’s technical network
3. The availability of the provider’s systems
4. The privacy of personal information that the service provider collects, retains, uses, discloses, and disposes of for users
5. The confidentiality of the information that the service provider’s technical systems and policies processes or maintains for users
SOC 2 Type I vs. Type II
SOC 2 reports come in two forms.
- Type I reports concern policies and procedures that are in operation at a specific moment in time.
- Type II reports concern policies and procedures over a specified time period. For this more rigorous designation, systems and policies are evaluated for a minimum of six months.
Why is SOC 2 Type II Certification Important?
SOC 2 Type II reports are the most comprehensive certification within the Systems and Organization Controls protocol. Organizations looking to engage with a managed service provider will find SOC 2 Type II is the most useful certification when considering a partner’s security credentials.
When it comes to working with the cloud and related IT services, top-notch cybersecurity and reliability is absolutely essential and increasingly required by regulators, examiners, and auditors. Highly-regulated industries, including financial services and healthcare, are often required to only work with SOC 2 Type II certified MSPs.