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SOC 3 (System and Organization Controls 3)

By Nick Barney

What is SOC 3 (System and Organization Controls 3)?

A System and Organization Controls 3 (SOC 3) report outlines information related to a service organization's internal controls for security, availability, processing integrity, confidentiality and privacy. These five areas are the focuses of the American Institute of Certified Public Accountants' (AICPA) Trust Services Criteria (TSC).

SOC 3 reports are public and part of the voluntary SOC compliance reports, which includes SOC 2 and SOC 1 financial reporting audits as well.

User entities or potential clients of an organization most often request a SOC 3 audit. Businesses that offer software as a service, cloud computing or data center storage -- or ones that handle sensitive customer data or personal data -- are more likely to have a compliance audit done. They are conducted by a certified public accountant (CPA) or an accredited third-party auditor.

SOC 3 audits provide a high-level overview of an organization's controls and security risks designed for a general audience. Because of this, organizations hire CPA firms to do the audits and reports, and they often post the results on their websites and distribute them through marketing campaigns to show clients they take data security seriously.

Tech companies most often need these reports. However, many other industries require similar regulatory compliance; companies in industries such as finance, healthcare, e-commerce and government also use SOC 3 reports.

Why is SOC 3 compliance important?

SOC 3 compliance is important for the following reasons:

SOC 2 vs. SOC 3: What are the differences?

SOC 2 and SOC 3 audits are similar in many ways. Both are conducted by third-party auditors and evaluate a service organization's controls and security risks for customer data security and availability. Both of them also are based on the AICPA's TSC standards and include an auditor's approval of compliance. However, there are several differences between them as well.

SOC 2

SOC 2 audits have the following characteristics:

SOC 3

Soc 3 audits have the following characteristics:

Differences between SOC 2 and SOC 3
SOC 2 SOC 3

A detailed look at an organization's controls

High-level overview showing a company's controls

Restricted-use report only for the organization and client requesting it

General-use reports for public distribution

Type I or Type II reports

Type II report

Has confidential information about the organization's security processes

Has no confidential information

Includes the auditor's report and list of controls used in the testing

Does not include auditor's report or list of controls

Who does SOC 3 compliance apply to?

SOC 3 compliance generally applies to any service provider. Though SOC 3 compliance is voluntary, it is useful for all businesses and other organizations that handle sensitive customer data and want to prove compliance with strong industry standards.

The types of organizations most likely to seek out SOC 3 compliance include the following:

SOC 3 audit process

The following four steps are part of a SOC 3 audit process:

  1. Auditor. The first step in conducting a SOC 3 audit is to hire an auditor, usually a CPA firm certified by the AICPA.
  2. Assessment. The auditor evaluates the effectiveness of a service organization's security controls and risk management program based on the AICPA's TSC standards. This process can include on-site inspections, systems testing, interviews with employees, document requests and review of documentation. The controls and policies an auditor evaluates often include security protocols, such as encryption, access controls, disaster recovery, intrusion detection, multifactor authentication, firewalls, structured and unstructured data protection, and performance monitoring.
  3. Attestation report. Once the evaluation is complete, the auditor prepares an attestation report that summarizes the results of the assessment, containing only information that can be publicly disclosed. The auditor issues a statement of assurance, stating that the organization has met the standards of data confidentiality, access and integrity.
  4. Publication. An organization is free to post its SOC 3 audit report on its website or include it in marketing or advertising campaigns.

SOC 3 compliance best practices

There are several best practices service organizations can follow to ensure they pass a SOC 3 audit:

SOC 3 is all about assessing the effectiveness of an organization's data security compliance. Learn about the 10 key elements of data compliance regulations.

08 Feb 2023

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