What Is SOC 3?

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

SOC 3 (System and Organization Controls 3) is a report type developed by the AICPA (American Institute of Certified Public Accountants) to assess an organization's security and control measures. Compared to SOC 2, it is a simplified report that focuses on security, availability, processing integrity, confidentiality, and privacy. SOC 3 reports serve as evidence that an organization has implemented adequate security measures. A SOC 3 report contains information about a service organization's internal controls across five areas: security, availability, processing integrity, confidentiality, and privacy. These five areas form the foundation of the AICPA's Trust Services Criteria (TSC).

SOC 3 reports are publicly available and belong to the voluntary SOC compliance reports, which also include SOC 2 and SOC 1 financial reporting audits.

Users or potential customers of an organization most commonly request a SOC 3 audit. Organizations that provide software as a service, cloud computing, or data center services -- or those that handle sensitive customer data or personal information -- are more likely to undergo a compliance audit. These audits are conducted by a certified public accountant or an external auditor.

SOC 3 audits provide a comprehensive overview of an organization's controls and security risks and are intended for a broad audience. For this reason, organizations engage CPA firms to conduct the audits and produce the reports. They often publish the results on their websites and promote them through marketing campaigns to demonstrate their commitment to data security.

Technology companies most frequently require these reports. However, many other industries must meet similar requirements -- companies in finance, healthcare, e-commerce, and the public sector also rely on SOC 3 reports.

Why Is SOC 3 Compliance Important?

SOC 3 compliance is important for the following reasons:

• Brand Reputation. SOC 3 reports give customers confidence that a company's controls and processes for protecting sensitive data meet industry standards. SOC 3 demonstrates that a company invests in security and maintains transparency around its security processes. Although SOC 3 reports are voluntary, many companies use them. Freely distributed SOC 3 reports are an effective way to attract customers, inform stakeholders, and strengthen the brand.

• Risk Management. SOC 3 standards help organizations evaluate their own risk management processes and optimize their network controls. By comparing their results with competitors' SOC 3 reports, organizations can better understand their vulnerability to potential security incidents and identify areas that need improvement. SOC 3 audits also offer the added benefit of reducing costs associated with security breaches.

• Regulatory Compliance. SOC 3 aligns with other regulatory requirements such as the EU's General Data Protection Regulation (GDPR) and the Health Insurance Portability and Accountability Act (HIPAA). Meeting SOC 3 standards is another way to demonstrate compliance with industry benchmarks.

• Marketing. Because SOC 3 reports are publicly available, they help companies attract potential customers. The reports show that a company has adequate, secure controls in place to manage and protect data, and that it is committed to meeting industry standards.

SOC 3 vs. SOC 2

SOC 2 Predecessor

SOC 2 reports are limited-purpose reports intended only for the service organization's management, stakeholders, and the client who commissioned the audit. They can be issued as either Type I or Type II reports.

Type II reports typically assess an organization over a one-year period, and the evaluation criteria are more rigorous than for Type I reports.

SOC 2 reports may contain confidential information about the company's security and cybersecurity processes. They are intended solely for the company and the commissioning client.

The report includes the auditor's opinion along with detailed information about the controls used during the examination.

The SOC 3 Value Proposition

SOC 3 reports are general-use reports intended for public distribution. They provide a broad overview of an organization's controls.

SOC 3 reports are Type II by default; there is no Type I option.

They offer a general overview of the effectiveness of an organization's controls and do not contain confidential or detailed information about the underlying processes.

The document includes neither the auditor's opinion nor a detailed list of the controls used.

Conclusion

SOC 3 is a simplified report type compared to SOC 2, focusing on information availability and integrity, confidentiality, and compliance. SOC 3 reports are publicly available and belong to the voluntary SOC compliance reports that also include SOC 2 and SOC 1 financial reporting audits. SOC 3 reports are exclusively Type II and do not contain confidential or detailed information about an organization's security processes. They provide a general overview of an organization's controls and support compliance with industry standards. They also serve as a tool for attracting customers, informing stakeholders, and reinforcing the brand.