Are your customers grilling you about SOC 2 compliance? Do you have an audit coming up? Regardless, your company may feel unprepared, and hurdling audit exceptions can be a challenge (especially if you don't know what to expect). Find out everything you need to know about SOC 2 audits, exceptions and reports, so your company passes with flying colors!
What in the World Is an Audit Exception?
SOC 2 is a security requirement for businesses managing customer data. SOC 2 audits ensure you're protecting your clients' privacy and your company's interests. Auditors assess your company's level of compliance with the five SOC 2 principles — security, availability, processing integrity, confidentiality and privacy.
Your SOC report will be unique to your business, as you design your own controls with the principles in mind. When the auditor finds instances where controls were ineffective or inappropriate, these instances will be listed as audit exceptions.
You may see three different types of exceptions in an audit exception report and audit exception examples:
- Description misstatements: System description misstatements are omissions or errors in your business's descriptions of its systems or services. Misstatements may happen if you intentionally leave something out of your descriptions or make changes without updating the descriptions. For example, you'll have a misstatement exception if you claim to provide ongoing security training but don't actually have ongoing training.
- Design deficiency: Design deficiencies occur when a control is poorly designed or completely missing. For example, your business would get a design deficiency if you have a control for reviewing user access, and the user lists to be reviewed are missing some users. In this case, the control was poorly designed because it didn't include every user.
- Operation deficiency: When there are deficiencies in the effectiveness of a control's operation, the control doesn't operate as intended or expected. For example, you'd get an operation deficiency exception if you have a control for all employees to use a password manager, and your auditor finds that some employees don't use a password manager.
Audit Finding vs. Exceptions
Just because the auditor lists exceptions doesn't necessarily mean you failed your audit. Don't worry — there's still hope. After assessing your controls and making a list of any exceptions, your auditor will make their audit finding or opinion. Based on the exceptions the auditor finds, they could report one of the following opinions:
- Adverse: An adverse opinion essentially means a business failed its audit. The business may have failed to comply with one or more standards. The auditor will typically describe what lead them to an adverse opinion.
- Qualified: If a company receives a qualified opinion, it complied with most standards but fell short in some areas. While the auditor will highlight the exceptions that didn't meet standards, an auditor's qualified opinion means the business passed the audit and needs to adjust its controls.
- Unqualified: When a business's controls comply with all the SOC 2 standards, the auditor will issue an unqualified opinion. This means all the controls operate effectively and are described appropriately.
- Disclaimer of opinion: An auditor may choose to issue a disclaimer of opinion when they can't find adequate evidence to support an opinion.
Luckily, not all exceptions will negatively impact the audit findings and your auditor's opinion. Depending on the severity, scope and number of exceptions, they may or may not impact an auditor's opinion. For example, a control may fail, but other controls could compensate for the mistakes and meet the necessary criteria. In situations like this, the auditor will list the failure as an exception and note that the standards were still met (yay!).
How to Avoid Those Tricky Audit Exceptions
While many companies see audit exceptions as a bad thing, you should try to view them as opportunities to improve existing processes. Still, the goal is to avoid audit exceptions and have as few exceptions as possible in your report.
Whether you're creating controls for the first time or are actively making improvements based on a previous audit, here are a few tips for avoiding pesky exceptions on your next audit.
1. Automate Processes and Functions
Security-related tasks and processes are highly necessary (but also extremely time-consuming, challenging and even boring). Automation helps make any process or function more secure and efficient. From technical checks and security alerts to human resources processes, automation helps reduce the risk of human error and ensures controls are operating effectively. You'll have immediate and continuous control visibility, which makes it easy to fill in any gaps to avoid audit exceptions.
2. Monitor Your Compliance
Monitoring your controls is essential to identify when you start to lose compliance. Without monitoring, any failures may go undetected until it's too late. Ideally, you'll implement a system that allows you to automate monitoring so you can receive alerts and collect data regarding your compliance. Automated monitoring helps your company identify when controls begin to fail so you can make quick fixes, avoiding exceptions.
3. Identify a SOC 2 Manager
Confusion will likely occur when several people are responsible for your SOC 2 compliance. To ensure organization, appoint a SOC 2 manager with clearly defined responsibilities. This individual would primarily own and maintain your SOC 2 program. From organizing documentation and policy changes to tracking alerts and active controls, a SOC 2 manager can ensure your company is compliant leading up to and after an audit.
4. Provide Compliance Training
While it's best to have one person in charge of the SOC 2 program, your teams need to be on the same page regarding your controls and the importance of compliance. Provide compliance training for your entire organization and keep everyone updated when changes are made.
5. Start With a SOC 2 Type I Audit
There are two types of SOC 2 audits — Type I and Type II. Type II audits are often required, though they cover six months or more, so you must wait at least six months for the report. Type I audits are point-in-time audits, so you'll have immediate results for how your controls perform right now.
While you're fine-tuning your controls, start with a Type I audit. Doing so allows you to catch exceptions before having a Type II audit. Plus, you'll show your clients you're working toward long-term compliance, which is ideal.
Achieve SOC 2 Compliance With Eden Data
As a startup company, understanding all your security and compliance needs can be confusing (and may even go right over your head). At Eden Data, we can make your brand shine with any compliance necessary, including SOC 2, HIPPA and more. We're obsessed with providing professional security, compliance and privacy services for companies like yours. Reach out today to get started!
