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30 October, 2019
Difference between SOC 1 and SOC 2
So often we have seen that our clients are confused between SOC 1 and SOC 2 audits. Though both these frameworks deal with the controls implemented within your organization, their focus areas are different. SOC 1 primarily focuses on how an organization is dealing with financial data. On the other hand, SOC 2 checks how an organization is securing and protecting customer data stored in a cloud environment. In this post, we explore SOC 1 and SOC 2 audits and their differences.
What is SOC 1?
A SOC 1 report or Service Organization Control 1 report gives assurance and peace of mind to your customers and users that you are handling their financial information safely and securely. Previously, the SOC 1 report was called SAS 70 (Statement on Auditing Standards 70), and it was then replaced by SSAE 16 (Statement on Standards for Attestation Engagements number 16). Just like SOC 2, SOC 1 also offers Type 1 and Type 2 audits. A Type 1 report for SOC 1 showcases that your organization’s internal financial controls are properly designed. Moving a step forward, a Type 2 report for SOC 2 demonstrates that the internal financial controls are operating effectively over a period of time. Our experts recommend that this period should be at least six months.
What is SOC 2?
SOC 2 assists service organizations in demonstrating that they have implemented security controls for data stored in the cloud, and they are operating as expected. When organizations started utilizing SAS 70 as a means to ensure the operational effectiveness of a service organization’s security controls, the SOC 2 framework was developed to prepare a report focussing only on the security aspects. At the core of SOC 2, there are five Trust Service Principles (TSPs). AICPA defines these TSPs as follows –
- Security: An organization’s data and systems must be protected against unauthorized access and any action that could compromise confidentiality, integrity, availability, and privacy.
- Availability: An organization’s systems must be available for operations and usages.
- Processing Integrity: An organization’s system must process in a timely, accurate, and authorized manner.
- Confidentiality: An organization’s information designated as confidential must be protected adequately.
- Privacy: An organization must use, retain, disclose, and dispose of any personal information appropriately.
A Type 1 report for SOC 2 is a point-in-time snapshot of your organization’s security controls that are validated by a set of tests to determine whether the controls have been designed appropriately. A Type 2 report for SOC 2 focusses on checking the effectiveness of these security controls over a period of time. You can read more about vulnerability scanning and penetration testing for SOC 2
SOC 1 and SOC 2 Certification
An organization shall pursue SOC 1 certification if its services directly impact the financial reporting of its clients. For example, if your SaaS product processes billing information for your client, then SOC 1 is appropriate. There is another prominent reason why some organizations pursue SOC 1. Without SOC 1 certification, availing “right to audit” can be a time-consuming and costly process for both parties. If an organization is a publicly traded company, then getting SOC 1 certification is a requirement under the Sarbanes-Oxley Act (SOX).
On the other hand, SOC 2 is not mandatorily required by any framework, law, or regulation such as HIPAA, PCI-DSS, etc. However, if your organization processes data in the cloud, other than financial data, then getting a SOC 2 certificate makes sense. Being a service provider, SOC 2 showcases that you have taken reasonable precautions to protect your client’s data.