As startups scale, trust becomes a critical component of success, particularly in sectors dealing with sensitive customer data. One of the key frameworks that can help build that trust is SOC 2—a compliance standard for service organizations that handle data. But what is SOC 2, and why should startups care?

In this blog, we’ll explore the essentials of SOC 2 compliance for startups, its benefits, and the steps involved in getting certified.

What is SOC 2?

SOC 2 (System and Organization Controls 2) is a framework developed by the American Institute of CPAs (AICPA) to assess the internal controls related to data security, availability, processing integrity, confidentiality and privacy. Unlike prescriptive certifications, SOC 2 is flexible and allows businesses to design their own security controls, making it adaptable to organizations of all sizes – including startups.

There are two types of SOC 2 reports:

• SOC 2 Type I: Evaluates the design of controls at a specific point in time
• SOC 2 Type II: Tests the operating effectiveness of those controls over a period (typically six months to a year) 

1. Define Your Scope: The first step is deciding which of the five trust service principles (security, availability, processing integrity, confidentiality, and privacy) are relevant to your organization. Startups typically focus on the security principle initially, as it’s often the most critical.
2. Perform a Readiness Assessment: Conduct a readiness assessment to identify gaps in your current security processes. This is often where working with a CPA firm, like SAV Advisory, can be invaluable. We help businesses determine whether their systems, policies, and procedures align with SOC 2 requirements.
3. Implement Controls: Based on the readiness assessment, implement the necessary controls to address any gaps. These controls may include network monitoring, data encryption, multi-factor authentication, and incident response plans, among others.
4. Conduct the Audit: Once controls are in place, you can engage a certified auditor to conduct a SOC 2 audit. The audit will assess whether your controls are functioning effectively (Type I) or over time (Type II).
5. Maintain Compliance: SOC 2 compliance is not a one-time task. After receiving your certification, you’ll need to regularly update and test your controls to maintain compliance, especially if you are preparing for a Type II report.