As companies increasingly leverage the cloud to store customer data, SOC 2 compliance is becoming a necessity for a wide variety of organizations. But what exactly is a SOC 2 report and how do these compare to SOC 3 reports?
In the following blog, we’ll be diving into the differences between SOC 2 and SOC 3 reports and providing helpful insights so you can decide which SOC report is the right fit for your business. Let’s take a closer look.
What is a SOC 2 report?
Developed by the American Institute of CPAs (AICPA), SOC 2 is a type of audit report specifically designed for service providers storing customer data in the cloud. A SOC 2 report is about putting in place well-defined policies, procedures, and practices. Therefore, it applies to nearly every SaaS company, as well as any company that uses the cloud to store its customers’ information. In a nutshell, achieving SOC 2 compliance means you have established a process and practices with the required levels of oversight across your organization.
SOC 2 Summary:
- Who needs one: Service organizations that store, process, or transfer data, such as cloud providers or organizations that sell software as a service (SaaS).
- What it covers: Security is the primary concern of a SOC 2 report, and that’s why security is called the report’s “common criteria.” Covering security issues is mandatory, but the client decides which of the other four Trust Service Criteria (availability, processing integrity, confidentiality, and privacy) should be documented.
- Types: SOC 2 reports can be issued as a Type I or Type II report. A SOC 2 report is typically only shared with those who have signed a nondisclosure agreement (NDA).
- Main audience: Current customers and/or those with a nondisclosure agreement (NDA).
For each criterion, the SOC 2 report answers such questions as:
- Security. What protects the system against unauthorized access, use, or modification?
- Availability. How do you ensure that systems are available for operation and used as committed or agreed?
- Processing integrity. What methods are in place to ensure system processing is complete, valid, accurate, timely, and authorized?
- Confidentiality. What methods ensure that any confidential information is protected as committed or agreed upon?
- Privacy. What procedures are in place to ensure personal information is collected, used, retained, disclosed, and destroyed in conformity with the commitments in a company’s privacy notice and with the criteria outlined in the generally accepted privacy principles (GAPP) issued by the AICPA?
Related blog: SOC 1 vs. SOC 2 Reports: What are the Differences?
What is a SOC 3 report?
A SOC 3 report is very similar to a SOC 2 report and actually covers the same subject matter. However, the SOC 3 report is intended for a different audience and contains a less detailed description of a service organization’s system. A SOC 3 also does not include details of the service auditor’s testing of controls and results.
SOC 3 Summary:
- Who needs one: Service organizations that store, process, or transfer data, such as cloud providers or organizations that sell SaaS.
- What it covers: SOC 3 reports cover the same areas as SOC 2, but the report itself is shorter and less specific — it’s meant to be shared with the public, including potential customers, usually for marketing purposes. These reports typically only include the auditor’s opinion, the service organization’s assertion, and a brief system description.
- Main Audience: General public & potential customers.
- The SOC 3 report also provides a competitive advantage by giving your company independent verification by trusted professionals.
Both SOC 2 and SOC 3 reports address risks around these five trust principles:
- Processing Integrity
Which SOC report do I need?
Choosing which report or reports are appropriate for you depends on a number of things. In many situations, we see clients requesting either a SOC 2 report or both a SOC 2 and SOC 3 report. Because the cost for performing these reports is similar due to the criteria that must be met, it often makes more sense for customers to obtain a SOC 2 and add on a SOC 3. Holtzman’s experienced team can help you understand which SOC report best fits your organization’s needs—whether you need assurance over a specific area for a contract or are looking to ensure regulatory compliance. We issue over 125 SOC reports a year and can provide SOC readiness support ahead of your actual audit, along with SOC 1, SOC 2, and SOC 3 reports for companies across many industries and locations. Get in touch today so that we can help your organization with your auditing needs.
What will I gain from a SOC 2 or SOC 3 report?
- More confidence and trust with your stakeholders and clients
- Enhanced organizational reputation and overall reduction of risk
- Stronger competitive edge in the market
- A greater understanding of how risks are addressed in similar organizations in the same industry
- And more
Are you researching SOC 2 or SOC 3 audits? We’re here to help.
Grab our new e-book: SOC Reports: Your Complete Guide for all the answers you need. In this helpful and easy-to-follow e-book, we break down SOC report types and which companies might need one.
- How to select a reporting period
- Time commitment and costs involved in getting a SOC report
- Common pitfalls to avoid (to save time and money!)
- How to select an audit firm
- And more!
- SOC 1 vs. SOC 2 Reports: What are the Differences?
- SOC Reports: Your Complete Guide
- SOC Audits: 4 Common Pitfalls to Avoid
- What are SOC Reports for, and which kind do I need?
- Importance of SOC 1 Reports for Employee Benefit Plans