When it comes to Information Security, companies struggle with the decision between selecting the SOC 2 attestation or ISO 27001 Certification, both the audits provide a competitive advantage in today’s Information security landscape. However, to understand which audit is required for your organization, one needs to understand the similarities and differences between the two audits. While both SOC 2 and ISO 27001 Certification are excellent compliance efforts for organizations to undertake, it is important to understand which audit can be utilized to gain advantages over the market competition and to achieve compliance with a regulatory requirement.
For this reason, we have today drawn out a comparative study between SOC 2 examination and ISO 27001 certification for an organization’s better understanding.
Explaining SOC 2 Audit Report
A SOC 2 audit evaluates the internal controls, policies, and procedures relating to the AICPA’s Trust Services Criteria. The audit report typically focuses on a service organization’s internal controls, pertaining to Security, Availability, Processing Integrity, Confidentiality, and Privacy of a system/process. The results of a SOC 2 audit report validates an organization’s commitment to delivering high quality, secure services to clients. SOC 2 Audit Compliance is a powerful market differentiator that can help companies gain a competitive edge over others in their industry.
Explaining ISO 27001 Certification
ISO 27001 is an internationally-accepted Information Security Standard for governing an organization’s Information Security Management System (ISMS). It is a framework of policies and procedures that preserves the confidentiality, integrity, and availability of an organization’s information by applying the Risk Management Process. It is a Standard that regulates how organizations effectively run an ISMS through policies and procedures and associated legal, physical, and technical controls. Compliance with the Standard gives confidence to the interested party that risks are adequately managed. An organization needs to integrate ISMS with the company’s operational process, and overall management structure. The aim is to consider Information security across the organization’s design of processes, information systems, and controls.
Similarities between ISO 27001 Certification and SOC 2 Report
Addresses Information Security
In both the cases of SOC 2 and ISO 27001 Certification, the compliance effort focuses on how the organization identifies and addresses information security issues and adopt an approach to mitigate information security risk. Both Compliance ensures the establishment of appropriate controls to maintain the information security risk at an acceptable level.
Implementation of Policy and Procedure
While the Policies and Procedures set to achieve Compliance may differ on different levels, but the objective is to ensure organizations develop a set Standard or framework to implement Policies and Procedures for strengthening their Information Security Systems.
Both SOC 2 and ISO 27001 Certificate have international recognition and applicability in the Information Security Industry. Compliance with both standards can benefit firms with international presences and/or customer bases. Both the frameworks enable organizations to work internationally with customers across the globe giving an assurance of adopting the best practice of information security.
Management Roles & Responsibility-
Compliance with any of the two mentioned framework ensures delineation and understanding of management responsibilities. This would particularly include setting organizational policies and procedures relating, setting information security roles and responsibilities, drawing operational planning and controls, leadership, and commitment to organizations’ information security.
Demonstrates Management Commitment–
Both compliance efforts are valuable to an organization in its unique way, instilling a sense of trust in their customer and market. Compliance with both frameworks demonstrates management’s commitment, ensuring that the organization is serious about information security and has accordingly been assessed by an accredited, certified, and competent third-party assessor. Although both the compliance efforts are very different from each other, they help build trust between service organizations and vendor partners.
Assessors for Audit-
SOC 2 examinations and ISO 27001 certifications both require an independent third-party assessor who is accredited and certified to provide assurance on controls in place to meet the Trust Services Principle (TSP) Criteria (SOC 2) and Standard Requirements (ISO).
Differences between ISO 27001 Certification & SOC 2 Report-
SOC 2 Report and ISO 27001 Certificate both cover similar policy and procedure frameworks with regards to the security control, designed to protect sensitive information.
ISO 27001 has 114 control requirements, but SOC 2 has more than 450+ requirements. In our practical experience, the overlap of ISO 27001 is around 15% to a max 20% depending on the seriousness with which the ISO 27001 was actually implemented and practiced.
However, there are quite a few differentiating factors that may suggest one better than the other in certain cases. So here are some differences between ISO 27001 Certification and SOC 2 Certificate highlighted below-
ISO 27001 Certificate- The ISO 27001 is an Industry Standard set to help companies protect the availability, confidentiality, and integrity of the data that they store, manage, or transmit. To achieve compliance, one must conduct a risk assessment to identify and implement security controls and review their effectiveness regularly. The main focus is to establish, implement maintain, and improve an ISMS.
SOC 2 Report- The Service Organization Control 2 report facilitates review of an organization’s/third-party vendor’s information security system based on the five Trust Service Criteria: Security, Availability, Confidentiality, Processing Integrity, and Privacy. The focus is to measure and validate the capabilities of the service organization’s control system against Security Principles & Criteria. SOC 2 looks at how the IT delivery, Security and management areas works in an organization.
Note – It is important to note that while SOC 2 considers and addresses the Privacy issues based on the 5 TS C Principles, ISO 27001 Certificate does not focus much if at all on data privacy issues.
2. Scope & Applicability-
ISO 27001 Certificate- The scope and applicability of ISO 27001 Certificate can be defined based on an organization’s objective and priority. For instance, if an organization wishes to expand its operations globally, in that case, the company would require an ISO 27001 Certificate (internationally accepted standard) to build a client base. An organization can decide its scope based on business priorities, plans and budget considerations.
SOC 2 Attestation- SOC 2 applies to service organizations storing, processing, and transmitting customer data or having direct or indirect access to client data. The applicability depends on the service offered, commitment to clients, and expectations of the stakeholder. While the scope depends on the organization’s service controls which are based on the 5 Trust Service Principles. Key difference between scoping of ISO 27001 and SOC 2 is that SOC 2 scoping and applicability is based on what the organisation provides as a service to the clients, their commitments and stakeholder expectations
(To understand more on SOC 2 scope for your organization, you can read through our article on 5 Trust Service Principle for a better understanding)
ISO 27001 Certification– The audit and compliance help organizations establish and achieve certification stating that the company meets specified requirements and is thus certified as best practice.
SOC 2 Report- The purpose of conducting a SOC 2 report audit is to facilitate service organization management in reporting to their customers that they have met established security criteria that ensure systems are protected against unauthorized access (both physical and logical).
SOC 2 Report- One of the most important differences between SOC 2 and ISO 27001 is that SOC 2 reporting is not a certification. They are examination services performed under the AICPA standards and considered as an attestation report. The Attestation reports provide an opinion by the assessor/ auditor, attesting the internal controls of a service organization is in place and meets the criteria related to the Trust Service Principles namely security, availability, processing integrity, confidentiality, and privacy. SOC 2 certification can only be performed by a licensed CPA (Certified Public Accountant).
ISO 27001 Certification- ISO 27001 is a Standard Certifying an organization’s conformity to its Information Security Management system (ISMS). ISO 27001 audit and certification need to be conducted by a recognized ISO 27001-accredited certification body.
ISO 27001 Certification- The deliverable for an ISO 27001 is a certificate which includes information on the ISMS scope, in-scope locations, standard certified against, date of certificate issued and date of expiration, etc. However, a report is issued at the end of every stage, surveillance audits, and reviews. But the reports issued are generally for internal use only and are not intended to be a document for an external deliverable, as in case of SOC 2 reporting.
SOC 2 Report- For a SOC 2, the final deliverable will be an attestation report which includes an opinion letter, an assertion letter, a system description containing an extensive narrative on the five key components of the organization’s system under review ( infrastructure, software, people, procedures, and data) organizational procedures, and finally the applicable trust services criteria, related control activities, and the testing performed by the auditor and the related test results.
6. Certifying Authority
ISO 27001 Certificate- Only a recognized ISO 27001-accredited registrar can certify an organization for ISO 27001.
SOC 2 Report- Only a licensed CPA firm can conduct the SOC 2 Audit and provide an attestation for the same. As a word of caution, we have seen SOC 2 reports by companies in India which are attested by CA (Chartered Accountants)… this is not allowed and may constitute a breach of contract with your client leading to heavy penalties and legal issues.
7. Organization Applicability-
ISO 27001 Certification- The Standard applies to any organization and industry vertical who wish to strengthen and secure their Information Security Systems.
SOC 2 Attestation- SOC 2 Compliance applies to only service organizations that store, process and transmits customer data. It applies to nearly every SaaS provider company, as well as any company that uses the cloud to store its customers’ information or have access to customer information.
8. Market Applicability-
ISO 27001 Certificate- ISO 27001 is an international standard accepted globally. For companies that have a large international client base will probably require ISO 27001 certification for their organization.
SOC 2 Report- The SOC 2 attestation is a recognized standard in the United States, created and governed by the AICPA. For companies that have a client base in the US will require SOC 2 attestation as they are well recognized and accepted there.So, Organizations will require SOC 2 attestation for earning greater ROI from customers in the US.
9. Time Frame & Validity-
ISO 27001 Certification- ISO 27001 depending on scope usually takes 3-4 months to complete, but depending on the additional process and documentation required to install an operating ISMS. ISO 27001 Certification is valid for 3 years with basic compliance audits conducted in the 2nd and 3rd year.
SOC 2 Attestation-
It typically takes three to six months to complete an entire process from start to finish for SOC 2 Type 1 attestation. However, it is important to note that the time frame depends on the time taken by the service organization to implement all of the security controls. Thereafter, another three to six months to achieve SOC 2 Type 2. SOC 2 Attestation is only valid for a year and hence requires comprehensive annual auditing to be conducted every year. So, as stated earlier achieving SOC 2 attestation involves 2 stages namely SOC 2 Type 1 & SOC 2 Type 2. Once SOC 2 Type 1 is achieved, the company has to annually conduct a Compliance audit for SOC 2 Type 2 every year thereafter to stay Compliant.(To get more insight to refer to my article difference between SOC 2 Type 1 and Type 2).
What applies to your organization?
Taking the right decision
While both SOC 2 and ISO 27001 are excellent Compliance efforts to undertake, it is essential to consider a few things when determining the appropriate audit for your organization. Here are a few questions you must consider when making a decision.
Which market does your organization plan to target?
If your customer base or target customers are international companies based in the US-based then opting for SOC 2 Attestation will be profitable, as SOC 2 is well-recognized and accepted in the US. On the contrary, if you are targeting any international company outside the US, one must opt for ISO 27001, for it is a popular Standard which is internationally accepted across the globe.
What assessments are customers requesting?
Many audits conducted by service organizations are driven by contractual obligations. So here the customer location or international acceptance of the standard does not become the driving factor. In this case, it becomes more of a contractual obligation for a particular audit.
What assessments are your competitors undergoing?
Having a competitive edge over others in the industry is critical for your business. So, being additionally compliant to an internationally accepted standard and marketing a new certification or audit report of your organization could be the market differentiator.
As stated earlier while both ISO 27001 & SOC 2 are excellent compliance efforts for organizations to demonstrate operating effectiveness of their internal controls, and their compliance with regulatory requirements, considering the key decision factors may help your organization determine the appropriate assessment for your organization.
Looking at the wider coverage of SOC 2, if your organisation is going ahead with SOC 2, then you will be meeting the requirements of ISO 27001 by default and you can easily get certified on both SOC 2 and ISO 27001 with minimal additional efforts.