As companies race to win customer trust in a time of growing cyber threats, one thing is clear: proving data security is no longer a “nice to have" in your offering.
For businesses managing sensitive data, like SaaS providers, financial services, and healthcare companies, the decision between becoming compliant or not, is about showing how trustworthy your product/services is.
SOC 2 reports provide a detailed breakdown of your security controls for clients who need to know you’ve got it all covered.
On the other hand, SOC 3 reports offer a simplified, public-facing snapshot that reassures the broader market without revealing all your internal secrets.
So, what exactly are the differences between these two reports? Let’s find out.
What is a SOC 2 Report?
A SOC 2 report is an essential document for companies that store or process sensitive customer data. It provides a detailed evaluation of a company’s internal controls related to security, availability, processing integrity, confidentiality, and privacy, collectively known as the Trust Services Criteria (TSC).
These criteria were established by the American Institute of Certified Public Accountants (AICPA) to ensure service organizations have proper safeguards in place to protect data.
When conducting attestation engagements, the auditors follow the SSAE No. 18 AT-C section 315 guidelines to ensure that a service organization meets the criteria.
An attest engagement is when a CPA in public practice is hired to provide an examination, review, compilation, or agreed-upon procedures report on information or claims that are the responsibility of another party.
To get the full picture of what the Trust Services Criteria is all about, read our blog post: “SOC 2 controls: Your Roadmap to Compliance”.
Key Components of a SOC 2 Report
The SOC 2 report includes several critical components.
- First, it provides a Company Overview that describes the services offered, the scope of the report, and the systems evaluated.
- Next, the System and Services Description offers a detailed view of the infrastructure, software, people, procedures, and data that make up the company’s systems.
- The report also includes a thorough Trust Services Criteria Evaluation, analyzing how well the company’s controls meet these criteria and whether they are effective in safeguarding data.
- The Controls and Testing Results section documents the specific controls in place and presents the findings from the auditor’s testing.
- Finally, the Auditor's Opinion provides a professional judgment on whether the controls are designed appropriately and are operating effectively.
SOC 2 compliance is crucial for companies across various sectors, such as cloud computing, SaaS, data centers, healthcare, and finance. In these industries, clients demand proof of robust data security measures.
For instance, a SaaS provider managing customer data must demonstrate effective security protocols to prevent data breaches. Without this assurance, customers may lose trust, which can lead to a significant loss of potential users.
What are the Different SOC 2 Reports?
There are two types of SOC 2 reports: Type I and Type II.
A Type I report assesses the design of a company’s controls at a specific point in time, while a Type II report evaluates the effectiveness of those controls over a more extended period, generally ranging from three months to a year.
Type II reports are particularly valuable because they demonstrate sustained compliance, not just a momentary snapshot.
We actually have an article on SOC 2 Type II reports, which will give you a complete understanding of what these reports are about, how you could benefit from them, and all else necessary!
What Are the Benefits of Becoming SOC 2 Compliant?
By becoming SOC 2 compliant, companies not only protect themselves against data breaches and unauthorized access but also build trust with their clients.
Without SOC 2 compliance, a business risks exposure to security threats, loss of client confidence, missed business opportunities, and potential legal repercussions.
The 2017 Equifax data breach, which affected millions and resulted in severe financial penalties and lasting reputational damage, is a prime example of the importance of data security.
SOC 2 compliance helps prevent such incidents by ensuring robust controls are in place.
At this point it's obvious that the ROI on becoming SOC 2 compliant is massive!
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What is a SOC 3 Report?
While SOC 2 reports provide an in-depth evaluation of a company's internal controls, SOC 3 reports serve a different purpose.
A SOC 3 report is essentially a public summary of a SOC 2 report, designed for a broader audience.
It highlights that a company meets the Trust Services Criteria (TSC) without going into the technical details that a SOC 2 report would cover.
The simplified nature of a SOC 3 report makes it particularly effective for marketing and public relations. Companies can use it to demonstrate their commitment to data security without disclosing sensitive or proprietary information.
Who are SOC 3 Reports For?
This is especially useful for organizations looking to establish trust and credibility with a wider audience.
Cloud service providers, e-commerce platforms, and financial services often utilize SOC 3 reports to showcase their adherence to security and privacy best practices and to differentiate themselves in competitive markets.
They are ideal for companies that want to provide transparency and build trust with the general public.
By offering a high-level overview of their compliance with security standards, organizations can reassure their customers without exposing the inner workings of their internal controls.
SOC 2 vs. SOC 3: Key Differences Explained
Understanding the differences between SOC 2 and SOC 3 reports is crucial when deciding which one to present to your client or partner.
Here are the key distinctions:
Depth of Information
- SOC 2: Provides a detailed, comprehensive evaluation of a company’s internal controls.
- SOC 3: Offers a high-level summary without detailed technical insights.
Intended Audience
- SOC 2: Designed for internal stakeholders, partners, and clients who need an in-depth understanding of the organization’s security practices.
- SOC 3: Aimed at a general public audience to build trust without revealing specific control mechanisms.
Usage and Purpose
- SOC 2: Used to provide detailed evidence of compliance for business partners, clients, and regulators.
- SOC 3: Serves as a marketing tool to demonstrate compliance and commitment to security without sharing sensitive details.
Accessibility and Distribution
- SOC 2: Restricted distribution, only available to specific stakeholders to protect sensitive information.
- SOC 3: Publicly accessible, freely distributed to demonstrate transparency to a broader audience.
The SOC 2 and SOC 3 Report Creation Process
Creating a SOC report involves specific steps, each with its own requirements and purposes. Here’s a breakdown of the processes for SOC 2 and SOC 3 reports:
SOC 2 Report Creation Process
Step 1:
Engage an independent third-party auditor, usually a Certified Public Accountant (CPA) specializing in IT systems.
Step 2:
Conduct a readiness assessment to identify any gaps or deficiencies in current controls.
Step 3:
Remediate any identified issues to ensure controls meet the Trust Services Criteria (TSC).
Step 4:
Undergo a formal SOC 2 audit. This can be either:
- Type I: Focuses on the design of controls at a specific point in time.
- Type II: Evaluates the operating effectiveness of those controls over a period (usually 3-12 months).
Step 5:
Receive the auditor’s report detailing the findings and conclusions regarding SOC 2 compliance.
SOC 3 Report Creation Process
Step 1:
Complete a SOC 2 audit, as SOC 3 reports are derived from SOC 2 findings.
Step 2:
Summarize the SOC 2 report into a more accessible format, focusing on high-level compliance rather than detailed controls.
Step 3:
Publish the SOC 3 report to make it available to the public, often for marketing and public relations purposes.
Deciding Between SOC 2 and SOC 3 Reports
Deciding which report to present depends on several factors.
If your objective is to provide detailed compliance evidence to specific stakeholders, a SOC 2 report is the right choice.
However, if the goal is to offer public assurance without delving into detailed information, a SOC 3 report would be more appropriate.
Understanding your audience is also critical.
If stakeholders need in-depth information about your controls and compliance, SOC 2 is the better fit.
On the other hand, SOC 3 is perfect for a broader audience that seeks general reassurance of your commitment to data security.
Additionally, consider any regulatory requirements your organization must meet. Some industries have specific standards that necessitate a SOC 2 report to prove that adequate data protection measures are in place.
Also, evaluate how much detail your company is comfortable sharing. If transparency is a priority and the goal is to enhance public trust, SOC 3 reports can be a great tool for marketing and public relations.
All in all, data breaches and losing a bunch of money isn’t easy, so isn’t the SOC 2 compliance process and dealing with stakeholders…
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Pros and Cons of SOC 2 and SOC 3 Reports
According to the Identity Theft Resource Center 2023 data breach report, there were 2,365 data breaches in 2023.
Also, within the report findings, there was a 72% increase in data breaches from 2021 to 2023.
With so many cyberattacks happening every year, it would be wise to demonstrate that your systems are effective in protecting personal data.
To decide which report is best to present to a client or partner, it’s helpful to weigh the pros and cons of each type:
SOC 2 Reports:
Pros:
- Provides a detailed and comprehensive overview of the company’s internal controls.
- Builds trust with clients, partners, and stakeholders who require thorough security evidence.
- Often required for regulatory compliance in certain industries.
Cons:
- The detailed nature limits its distribution, making it accessible only to specific stakeholders.
- Can be costly and time-consuming to prepare, requiring significant internal resources.
SOC 3 Reports:
Pros:
- Publicly accessible and can be a powerful marketing tool to build trust with a broader audience.
- Less detailed, making it easier and quicker to prepare.
- Demonstrates adherence to the Trust Services Criteria without disclosing sensitive information.
Cons:
- Lacks the depth and technical specifics that some clients or regulatory bodies may require.
- May not be sufficient for partners or clients who need detailed proof of compliance.
By evaluating these pros and cons, you can better determine which report aligns with your organizational goals and stakeholder needs.
Streamline Your SOC 2 Compliance with EasyAudit
Now that you have a concrete understanding of each report, you can make the right decision on which one of these to present to your clients and partners.
But take into consideration that a SOC 2 report must be written in order to prepare a SOC 3 report. Meaning you’ll have to go through the SOC 2 compliance process regardless of which report you decide to present…
Fortunately for you, that’s what we do best! With EasyAudit’s software you can start closing big boy deals quicker and for half the cost, compared to what it would take you with any other compliance firm.
How you might ask?
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And if you want to talk to an expert to learn more, you can book a call here.
But as they say “the early bird catches the worm”, the same goes for making deals with the companies you desire. Therefore if you want a better shot at closing those deals, it would be wise to begin the SOC 2 compliance process as soon as possible!
Frequently Asked Questions (FAQs)
- What are the main differences between SOC 2 Type I and Type II?
Type I evaluates the design of controls at a specific point in time, while Type II assesses the effectiveness of those controls over a period, providing a more comprehensive picture.
- Is SOC 2 equivalent to ISO 27001?
A: No, SOC 2 is specific to service organizations’ internal controls, whereas ISO 27001 is an international standard for information security management systems that applies more broadly.
- Can an organization have both SOC 2 and SOC 3 reports?
A: Yes, an organization can have both. SOC 2 is for detailed internal assessments, while SOC 3 serves as a public-facing summary, catering to different audiences.
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