A Detailed History of SOC 2 Compliance

Security threats do not only come from bad actors online or suspicious links in an email. Have you considered the security threats posed by your organization’s closest entities – like vendors and partners? Third party service providers may unknowingly pose security threats to their consumers and stakeholders. How can service providers demonstrate their adherence to rigorous data privacy and security standards? That is where SOC 2 audits and reports come into play. These assessments provide invaluable assurance to clients and partners by evaluating how well a company safeguards data. This blog post will dive deeper into the history of SOC 2 audits and reports – as well as understanding why your organization might need one.

SOC 2 Basics

SOC stands for System & Organization Controls. There are five types of SOC reports, referred to as SOC 1, SOC 2, SOC 3, SOC for Cybersecurity, and SOC for Supply Chain. The most talked about and sought after report is a SOC 2. Read more about the specifics of what a SOC 2 entails in our recent blog post, with details such as key principles, uses, industries, and more.

SOC 2 reports are designed to provide assurance to consumers and stakeholders about the effectiveness of a service organization’s controls related to data security and privacy. The framework of SOC 2 consists of five areas, referred to as the Trust Services Criteria (TSC). Both types of SOC 2 reports (Type I and Type II) use these defined criteria to assess organizational controls. Type I reports on management’s description of the system and suitability of internal controls. Type II includes all of Type I, plus testing the operational effectiveness of these controls over a period of time.

Necessity Is the Mother of Invention

The ever-changing cyber landscape made companies weary of who they conducted business with. Therefore, service providers needed a way to demonstrate their data security and privacy measures through a trusted third-party audit. This led to the creation of the SOC framework.

The birth of SOC 2 reports was in 2010, when the American Institute of Certified Public Accountants (AICPA) announced a new auditing standard called the Statement on Standards for Attestation Engagement (SSAE 16). With the new SSAE 16 came three Service Organization Controls (SOC) reports – including SOC 2 (along with SOC 1 and SOC 3 of course). The acronym “SOC” originally stood for “Service Organization Controls.”

Years later, in 2017, the AICPA updated SSAE 16 to SSAE 18 with some minor changes and simplifications. During the same year, the SOC acronym was updated to the current naming of System & Organization Controls… thank goodness they did not need to change the acronym! SSAE 18 is the framework currently used for all SOC 2 reports.

Earlier Roots of SOC 2 Reports

Although 2010 was the “official” origin of SOC 2 reports, these reports have roots from even earlier frameworks. The AICPA released the Statement on Auditing Standards (SAS 1) in the 1970’s. SAS 1 officially outlined an independent auditor’s role and responsibilities. These standards were tweaked and revised over the course of two decades, when finally, the AICPA released SAS 70 in 1992, its most recent version.

SAS 70 assessed the internal controls of service organizations, primarily focusing on controls relevant to financial reporting. Over time, SAS 70 began to be utilized more broadly for information security purposes. This early framework became widely standardized for service organizations to demonstrate the security of their control environment to stakeholders. As years progressed and technology evolved, so did the concern for more rigorous data security, privacy, and availability.

This brings us to the year 2010, and the creation of SSAE 16 – which, as listed in the section above, included the first instance of the SOC 2 report. SSAE 16 and the SOC framework were introduced as a successor to / replacement of SAS 70 to better align with organizations’ evolving needs for data security and privacy, expanding further than just financial reporting. Development of the Trust Services Principles (TSP) by the AICPA shortly followed. These criteria span the areas of security, availability, processing integrity, confidentiality, and privacy. The Trust Services Principles were rebranded to Trust Services Criteria (TSC) in 2017.

SOC 2 reports are now widely respected and used by service organizations of all kinds. Industries such as technology, data hosting, cloud computing, and SaaS (software as a service) are all common for SOC 2 reports and audits. The SOC 2 framework continues to evolve alongside technological advancements and changing regulatory landscapes to maintain relevance and effectiveness in building trust and transparency in service organizations' operational security.

Changes Since Inception

Since its original implementation, the SOC 2 framework has evolved and adapted to changes in technology, regulatory requirements, and industry practices. Some of the notable changes and updates include:

• 2017: The AICPA updated the Trust Services Criteria (TSC) for SOC 2 and SOC 3 reports. This was done to further align the TSC with emerging technologies and risks, such as new cybersecurity threats and concerns.
• 2018: The framework for the SOC for Cybersecurity was introduced by the AICPA. This new report provided guidance on how to effectively communicate relevant cybersecurity information from organizations to their stakeholders.
• 2020: Updates were made to the SOC 2 reporting framework by the AICPA. Some of these modifications included changes to the description criteria and certain requirements of the examination and reporting processes. In this year, the AICPA also released the SOC for Supply Chain framework.
• 2021: The AICPA made further updates to the SOC 2 reporting framework. These new updates focused on enhancing clarity and consistency in the reporting aspect.
• 2023: The SOC 2 framework had some minor changes and clarifications, specifically to the points of focus. The AICPA implemented these revisions to guide the assessment of controls aligned with external frameworks, strengthen the distinction between “confidentiality” and “privacy” categories, outline new attestation standards, and clarify the risk assessment process for specific risks.

This timeline highlights notable amendments made to the SOC frameworks (specifically SOC 2), however, there are constant revisions and additions to the framework and not all are listed above. The AICPA periodically updates the SOC framework to ensure its relevance and usefulness for organizations and their stakeholders. The main purpose of these revisions is to account for advancements in technology, changes in regulatory environments, and the evolving best practices in risk management and controls assessment.

Navigate SOC Audits with Expert Guidance

After learning more about the details and history of the SOC 2 audit, you might realize that your organization could greatly benefit from one. Navigating SOC audits can be daunting for businesses of any size or industry. At Compass, we specialize in conducting SOC audits with a team of seasoned professionals skilled in risk management, control-oriented audits, and information security. In collaboration with an independent CPA firm, we will validate your compliance level with the five Trust Services Criteria, ensuring your readiness and optimizing your chances for successful business endeavors. Contact us today to explore how we can tailor our SOC audit services to meet your specific reporting needs and propel your business forward!