SOC 1 and SOC 2: The Key to Choosing Secure Service Providers 

Today’s business landscape is digitally interconnected, so an organization’s security posture depends not only on its own defenses but also on the security measures implemented by its service providers.  

System and Organization Controls (SOC) 1 and 2 reports offer a standardized way to assess the security and reliability of service providers, making them extremely valuable when choosing cloud-based solutions and Software-as-a-Service (SaaS) applications. 

What Do SOC 1 and SOC 2 Reports Tell About Service Providers? 

SOC 1 is designed primarily to address internal controls over financial reporting. This type of report is essential for organizations whose services affect or could affect their clients’ financial reporting. For instance, if a service provider manages payroll processing, transaction handling, or any system that impacts financial statements, a SOC 1 report becomes necessary. 

SOC 2 was created in 2010, and it casts a wider net than SOC 1 by evaluating how organizations manage customer data based on five key principles: 

1. Security: How well is the organization protecting your data from unauthorized access? 

2. Availability: Can you rely on the organization’s systems and services to be up and running when you need them? 

3. Processing Integrity: Are the organization’s systems accurate, timely, and reliable? 

4. Confidentiality: Is your sensitive data kept private? 

5. Privacy: If the organization collects personal information, does it handle the information responsibly? 

SOC 2 reports are particularly relevant for organizations that provide cloud-based services, such as Software-as-a-Service (SaaS) providers because they store, process, and manage often-sensitive customer data and are thus responsible for its protection. 

Both SOC 1 and SOC 2 reports come in two types: 

• Type 1: This report focuses on the design of controls at a specific point in time. It assesses whether the controls are suitably designed to meet specified criteria relevant to financial reporting for SOC 1, or the five trust principles for SOC 2. Essentially, it answers the question: “Are the controls appropriately designed to achieve their objectives on this date?” 

• Type 2: This report goes deeper by not only evaluating the design of the controls but also their operational effectiveness over a specified review period. It provides an assurance about the control’s actual functioning throughout this period, guaranteeing that they operate as intended consistently over time. 

Understanding the Scope of SOC Reports When Choosing a Service Provider  

When selecting a cloud-based service provider, it’s paramount to understand exactly what aspects of the service are covered by SOC 1 and SOC 2 reports. A common misconception is that a SOC certification for a service provider applies universally to all aspects of their service. However, this is often not the case, particularly with SaaS providers. 

In reality, a SaaS vendor’s SOC 2 compliance may only apply to the data center or cloud environment where their product is hosted, such as Microsoft Azure or Amazon AWS, and not to the actual software application itself.  

For the clients of such SaaS vendors, the implications of assuming comprehensive security without verifying specific SOC report coverage can be significant. Data breaches, unauthorized access, and compliance failures could potentially arise from gaps in security that were assumed to be covered under the general umbrella of SOC compliance but were not. 

To determine the true scope of a vendor’s SOC report, we recommend you do the following: 

• Request the full report: Ask the vendor to provide the complete SOC 1 or SOC 2 report, not just a summary or an attestation of compliance. 

• Review the report scope: Carefully review the SOC report to understand what specific services, systems, and processes are covered. Look for any exclusions or limitations in the report’s scope. 

• Ask for clarification: If you’re unsure about the scope of the vendor’s SOC report, don’t hesitate to ask for clarification. A trustworthy vendor should be willing to provide the information you need to make an informed decision. 

• Seek expert guidance: If you lack the internal expertise to thoroughly assess a SOC report, consider engaging a third-party consultant or auditor to assist in reviewing the report and evaluating the vendor’s security posture. 

• Don’t limit yourself to SOC reports: While SOC reports are valuable tools for assessing a vendor’s security posture, they shouldn’t be the only factor in your decision-making process. You can also explore other relevant certifications and frameworks, such as ISO 27001, NIST, HIPAA, or CMMC, depending on your industry and specific needs.  

By taking the time to verify the scope of SOC reports, you can make an informed decision about available service providers and maintain a strong security posture in an increasingly complex and interconnected digital landscape. 

Conclusion  

Choosing the right service provider is a critical decision for any organization, and SOC 1 and SOC 2 reports are useful tools for assessing the security posture of potential vendors. However, it’s crucial to understand that not all SOC reports are created equal. To make an informed decision, you must dig deeper into the scope of these reports and verify that they really cover what they seem to cover.  

If you need assistance in selecting reliable cloud service providers and integrating them into your existing infrastructure, OSIbeyond is here to help. Our team of experts can guide you through the process of evaluating SOC reports, assessing vendor security, and implementing solutions that align with your organization’s unique needs and goals.