What is SOC 2 Compliance? A Beginner's Guide

SOC 2 is a security and privacy framework developed by the American Institute of Certified Public Accountants (AICPA). It evaluates how well a service organization protects customer data based on five Trust Services Criteria: Security, Availability, Processing Integrity, Confidentiality, and Privacy.

Achieving SOC 2 compliance means undergoing an independent audit to prove your systems and processes meet these standards. While not legally required, SOC 2 is often contractually required by enterprise buyers and partners.

This beginner’s guide contains all the information you absolutely need to know about SOC 2 compliance.

What Does SOC 2 Stand For?

SOC 2 stands for System and Organization Controls 2. A SOC 2 report shows whether your business has the right controls in place to keep sensitive information secure, available, private, and accurate. It’s especially important for companies dealing with sensitive customer data, such as cloud providers, SaaS vendors, and other web-based service providers.

What Is SOC 2 Compliance?

SOC 2 compliance means demonstrating that your organization protects customer data according to trusted, independent standards. It’s built around five Trust Services Criteria (TSC):

• Security. Protects systems and data from unauthorized access, breaches, and misuse.
• Availability: Ensures systems are operational and accessible as promised (e.g., in SLAs).
• Processing Integrity: Confirms data is processed accurately, completely, and on time.
• Confidentiality: Restricts access to sensitive business or client information.
• Privacy: Governs how personal data is collected, used, stored, and shared according to user expectations and applicable laws.

SOC 2 compliance is unique to each company because it’s a set of trust principles as opposed to a prescriptive list of controls to mark off. Every company’s security practices will look different, meaning you can achieve SOC 2 compliance with custom policies and processes that are relevant to your business’s operations.

What is a SOC 2 Audit?

A SOC 2 audit is an independent assessment of your company’s security controls, conducted by a certified public accountant (CPA) firm. The goal is to verify that your systems meet the Trust Services Criteria and that your controls are properly designed—and in the case of a Type 2 audit, operating effectively over time.

Passing a SOC 2 audit results in an official SOC 2 attestation report, which you can share with customers to demonstrate your security posture. There are two types of SOC 2 reports, Type 1 and Type 2:

• SOC 2 Type 1 reports focus on a specific point in time and reviewing if you were compliant (e.g., were you compliant last week?). It does not review compliance over a long period of time. This type of SOC 2 report is requested less than SOC 2 Type 2.
• SOC 2 Type 2 report is the more commonly requested because it holds more weight by reviewing a company’s compliance over a period of time (e.g., were you compliant for the last continuous year?). SOC 2 Type 2 holds companies to a higher bar because their security practice will need to be more robust and provide continuous compliance. 

Typically, either SOC 2 report will contain five sections:

• An opinion letter/auditor report
• Management assertion
• Detailed description of the system or service being evaluated
• Details specific to each of the Trust Services Criteria being evaluated
• Test results from testing done on the controls evaluated

When hiring a CPA to handle your SOC 2 audit, be prepared to provide security questionnaires, documentation of your policies, practices, and security controls, and evidence that those policies, practices, and security controls are being consistently followed within the organization.

Why SOC 2 Instead of SOC 1 or SOC 3?

All three types of SOC reports (SOC 1, SOC 2, and SOC 3) test the same five categories, but in different contexts. However, if you’re asked for a SOC report concerning security and data, it’s safe to assume what they’re looking for is SOC 2.

• SOC 1 is used by companies that deal heavily with finances and money, like payroll services, cloud-based billing services, employee benefits providers, and the like. If you pass your SOC 1 audit, your clients can be assured your business safely handles sensitive financial information.
• SOC 2 is a broader report that covers all your data security controls. There’s plenty of sensitive information that doesn’t include financials, and a SOC 2 audit tests how well you protect other data, like customer or end user information and proprietary systems. 
• SOC 3 is the public summary derived from the SOC 2 audit. You cannot receive a SOC 3 report without first completing a SOC 2 audit. The report itself is largely similar to SOC 2, with the exception that it is made to be public-facing to increase investor or customer confidence. 

Who Needs SOC 2 Compliance?

SOC 2 compliance will help businesses that deal with client data to prove their commitment to security and other TSC criteria. Because SOC 2 reports include details of your security systems, most companies that seek compliance are B2B service providers.

An attestation will be useful for:

• Healthcare providers: Hospital systems, electronic medical record providers, and telemedicine providers, among others, have a large amount of patient data on hand. These companies are all required to comply with HIPAA, but SOC 2 adds another layer of surety that individuals’ sensitive medical data will stay protected.
• Financial institutions: Banks, payment processors, insurance companies, and the like are responsible for personal data that can cause catastrophic problems if leaked. 
• Managed service providers: Security services, IT support, and business intelligence services all have access to sensitive company data and systems. A breach at any of these companies could allow the hackers to compromise other companies or undermine their operations. 
• Cloud service providers and data centers: These companies might store data ranging from a D2C business’s customer information to a government contractor’s personnel data. A breach of a cloud provider could therefore be hugely damaging to its clients and open them up to further exploitation by bad actors.
• B2B or B2B2C SaaS companies: SaaS providers typically hold proprietary data, whether that’s a company’s sales pipeline or creative assets and IP that are covered by an NDA. If this information were made public, it would provide a serious advantage to that company’s competitors and potentially scuttle upcoming campaigns or growth plans. 
• Education providers: Companies that augment our school system, like asynchronous learning platforms, online exam tools, and class management software, are all covered by regulations including FERPA and PPRA. SOC 2 compliance can help prove their adherence to these policies and protect the data of minor students.

Along with the above categories, any company that operates in a heavily regulated space or stores sensitive PII will benefit from being able to prove SOC 2 compliance. Additionally, compliance may become a bigger concern at certain points in a business’s lifecycle. Your company may naturally evolve a need for SOC 2 attestation as it continues to grow and develop.

• Scaling operations: As companies move from startup to scale-up, it’s common to finalize and document practices that have become unofficial operating procedures. This is a natural point to seek SOC 2 compliance—you don’t want your growth to come at the price of security.  
• Entering new markets: Companies looking to break into markets or industries that are more heavily regulated will do well to provide their SOC 2 compliance before they launch marketing or sales initiatives. While lesser security measures may seem sufficient for businesses that don’t handle sensitive information, they won’t translate well to any industry that is responsible for confidential business or customer data.
• Meeting customer demands: As your customers scale and expand, they may also realize the need for better security measures and pass those requirements on to you. SOC 2 compliance may become a necessity for keeping existing clients or landing new ones. 

How Much Does SOC 2 Compliance Cost?

The cost of your SOC 2 audit will depend on the size of your company, the scope of your audit, and whether you’re after a Type 1 or Type 2 attestation. Because an audit must be performed by a licensed CPA, you’ll be paying for your auditor’s time and expertise. The more complex your company and the broader your needs, the more you can expect your audit to cost.

• Type 1 audits are cheaper because they only require a snapshot view of your security controls. Small to midsized companies may pay between $7,500 and $15,000 for an audit, while larger businesses may find themselves paying between $20,000 and $60,000.
• Type 2 audits are much more in-depth because they certify that your security controls operate as expected over an extended period. Small to midsized companies can expect to pay $12,000 to $25,000 for such an audit, while larger companies should budget between $30,000 and $100,000.

Some companies will need to budget for costs outside of the audit itself. If you’ve never undergone a SOC 2 audit, your first step will be your internal assessment. This will require your employees to spend time and resources evaluating and building out your systems and practices. 

You may also want to hire an outside consultant to conduct penetration testing. The cost of software to strengthen your security posture or automate your compliance efforts can add up as well.

How Long Does it Take to Become SOC 2 Compliant?

The timeline for your SOC 2 audit will also depend on whether you choose Type 1 (shorter) or Type 2 (longer). The long timeline of SOC 2 attestation leads many companies to first seek a Type 1 report, which they can issue as an assurance as they work toward Type 2 compliance.

Drata found, in a 2023 study, that companies spend an average of 4,300 hours yearly to achieve or maintain SOC 2 compliance. This number may increase or decrease depending on your organization’s size, the complexity of your operations, and the scope of your audit. If you’re starting from scratch, plan around six months for your internal, pre-audit efforts. Organizations that already have a strong security posture may not end up needing the entire period. However, it’s best to give yourself sufficient time to find and remediate any issues.

The audits themselves also take time. A Type 1 audit can be completed within two months or less. A Type 2 audit, on the other hand, typically ranges from six months to one year. After the audit, the auditor also needs two to six weeks to prepare the final report. 

What are the Benefits of SOC 2 Compliance?

SOC 2 is external proof of your commitment to security. As cybersecurity risks continue to rise, more organizations are dedicated to improving their security posture.

Because compliance itself is a process and you’ll need to prove that compliance over time, experts recommend making it a priority now—before you’re asked to provide a SOC 2 report. 

SOC 2 Helps Protect Your Company Against Security Risks

Hacks, ransomware, and other digital attacks are ballooning in volume. Wakefield Research and Rubrik Zero Labs surveyed over 1,600 IT and security leaders and found that 98% became aware of an attempted cyberattack in the past year (52% reported breaches, and 51% reported ransomware attacks). 

That means no one is safe. Worse, 33% of respondents said their boards or executive leadership had “little or no confidence” that the business would be able to recover important data and applications after a cyberattack. With 96% of surveyed organizations suffering at least some negative consequences after a breach, executives’ hesitance may be understandable. 

Attacks are costly for companies, with the average data breach costing $4.88 million in 2024. PwC’s 2024 Global Digital Trust Insights report found that 36% of companies suffered a cyberattack that cost them at least $1 million in the past year, up from 27% in 2023. With cyberattacks on an upward trend over the past two years, it’s hard to imagine the threat will diminish any time soon.

SOC 2 Compliance Shows Prospects and Partners You Take Data Security Seriously 

With risks rising and awareness about data security at an all-time high, it’s no longer enough to say you have good security practices in place. A growing number of companies across a variety of industries are requiring that vendors and business partners prove it with a SOC 2 report.

This means getting your policies and controls in order and tracking your compliance religiously over time. This applies to any service provider that stores, processes, or transmits customer or client data in the cloud—which is just about all of us these days. 

If you haven’t had a prospective customer ask for a SOC 2 report yet, you might think you don’t need one. For startups especially, it can be tempting to delay starting the compliance process in lieu of other priorities. But it’s really only a matter of time—we’re hearing from new customers everyday that they’ve started the process because their sales cycle stalled without one. 

It’s not exactly a quick process to become SOC 2 compliant, either. It can take companies months to become SOC 2 compliant, meaning money left on the table for your company. Not to mention that most SOC 2 report requests are for SOC 2 Type 2, meaning you’re being asked to prove you have stayed compliant over a long period of time (more on this in a minute). The longer you take to become compliant, the further you can fall behind the competition.

SOC 2 Compliance Accelerates Sales Cycles and Business Growth

The risk of cyberattacks won’t discourage companies from using online services, but it will make security more important to savvy leaders. SOC 2 compliance is becoming a selling point for companies that process and store sensitive data in the cloud. 

Enterprise companies are likely already SOC 2 compliant and therefore require similar security assurances from their vendors. Companies that wish to contract with the government must also follow strict data control procedures. SOC 2 can help your company prove it complies with Federal Information Security and Modernization Act (FISMA) and National Institute of Science and Technology (NIST) 800-171 requirements. SOC 2 can also be used to prove compliance with GDPR and HIPAA.

If you aren’t SOC 2 compliant, you’ll have trouble finding clients among organizations that must abide by any of the above standards. The good news is, because SOC 2 is a flexible standard that can be applied to companies of any size, small and mid-sized businesses can achieve SOC 2 compliance and increase their likelihood of landing the big clients that will support their growth.

Once you have your SOC 2 report, you’ll also find it much easier to prove your security credentials during the sales process. Rather than training your sales team in your security practices or bringing your IT team to meetings to prove your systems are secure, you can simply share your SOC 2 report. Potential contractors will be able to understand your security controls and see how well they performed during your SOC 2 audit. 

What Are the SOC 2 Implementation Best Practices?

To prepare for your SOC 2 audit, you’ll want to do a readiness assessment that covers the same scope of TSC you want your final report to include. 

Our SOC 2 Compliance Checklist goes deeper into the frameworks and criteria you can expect your SOC 2 auditor to test your company against. After reviewing these standards and self-assessing against them, you’ll know where the gaps are in your process. Gap remediation typically consists of: 

• Developing or expanding policies and procedures that your company is missing.
• Changing workflows as necessary to improve your risk management. 
• Implementing or updating internal controls and security measures.
• Training your workforce on new policies and practices to ensure your plans are properly implemented. 

After your gap remediation process, it’s time for another internal assessment to ensure the changes you made had the desired effect. If they didn’t, you have another chance to remediate your policies and processes before the official audit.

By this point, your company should be SOC 2 compliant—it just won’t be proven until your audit has been completed and the report issued.

Simplify SOC 2 Compliance With Drata

If this sounds pretty overwhelming, we hear you. Becoming SOC 2 compliant is a complex, time-consuming process for most companies. And we have been there.

In fact, the reason we started Drata in the first place is that we were the people responsible for compliance at our previous jobs, so we know how complicated, frustrating, and lengthy the process can be. And we wanted to find a way to make it simpler. Drata is the result of the simplification.

Automated 24/7 monitoring, real-time alerts, evidence collection, security training, simple dashboards and reports, and dedicated support from compliance experts—everything we do is designed to take as much burden as possible off your teams while maintaining compliance. 

Because once you’ve done all that work to become compliant, you’ll need systems in place to help you stay secure and compliant and prove it (which will keep you competitive).

If SOC 2 compliance is on your horizon, it’s a good time to take a look at automation with Drata. Book a demo to see how we can help your company achieve and maintain SOC 2 compliance.

SOC 2 Compliance Frequently Asked Questions (FAQs)

Below we answer common questions related to SOC 2 compliance.

Is SOC 2 Mandatory?

No, SOC 2 isn’t required by law. However, it’s often contractually required by enterprise clients, especially in SaaS, cloud, and data-processing industries. Without it, many companies are excluded from vendor lists or face delayed sales cycles.

Is SOC 2 a Certification or an Attestation?

SOC 2 is an attestation, not a certification. A licensed CPA firm evaluates your controls and issues a report confirming whether they meet the AICPA’s Trust Services Criteria. Unlike certifications, attestations reflect a point-in-time or time-bound review of your environment.

Who Needs to Comply with SOC 2?

Any organization that stores, processes, or transmits customer data (especially SaaS companies, cloud providers, MSPs, and B2B service vendors) should pursue SOC 2 compliance. It’s particularly important when selling to regulated industries or enterprise clients.

How Long Does SOC 2 Compliance Take?

SOC 2 Type 2 compliance can take 12-18 months, between your pre-audit preparation work, the observation and audit periods, and the time required to issue a final report. Type 1 compliance, which is a less robust attestation, may be completed in around six months. 

What Happens if I Fail a SOC 2 Audit?

SOC 2 audits don’t grade your organization on a pass/fail scale. Your audit report will designate your compliance as unqualified (all SOC 2 criteria met); qualified (most SOC 2 criteria met); or adverse (most SOC 2 criteria were not met). 

Any time one of your security controls was poorly designed or did not perform as expected, you will receive an audit exception that specifies your lack of compliance in that area. If you have other measures in place that compensate for the failure, you may still comply with all SOC 2 criteria. If not, you’ll likely see your compliance level downgraded. 

Your SOC 2 report will list out exceptions, so the more you have and the more severe they are, the less potential clients may trust you to keep their information secure. 

How is SOC 2 Different from ISO 27001?

While SOC 2 focuses on an organization’s data security controls, ISO 27001 provides a data management framework to ensure security as measured by information availability, confidentiality, and integrity. 

ISO 27001 has a wider scope and takes longer to implement because it requires companies to develop and maintain an information security management system (ISMS) versus requiring certain data security controls. Finally, ISO 27001 is a formal international certification, whereas SOC 2 is a U.S.-based attestation that is more flexible.