SOC 3 is a type of audit report that provides assurance to customers, users, and stakeholders about the security controls in place within an organization's systems. It stands for “Systems and Organization Controls” and is designed to provide an independent assessment of the company’s internal policies and procedures related to information security. 

The SOC 3 report is based on the AICPA (American Institute of Certified Public Accountants) Trust Services Principles, which assess five criteria:

• Security
• Availability
• Processing integrity
• Confidentiality
• Privacy

The purpose of this assessment is to demonstrate that a company’s system meets or exceeds industry standards when it comes to protecting data from unauthorized access or misuse. A SOC 3 report can help organizations build trust with their customers as well as maintain compliance with regulatory requirements such as HIPAA or PCI-DSS. 

The SOC 3 audit goes beyond just assessing technical aspects by also looking at non-technical elements, thereby providing a comprehensive view of how secure a business really is. 

In addition to providing assurance around system security controls, SOC 3 also helps identify potential risks so they can be addressed before they become serious issues — unstructured data is a good example. 

Why is SOC 3 compliance important?

By conducting an independent assessment of their controls, organizations can gain clarity on their security posture, identify potential weak points, and make sure they have the necessary safeguards in place to protect sensitive information. 

Compliance with the AICPA Trust Services Principles can also help organizations demonstrate to customers and stakeholders that they take security seriously and provide assurance that their systems are trustworthy. This is particularly important in highly regulated sectors such as healthcare or finance, where proper data protection is essential. Additionally, achieving SOC 3 compliance can potentially open up new markets or customer opportunities, as customers may be more willing to do business with companies that meet these standards.  

Who does SOC 3 compliance apply to?

SOC 3 compliance applies to any organization that stores and processes sensitive customer data, such as financial information, health records, or personally identifiable information. This includes businesses in all industries, including healthcare, finance, retail, and technology. 

If a company is providing services to their customers online such as e-commerce or banking applications, for example, they need to ensure that their systems and processes are in line with industry standards that protect customer data. 

In this case, SOC 3 compliance would be beneficial for the organization as it offers assurance that the security controls in place within its systems meet or exceed industry standards. 

Similarly, organizations in regulated industries such as healthcare or finance must comply with specific regulations related to data protection and privacy. Achieving SOC 3 compliance can help these organizations demonstrate to regulatory authorities that they have taken appropriate measures to protect sensitive information. Additionally, many organizations may have customers who require proof of SOC 3 compliance before doing business with them. 

SOC 3 compliance can provide organizations with an independent assessment of their internal policies and procedures related to information security which can help build trust with their customers as well as maintain compliance with various regulatory requirements.

Do I need SOC 1, SOC 2, or SOC 3? 

SOC 1, SOC 2, and SOC 3 are frameworks from the AICPA that provide guidelines for organizations to assess their internal controls related to information security. The type of framework needed depends on your specific requirements and goals. 

SOC 1 is a framework designed to provide assurance that your organization's internal financial reporting processes are adherent to Generally Accepted Accounting Principles (GAAP). Businesses such as banks and other financial institutions often need SOC 1 compliance in order to demonstrate the accuracy of their financial data for external stakeholders.

SOC 2 is a framework that focuses on non-financial reporting systems such as operational procedures, vendor selection, or personnel management practices. This type of assurance is important for businesses operating in highly regulated industries such as healthcare or finance where sensitivity around customer data must be maintained. SOC 2 compliance demonstrates that appropriate security measures have been implemented to protect sensitive customer information from unauthorized access or misuse. Since SOC 2 compliance is ongoing in nature, you might also seek a bridge letter between audits to demonstrate your commitment to compliance despite not having officially completed your next audit.

SOC 3 provides an assessment of all elements related to your organization's security posture, including technical and non-technical elements. This helps provide a holistic picture of your security posture so potential risks can be identified and addressed before any serious issues occur. Achieving SOC 3 compliance can potentially open up new markets or customer opportunities, as customers may be more willing to do business with your company if it meets these standards. 

It's important to consider your organization’s requirements and decide which framework you need by evaluating their industry sector and target markets. For example, if you operate in a highly regulated industry, you may wish to pursue SOC 2 compliance. If you’re focused on demonstrating the accuracy of your financial data externally, then SOC 1 may be the better option. Each framework offers its own benefits, so it's important to evaluate your needs carefully before selecting the best fit for you. For more information on the difference between SOC 1, SOC 2, and SOC 3, check out our previous blog post.

What is included in a SOC 3 report, and how is a SOC 3 report conducted?

The SOC 3 report assesses the internal controls and measures taken to protect the organization's data and systems from unauthorized access or misuse. The report typically includes a review of the organization's technical elements, such as system configuration, access control measures, and encryption practices, as well as non-technical elements like personnel management practice and training programs.

1. Preparation phase

The auditor requests information from the organization about its policies, procedures, and operations that relate to its security posture. The organization should gather and provide all necessary documents and details that give an insight into their data and system protection strategies.

2. Development of evaluation tests

Using the provided information, the auditor develops detailed tests for evaluating each area under review. These tests are designed to assess both technical and non-technical aspects of the organization's security measures, such as system configuration, access control, encryption practices, personnel management, and training programs.

3. Initial meeting

A formal meeting is held between the auditor and the organization's representatives. During this meeting, the auditor can ask additional questions to gain a better understanding of the organization's internal controls and security measures.

4. Performance of tests

The auditor begins performing their tests. This can involve interviews with key personnel, reviews of security-related documents and records, observations of physical areas where data is stored or transmitted, and testing of system configurations.

5. Feedback and correction

If the auditor notes any discrepancies or weaknesses during the testing process, they communicate these back to the organization. The organization then has an opportunity to correct these issues before the certification can be issued.

6. Completion of tests and corrective actions

The organization implements any necessary corrective actions. Once all tests have been successfully completed and any required corrections made, the process moves to the final stage.

7. Issuance of the SOC 3 report

The auditor issues a formal SOC 3 report. This report outlines the findings from the review and may include recommendations for further improvement. This report provides an independent assessment of the organization's security posture, which can be used to build trust with customers and demonstrate compliance with regulatory authorities.

How can I get a SOC 3 report? 

If you want to obtain a SOC 3 report for your organization, you have two options. You can work with a traditional auditing firm or you can go with a more up-to-date approach. While traditional auditing firms are well-established, their practices and methods tend to be slow and expensive. 

Tech-enabled approaches, like the Strike Graph compliance platform, save time and money by giving you the tools to take a risk-based approach to security and, more broadly, TrustOps. And, Strike Graph provides in-house auditing so you get everything you need in one spot.