Summary: SOC 2 Framework for service organizations is crucial for safeguarding confidential and sensitive information. It mandates data destruction over the information retention period to ensure data privacy. By following SOC 2 compliance organizations can strengthen their data management policies, and internal controls to gain a competitive edge. In this blog, we will discover what Section C1.2 and Section P4.3 of the 2017 Trust Services Criteria say about the disposal and destruction of personal information to plan better for SOC audit..
SOC (Service Organization Controls) is a framework for service-provider organizations designed by the American Institute of Certified Public Accountants (AICPA) to audit & validate service-providing company controls. This framework assesses and reports on the internal controls, security, and privacy practices of service organizations. SOC audits are performed by independent CPAs (Certified Public Accountants) or accounting firms. Primarily there are four main types of SOC audits and reports with their own subsets which validates the service organization’s commitment to secure and effective operations.
SOC 1® – SOC for Service Organization: ICFR
Any business that relies on outsourced services relevant to the company’s (user entity) financial reporting needs a SOC 1 report. The clients and stakeholders of the service organization get guaranteed proof regarding the effectiveness of the internal controls implemented by the business. The SOC 1 reports are audited by independent auditors who verify the design and operational effectiveness of controls around financial reporting.
SOC 2® – SOC for Service Organizations: Trust Services Criteria
SOC 2 reports fetch comprehensive information to service organization management, user entities, business partners, and other concerned parties regarding the service organization’s controls related to security, availability, processing integrity, confidentiality, and privacy. These are unique for each organization and it aims to help service organizations mitigate data privacy and cybersecurity threats. Through SOC 2 reports, service organizations can evaluate their internal control systems and demonstrate their commitment to protecting their client’s and stakeholders’ sensitive data.
SOC 3® – SOC for Service Organizations: Trust Services Criteria for General Use Report
SOC 3 reports are available for free distribution. These reports are accessible to anybody and provide a condensed summary of the detailed information shared in SOC 2 reports w.r.t security, availability, processing integrity, confidentiality, or privacy. Those organizations that want to give assurance to customers about their commitment to security and compliance without divulging comprehensive technical details can leverage the benefit of these reports.
Most organizations pursue these reports because of strong client demand for tangible evidence that their sensitive data is safe.
In the context of data privacy and security, SOC 2 lays down the importance of data destruction under its “Confidentiality and Privacy” principle to ensure the data privacy of the organization’s customers is maintained. An organization can selectively apply for SOC 1, SOC 2, or SOC 3 compliance. For technology-related services, cloud services, data centers, software-as-a-service (SaaS) solutions, and other services that involve the handling of sensitive data SOC 2 Compliance is suggested. Let’s delve further and understand how to remain SOC 2 compliant.
How does SOC 2 help maintain Data Privacy and Security?
Compliance frameworks like SOC 2 have emerged as the gold standard for assessing and assuring the effectiveness of an organization’s security, availability, processing integrity, confidentiality, and privacy controls. Through this compliance, security-conscious organizations demonstrate their zero-tolerance approach towards poor data privacy and security measures and prove they are trustworthy entities prioritizing client privacy.
These reports play a crucial role in:
● Helping organizations maintain an effective oversight over their operational controls and security measures
● Strengthen vendor management programs
● Assessing and enhancing internal corporate governance and risk management processes
● Meeting regulatory requirements to fulfill the organization’s commitment to data protection and information security
SOC 2 comprises two distinct types of reports – Type 1 and Type 2.
The Type 1 report evaluates the management’s system description and the adequacy of its control design. There is no continuous monitoring period for the Type 1 reports. However, The Type 2 report shares a scrutinized assessment of both the design and operating efficiency of a service organization’s system control. There is an observation period of 3 to 6 months before applying for a Type 2 audit. Both reports empower organizations and their stakeholders with crucial insights into the security measures and practices adopted by service providers, however, their use is restricted to the management of the service organization, user entities, and user auditors.
Compliance Requirement for SOC 2:
The SOC 2 compliance focuses on the 5 Trust Services Category to assess how service-providing organizations safeguard sensitive data. The 2017 Trust Services Criteria (With Revised Points of Focus – 2022) encompasses and cites five key principles—security, availability, processing integrity, confidentiality, and privacy—to evaluate an organization on robust data management practices relevant to their overall objective. However, organizations don’t need to implement all five principles. Based on the nature of their business operations and regulatory requirements, service organizations can decide which Trust Service Category they would want to deploy.
The five trust services criteria are classified into the following categories:
It refers to shielding information during its collection or creation, use, processing, transmission, and storage against unauthorized access, data breaches, and cyber threats by strengthening IT infrastructure security measures, like firewalls, and two-factor authentication.
It ensures that the customers can access and use data and services as required to meet their objectives. The availability principle confirms that the system has specific controls in place to facilitate seamless access for operational tasks, monitoring processes, and maintenance activities.
3. Processing Integrity
This principle verifies data processing and ensures it is accurate, complete, and reliable, that it is free from accidental or unauthorized data manipulation or errors ensuring the integrity of critical business operations.
Under this principle, sensitive information is protected throughout the data lifecycle journey and destroyed when the retention period is over i.e. from its collection or creation through its final disposition and erasure per management’s objectives. Section C1.2 of the 2017 Trust Services Criteria (With Revised Points of Focus – 2022) document highlights two important characteristics related to data erasure and destruction as quoted below:
- “Identifies Confidential Information for Destruction — Procedures are in place to identify confidential information requiring destruction when the end of the retention period is reached.”
- “Destroys Confidential Information — Policies and procedures are in place to automatically or manually erase or otherwise destroy confidential information that has been identified for destruction.”
This criterion focuses on the collection, use, retention, disclosure, and disposal of personal information, complying with privacy laws, and respecting individuals’ rights, fostering transparency and customer confidence. Section P4.3 of the 2017 Trust Services Criteria (With Revised Points of Focus – 2022) document highlights three important characteristics related to the disposal of personal information as quoted below:
- “Captures, Identifies, and Flags Requests for Deletion [P][C] — Requests for deletion of personal information are captured and information related to the requests is identified and flagged for destruction to support the achievement of the entity’s objectives related to privacy.”
- “Disposes of, Destroys, and Redacts Personal Information [P][C] — Personal information no longer retained is anonymized, disposed of, or destroyed in a manner that prevents loss, theft, misuse, or unauthorized access.”
- “Destroys Personal Information [P][C] — Policies and procedures are implemented to erase or otherwise destroy personal information that has been identified for destruction.”
Who Should Attain SOC 2 Compliance?
As mentioned above, any SaaS company or technology provider (like third-party service providers, data centers, or payment processors) that stores, processes and transmit customer data can voluntarily opt to achieve SOC 2 compliance when demanded by their customer. Moreover, partners, prospects, compliance supervisors, external auditors of the audited firms, or support organizations engaged with these firms must also uphold SOC 2 compliance to guarantee the security and reliability of their data systems and protective measures.
Why Organizations Need to Prioritize SOC 2 Compliance?
Prioritizing SOC 2 compliance is a strategic decision that ensures transparency in the company’s information security measures and validates that it is in line with the evolving data protection requirements. Let’s see some key pointers why each organization must embrace SOC 2 compliance for their competitive advantage:
- Enhanced Risk Management: The SOC audit highlights the flaws and weaknesses in the organization’s system, alerting them about the threats and the necessary data security practices that need to be implemented. SOC 2 compliance helps in recognizing shortcomings and reducing the likelihood of security incidents, data breaches, and other operational risks. For Example, Equifax, one of the largest consumer credit reporting agencies in the US suffered a massive data breach exposing the personal information of approximately 143 million consumers. It could have identified the security vulnerabilities within its systems through SOC compliance. The compliance could have helped such an organization to rectify and patch its flaws to prevent the data breach incident.
- Internal Controls and Efficiency: With SOC 2 compliance the service organization would know what the internal controls related to various operations look like. SOC provides visibility into the areas for improvement, documents system configuration changes, and monitors the access and controls of users. Overall, the SOC compliance framework gives a detailed view of internal controls and gives valuable insights for optimizing operations.
- Customer Trust and Third-Party Assurance: SOC 2 compliance, assures the company’s customers that the service organization takes data security and privacy seriously, enhancing their confidence. The audit verifies that the organization has implemented appropriate controls to protect data, minimizing the need for separate customer or partner assessments.
- Competitive Advantage with SOC Seal of Guarantee: Organizations, particularly those in the technology, cloud services, and SaaS industries, prefer that their service providers have robust information security practices in place. SOC 2 compliance is a seal of guarantee that the chosen service providers prioritize security and data protection giving them a competitive edge.
But, how can an organization leverage these benefits? How can they meet the requirements of a SOC audit? Let’s find out!
Things to Keep in Mind For a SOC Audit?
Preparing for a SOC 2 audit involves meticulous planning, eye-on details, a holistic overview of the organization’s business processes, and security and compliance arrangements. Below are some steps through which organizations can enhance their readiness for a SOC 2 audit:
- Get familiarized with the SOC 2 Framework: Understand the requirements and principles well to be on track with the scope of the audit and implement desired controls.
- Identify Applicable Trust Service Criteria (TSC): Carefully evaluate the nature of the business and the services offered to identify which of the five trust service criteria (security, availability, processing integrity, confidentiality, and privacy) is relevant to the organization.
- Develop Policies and Procedures: Prepare policies, procedures, and guidelines that align with the trust service criteria. Consider areas like access control, incident response, change management, data classification, and vendor management to conduct regular audits for identifying issues of non-compliance before an official audit.
- Deploy Security Controls and Conduct routine Gap Analysis: Implement security safeguards like access controls, network security, encryption, logging and monitoring, and vulnerability management. Train employees to prepare for the audit. Do a comprehensive evaluation of the immediate measures and document the gaps for improvement to meet compliance requirements.
- Evaluate Vendor Security Measures: To achieve SOC 2 Compliance it is necessary that the service organization’s third-party vendors also satisfy security requirements. Adopt strong vendor management processes and contractual agreements.
Data Privacy and Confidentiality: Enforce rigorous measures to protect the privacy and confidentiality of sensitive data. This includes data classification, data handling procedures, data access controls, encryption, and data erasure.
How Data Erasure Helps in Achieving SOC 2 Compliance?
For SOC 2 audit, the Trust Service Criteria of Confidentiality and Privacy are important categories on which the certification depends. Section C1.2 (Page 52) of the Confidentiality Principle and Section P4.3 (Page 61) of the Privacy Principle in 2017 Trust Services Criteria (With Revised Points of Focus – 2022) document clearly mentions disposing of, and permanently destroying sensitive information to prevent the loss, theft, misuse, or unauthorized access of this data. For organizations operating on these principles, using data-wiping software like BitRaser to permanently erase data from storage devices can help them strengthen data privacy and meet the requirements of these principles. The erasure reports and certificate showcase the service
How is SOC 2 compliance different from SOC 1 or SOC 3 compliance?
SOC 2 compliance fetches comprehensive information regarding the service organization's controls related to security, availability, processing integrity, confidentiality, and privacy. Whereas, SOC 1 is for financial reporting controls, and SOC 3 provides a condensed summary of the detailed information shared in SOC 2.
Who must prioritize SOC 2 compliance?
Any SaaS company or technology provider (like third-party service providers, data centers or payment processors) that stores, processes and transmit customer data should achieve SOC 2 compliance. Additionally, the partners, prospects, compliance supervisors, external auditors of the audited firms or support organizations engaged with these firms must also uphold SOC 2 compliance.
Is SOC 2 compliance mandatory?
SOC 2 compliance is not mandatory, however service providers can voluntarily opt for SOC 2 compliance to demonstrate their commitment to protecting data privacy of their customer's information & meeting regulatory requirements. It is considered reliable and trustworthy by businesses.
Is there any difference between SOC 2 compliance and ISO 27001?
Both frameworks are quite similar in nature, but SOC 2 compliance is preferred over ISO certifications in the United States. The ISO 27001 certification carries more weight in the European market. However, the SOC 2 reports do not expire; organizations typically need a new report every year, but an ISO certification remains valid for at least 3 years.