TL;DR
System and Organization Controls Type 2 (SOC 2) is the benchmark compliance standard for SaaS providers. Earning this certification requires an independent audit of five trust criteria — security, availability, confidentiality, privacy, and processing integrity — conducted over a minimum six-month period. Unlike the point-in-time snapshot of a Type 1 report, Type 2 demonstrates how well your systems actually perform over time, giving clients meaningful, reliable assurance that your organization handles their data responsibly.
What is SOC 2?
The SOC in SOC 2 stands for "system and organization controls." If the term seems confusing, substitute the word "standards" for controls. In a SOC 2 audit, an independent company ensures you're following recognized standards to protect data and information.
When your potential clients shop for SaaS vendor partners, they assess risk. How likely is it that you'll cause a data-based problem? A SOC 2 audit helps you ease those concerns.
During a SOC 2 compliance audit, your company demonstrates the ability to manage data securely. In other words, you will prove to an auditor that you have the right systems and safeguards in place, and you'll have certification you can show to current and future clients.
SOC 2 compliance is considered critical for SaaS (software as a service) providers. Companies like this handle a great deal of client data, and most can change the information they touch. SOC 2 compliance proves customers can trust you.
Two types of SOC 2 reports exist:
- Type 1: You describe how your systems are designed. An auditor either agrees or disagrees with your description. Your auditor looks at just one point in time.
- Type 2: You describe how your systems are designed. An auditor determines how well they work over a specified period lasting six months or longer. Your clients get more detailed assurances with this report.
These reports are typically conducted annually. The report framework was developed by the American Institute of Certified Public Accountants (AICPA), which says the report audience includes a broad range of people. In essence, anyone who needs detailed information about your security controls could need your SOC 2 reports.
5 SOC 2 certification factors
Auditors don't look over anything they want to during a SOC 2 audit. Instead, they work off a recognized checklist.
Your auditors will examine these aspects of your business:
- Availability: How often are your servers online for your customers? How do you recover from a disaster? How quickly do you detect an incident?
- Confidentiality: How do you protect data? What protocols do you use concerning encryption and authentication?
- Privacy: How do you ensure the right people can see data? Do you use encryption or two-factor authentication?
- Processing: How do you perform quality assurance? How often do you monitor your functions?
- Security: What do you do to keep data safe?
Some tools, including firewalls and two-factor authentication, play multiple roles here. Strong solutions could help you check off multiple items from this checklist.
Every company has a unique report, as your controls may differ from those a neighbor uses. But auditors tend to look for the same types of things as they work.
What other SOC reports should you know about?
A SOC 2, Type 2 report is considered the gold standard for SaaS companies. Move through this process, and you have strong proof that you protect client data. But other SOC reports do exist.
| Report Type | Focus Area | Best For |
|---|---|---|
| SOC 1 | Financial information | Organizations that handle money and can alter that data |
| SOC 2 | Data security and protection (security, availability, confidentiality, privacy, processing integrity) | SaaS companies requiring the gold standard of client data protection assurance |
| SOC 3 | Simplified data security (smaller data burden) | Organizations in less stringent regulatory environments |
SOC 2: SOC for Service Organizations. Trust Services Criteria. AICPA.
Frequently asked questions
What is the difference between System and Organization Controls (SOC) Type 1 and Type 2?
A Type 1 report evaluates how your systems are designed at a single point in time, while a Type 2 report assesses how effectively those systems operate over a defined period of at least six months. Type 2 provides clients with more detailed and reliable assurances about your data protection practices.
Why is System and Organization Controls Type 2 (SOC 2) compliance especially important for SaaS companies?
SaaS providers handle large volumes of client data and often have the ability to modify that data. SOC 2 compliance demonstrates to customers that the organization has the right systems and safeguards in place to manage that data securely and responsibly.
What are the five trust criteria examined in a System and Organization Controls Type 2 (SOC 2) audit?
Auditors evaluate five areas: security (keeping data safe), availability (server uptime and disaster recovery), confidentiality (data protection protocols), privacy (ensuring only authorized access), and processing integrity (quality assurance and monitoring).
How often do System and Organization Controls Type 2 (SOC 2) audits need to be conducted?
SOC 2 reports are typically conducted on an annual basis, giving organizations a regular cadence for demonstrating their ongoing commitment to data security standards.
What is the difference between System and Organization Controls Type 2 (SOC 2) and System and Organization Controls Type 3 (SOC 3) reports?
SOC 3 reports are simplified versions of SOC 2 reports, carrying a smaller data burden and generally being shorter and easier to complete. They may be appropriate for organizations operating in less stringent regulatory environments, whereas SOC 2 Type 2 is considered the gold standard for SaaS companies.
Who developed the System and Organization Controls Type 2 (SOC 2) framework and who uses these reports?
The SOC 2 report framework was developed by the American Institute of Certified Public Accountants (AICPA). The intended audience is broad — essentially anyone who requires detailed information about an organization's security controls, including current and prospective clients.
