What is SOC 2: Meaning, Importance, SOC 2 Reports, Benefits, System and Organization Controls

This article explains what SOC 2 is and outlines the types of SOC 2 reports, their purpose, and contents. It also discusses report validity, who needs SOC 2, what to do after an audit, how SOC 2 reduces cybersecurity risks, whether it’s mandatory, risks of non-compliance, and offers a checklist to guide organizations in achieving and maintaining SOC 2 compliance. 

What is SOC 2?

In cybersecurity, SOC stands for Security Operations Center. Designed by the American Institute of Certified Public Accountants (AICPA), SOC 2 is a compliance framework that evaluates how well a company implements and manages controls based on the Trust Services Criteria: security, availability, processing integrity, confidentiality, and privacy. With the rise of SOC as a Service offerings, organizations can now streamline their compliance journey using expert-managed solutions that monitor, manage, and maintain their security posture in real time. Many businesses also rely on external SOC services to ensure continuous monitoring, threat detection, and incident response without the heavy investment of building internal security operations. It is a centralized team or facility responsible for monitoring, detecting, investigating, and responding to cybersecurity threats in real time. 

What are SOC 2 reports?

SOC 2 reports are essential for service organizations that store, process, or transmit customer information, particularly in cloud-based environments. A SOC 2 audit evaluates how effectively an organization’s systems and processes align with compliance requirements, offering stakeholders transparency and assurance. The average cost of a data breach in 2023 was $4.45 million, and SOC 2-aligned companies experience 40% fewer security incidents due to enforced control systems as per Gartner Research, 2023 Vendor Risk Management Report. 

There are two main types of SOC 2 reports: 

1. SOC 2 Type I assesses the design of controls at a specific point in time—essential for organizations in the early stages of SOC 2 readiness. 
2. SOC 2 Type II evaluates the operational effectiveness of those controls over a defined period, making it more valuable for long-term trust and vendor partnerships. 72% reported enhanced customer trust and sales conversions after achieving Type II compliance. 

Key characteristics of SOC 2 reports: 

• Tailored to each service organization based on its systems, services, and risks 
• Issued by independent CPAs through a defined SOC 2 audit process 
• Central to vendor due diligence, especially in industries where data security and compliance requirements are non-negotiable 
• Often compared against SOC 1 and SOC 3, though SOC 2 uniquely focuses on trust principles rather than financial reporting. 

What is the purpose of SOC 2?

The SOC 2 framework serves the following primary purposes: 

• SOC 2 helps service organizations prove they manage customer data securely by aligning with the five Trust Services Criteria: security, availability, processing integrity, confidentiality, and privacy. 
• It provides a formal SOC 2 report, issued after a third-party audit, that demonstrates compliance with the SOC 2 framework and reassures clients of your security posture. 
• SOC 2 compliance is a key differentiator in B2B partnerships, especially for SaaS and cloud providers handling sensitive data. 
• The framework supports both Type 1 and Type 2 audits, allowing companies to validate control design and operational effectiveness over time. Asana pursued SOC 2 Type II compliance to prove that their cloud-based project management software met rigorous security and privacy requirements to win over clients like NASA and SALESFORCE. 
• Beyond meeting audit requirements, SOC 2 builds long-term credibility, aligning security practices with client expectations and industry compliance standards. 

What does a SOC 2 report include?

A SOC 2 report provides a comprehensive evaluation of your internal control environment. Its contents typically include: 

• Management’s description of the service organization’s system 
• The scope and objectives of the SOC 2 audit 
• Details of controls in place to meet the Trust Services Criteria 
• Auditor’s opinion on the design (Type 1) or operating effectiveness (Type 2) of controls 
• Any deviations or exceptions found during the audit 
• Appendices with testing procedures and results 

How long is a SOC 2 report valid?

SOC 2 reports typically cover a reporting period of 6 to 12 months, especially for Type 2 audits. However, their relevance is tied to the time period they assess. Most organizations are expected to undergo a SOC 2 audit annually to maintain trust and compliance continuity. Stakeholders often consider a report older than 12 months to be outdated, especially in industries where data security is a continuous concern. 

Who needs a SOC 2 report?

Organizations that store, process, or transmit customer data—particularly SaaS providers, cloud service providers, and managed IT companies—typically need a SOC 2 report to meet client demands and regulatory expectations. 

B2B companies often request this documentation as part of vendor due diligence. Achieving SOC 2 compliance assures clients that your systems adhere to strict security and compliance controls, making it a competitive advantage for service providers aiming to grow enterprise relationships. Partnering with a trusted SOC provider can streamline the audit process and ensure all Trust Services Criteria are properly addressed. To support high-volume sellers that deal with sensitive customer payment data and integrations, Shopify Plus adheres to both PCI DSS and SOC 2 compliance.  

What should you do with your final SOC 2 report?

Once your SOC 2 audit is complete, the final report should be: 

• Stored securely, as it contains detailed system descriptions and control data 
• Shared selectively with stakeholders under NDA, to avoid exposure of sensitive details 
• Used proactively in your compliance documentation, sales enablement, and partnership discussions 
• Reviewed internally, to plan improvements for future audits and address any control exceptions 
• Monitored for expiration, as part of your broader compliance program to ensure ongoing alignment with the SOC 2 compliance framework. 

How does SOC 2 reduce cybersecurity risks?

By following the SOC 2 framework, companies establish a repeatable, measurable process for: 

• Identifying and mitigating vulnerabilities 
• Implementing and maintaining security controls 
• Ensuring continuity through processing integrity and availability 
• Enhancing overall information security management 

Is SOC 2 mandatory for B2B companies?

SOC 2 compliance is not legally mandatory, but it is often a contractual or procurement requirement in B2B relationships. If you're a service organization handling client data—especially in finance, healthcare, or technology—clients may require a SOC 2 audit report before doing business with you. In many cases, SOC 2 compliance becomes a de facto standard for securing and retaining enterprise customers. 

What are the risks of not being SOC 2 compliant?

Without SOC 2 compliance, a service organization risks: 

• Losing B2B opportunities due to missing procurement or vendor compliance requirements 
• Data breaches or non-compliance incidents that could lead to fines, legal action, or reputational damage 
• Operational inefficiencies and audit failures, especially when scaling without proper security controls 
• Lagging behind competitors who are already aligned with SOC 2 compliance requirements 

What is SOC 2 compliance checklist? 

A SOC 2 compliance checklist outlines the key steps a service organization must follow to meet the Trust Services Criteria set by the AICPA, including security, availability, processing integrity, confidentiality, and privacy. It typically includes defining the audit scope, documenting policies and procedures, implementing SOC 2 controls, and conducting a readiness assessment. This checklist helps ensure organizations are prepared for the SOC 2 audit and can maintain ongoing compliance.