SOC 2 and ISO 27001: What’s the Difference?

SOC 2 and ISO 27001: What’s the Difference?

ISO 27001 is a widely acknowledged ISO standard that defines best practices for Information Security Management Systems (ISMS). System and Organization Controls (SOC) is a series of standards that certified public accounting (CPA) firms may deliver relating to either system-level service organization controls or entity-level controls of other organizations. The aim of both security standards is to facilitate effective controls around information and data security, and privacy.

So what’s the difference between ISO 27001 and SOC 2? In this article, we’ll provide background information on ISO 27001 and SOC 2,  examine key differences and similarities between both,  and provide guidance on areas to consider when deciding whether to pursue a SOC 2 audit or ISO 27001 certification.

The Basics of Compliance: What are ISO 27001 and SOC 2?

ISO 27001 can be considered a “compliance” standard because there are specific compulsory requirements that must be adhered to when achieving certification. Contrarily,  SOC 2 audit reports are the outcomes of examinations and attestations related to internal controls. Obtaining a SOC 2 report is not a security compliance-driven activity and organizations cannot be “certified” against SOC requirements. In a SOC 2 engagement, the auditor issues an opinion on the design and effectiveness of an organization’s internal controls. Let’s explore ISO 27001 and SOC 2 in more detail.

What is ISO 27001?

ISO 27001 is governed by the International  Organization for Standardization (ISO) and the International Electrotechnical Commission (IEC). The standard is one of several in the broader ISO/IEC 27000 series of standards that collectively focus on information security. The requirements set forth by ISO 27001 enable organizations to effectively manage information security-related activities in support of cybersecurity activities.

The standard was last updated in 2022. Organizations seeking recertification must recertify against the 2022 version of the standard by no later than October 31, 2025.

Why is ISO 27001 Important?

ISO 27001 certification provides assurance to various stakeholders, customers, and partners that the organization has implemented robust information security measures, which enhances trust and credibility. Undergoing the ISO 27001 certification process has the following additional benefits, where organizations can:

  • Showcase their dedication to protecting sensitive information and ensuring its availability, confidentiality, and integrity.
  • Provide assurance to stakeholders that an organization’s information security practices are in line with international standards.
  • Differentiate themselves from competitors and attract new business.
  • Identify potential weaknesses and provide recommendations for improvement.
  • Demonstrate compliance with legal and compliance requirements.
  • Mitigate the risk of data breaches and cyber-attacks, protecting an organization’s reputation, and minimizing financial losses.

How to Prepare for an ISO 27001 Certification Audit

Audit preparation includes Identifying the processes to be audited, gathering required documentation, and providing training to employees and contractors.

Identifying the key processes to be audited

Identifying key processes starts by clearly defining the ISMS scope. In defining the scope, the organization should consider the ISMS boundaries, locations, and in-scope functions. Risk assessment results and legal/regulatory requirements can also be used to identify and prioritize key processes. After process identification, conversations with process owners and key stakeholders should occur to understand process criticality, complexity, and impact on the ISMS.

Gather the required documents for the audit report

The standard calls for required documentation. For example, ISO 27001:2013:

  • Clause 4.3 requires that the scope is documented.
  • Clause 5.2 requires a documented security policy.
  • Clause 6.1.2 requires the retention of documentation about the information security risk assessment process.
  • Clause 6.1.3 requires the retention of documentation about the information security risk treatment process.
  • Clause 9.2 requires the retention of documentation as evidence of the audit programme(s) and the audit results.
  • Clause 9.3 requires the same regarding management review.
  • Clause 10.1 states that the organization shall retain documentation as evidence of the nature of corrective actions and the results of corrective actions. 

All required documentation should be readily available for audits.

Provide training to the necessary personnel and contractors

ISO/IEC 27001:2013 clause 7.2 requires organizations to ensure persons are competent based on appropriate education, training, or experience. Annex A control A.7.2.2 requires appropriate awareness education and training and regular updates in organizational policies and procedures, as relevant for their job function for all employees of the organization and, where relevant, contractors.

What is SOC 2?

The framework consists of several standards with SOC 2 being one of the most common of the series. SOC 2® involves Type 1 audits, Type 2 audits, and related attestation reports.

According to the American Institute of Certified Public Accountants (AICPA), SOC 2 reports are “intended to meet the needs of a broad range of users that need detailed information and assurance about the controls at a service organization relevant to security, availability, and processing integrity of the systems the service organization uses to process users’ data and the confidentiality and privacy of the information processed by these systems.”

SOC 2 examinations are typically related to service organization internal control, regulatory compliance, and due diligence activities. A Type 1 report examines the design of controls at service organizations, and Type 2 reports focus on the effectiveness of the identified controls based on the Trust Services Criteria (TSC) over a defined period of time, typically a minimum of six months.

What Are the Key Differences Between ISO 27001 and SOC 2?

Differences between ISO 27001 and SOC 2 are examined below in the context of the stakeholders they impact, how they impact security compliance and process customer data, the audit process, data protection, regulatory bodies, and international compliance applicability.

The Stakeholders They Impact

ISO key stakeholders include the “C-suite”, senior risk personnel, and the stakeholder(s) responsible for ISMS implementation and maintenance (likely the CISO or related role). Secondary stakeholders, which can also be identified as interfaces and dependencies in ISO 27001 Clause 4.3, can include IT security and technical resources, Legal, HR, Internal audit, and other internal and external parties.

SOC 2 stakeholders include service organizations, user entities, CPA firms, and SaaS organizations among others.

How They Impact Security Compliance and Process Customer Data

ISO 27001 establishes comprehensive requirements for securing the ISMS and related data. By adhering to ISO 27001, companies demonstrate a rigorous commitment to protecting sensitive customer information through risk management. Implementation could enhance an organization’s reputation for reliability and safety and ensure compliance with legal, contractual, and regulatory data protection obligations.

SOC 2® examinations are based on one or more of the following five TSCs:

  1. Security
  2. Availability
  3. Confidentiality
  4. Privacy
  5. Processing Integrity

The “Security” TSC is considered in scope in all SOC 2® examinations. TSC controls are aligned with the 17 principles of the 2013 Committee of Sponsoring Organizations (COSO) framework and grouped into the following five categories:

  1. Control Environment (CC1 series)
  2. Information and Communication (CC2 series)
  3. Risk Assessment (CC3 series)
  4. Monitoring of Controls (CC4 series)
  5. Control Activities Related to The Design and Implementation of Controls (CC5 series)

These five categories are also referred to as the common criteria. The TSC Points of Focus were revised in 2022 with minimal updates.

Obtaining a SOC 2 Type 2 report not only ensures that an organization is following best practices for protecting customer data but can also provide a competitive advantage. Many organizations require that vendors and service providers obtain a SOC 2 Type 2 report before entering into business agreements.

Audit Process

The ISO 27001 certification process consists of several types of internal and external audits. All audits should be governed by an audit program and audit plan which is created by the lead auditor. The lead auditor may be assisted by audit team members during audit execution depending on the audit scope. The number of effective personnel within the ISMS scope and the complexity of organizational processes are the key factors in determining the ISMS audit length (in terms of audit days).

Internal Audit

Clause 9.2 of the standard mandates that organizations conduct internal audits at planned intervals to determine compliance with the requirements of the standard. Internal audits should be governed by a formal internal audit process. 

Management Review

ISO 27001 Clause 9.3 requires management review: ISMS Management Review must occur at planned intervals to ensure continuing suitability, adequacy, and effectiveness.

External Audits

Stage 1 and Stage 2, Surveillance, and Recertification audits are considered external audits, performed by external auditors. External audits are also referred to as third-party audits. In some cases, external audits may also be carried out by interested parties.

Stage 1 Audit

Although not required, organizations may conduct a gap analysis to ascertain the ISMS implementation status prior to proceeding to a Stage 1 audit. A Stage 1 audit is essentially a documentation review to ensure the required documentation is in place for an operational

ISMS. The purpose of a Stage 1 audit is to gauge an organization’s readiness for an ISO 27001 certification.

Stage 2 Audit

Stage 2 audits focus on the implementation and effectiveness of an organization’s information security controls, as well as its compliance with ISO 27001 requirements. Stage 2 can be viewed as the initial certification audit.

Surveillance Audits

Surveillance audits occur annually between Stage 2 and Recertification audits. The purpose of these audits is to validate continued operational compliance and continual improvement of the ISMS. All requirements of the standard must be audited between the two Surveillance audits.

Recertification Audit

Recertification audits are essentially another Stage 2 audit where all requirements of the standard are assessed to gauge ISMS compliance with the standard. Recertification audits occur every three years at the end of the certification cycle. After recertification, the ISMS is certified again for three years.

The SOC 2 examination cycle consists of 11  high-level processes as described below.

SOC 2® Examination Cycle

Throughout this process, communication and collaboration within the organization are crucial. To ensure success, organizations should involve cross-functional teams in the process including IT, HR, Legal, and executive leadership.

Data Protection

The ISO 27000 series of standards addresses data protection directly via ISO 27701. ISO 27701 is not a standalone standard, but instead it is a data privacy extension to ISO 27001. According to ISO, 27701 specifies requirements and provides guidance for establishing, implementing, maintaining, and continually improving a Privacy Information Management System (PIMS) in the form of an extension to ISO/IEC 27001 and ISO/IEC 27002 for privacy management within the context of the organization. Organizations must document their policies, procedures, protocols, and activities in line with the standard and undergo internal and third-party audits to show compliance with the standard. SOC 2 addresses data protection through the implementation of the five TSCs.

Regulatory Bodies

ISO 27001 is governed by the IOS/IEC. The standard is one of several in the broader ISO/IEC 27000 series of standards that collectively focus on information security. ISO 27001 certificates are issued by certification bodies. An accreditation body accredits a certification body. There are numerous ISO accreditation bodies worldwide. Currently, there are 38 ANAB-accredited ISO/IEC 27001 certification bodies. These accredited certification bodies undergo continuous audits from accreditation bodies throughout the year.

SOC 2 is part of a suite of service offerings licensed CPA firms may provide in connection with system-level controls of a service organization or entity-level controls of other organizations. SOC is governed by the AICPA. SOC examinations and related reports may only be performed and issued by certified CPA firms.

International Compliance

ISO 27001 is an international standard with worldwide adoption. The ISO 27701 add-on strengthens the ISO 27000 series implementation as an international standard for data protection.

SOC 2 is primarily implemented in North America. The framework is governed by the AICPA. The SOC 2 privacy criteria translate to some aspects of the General Data Protection Regulation (GDPR) leading to increased European adoption of the security framework.

What Are the Key Similarities Between SOC 2 and ISO 27001

Both standards address information security topics specifically related to confidentiality, integrity, and availability. Neither framework is mandatory as compared to other regulations such as GDPR, PCI DSS for payment card services, or HIPAA for healthcare information. ISO 27001 and SOC 2 both mandate risk management processes, requiring organizations to assess, identify, and manage information security risks continuously. Additionally, both frameworks demand effective processes for managing and safeguarding data. Both ISO 27001 and SOC 2 require annual audits and are based on the principle of continuous improvement and periodic review, ensuring that security controls remain effective and up to date.

Which is Better for My Business: SOC 2 or ISO 27001?

The choice between ISO 27001 and SOC 2 depends on the organization’s nature, global reach, and sector. ISO 27001 is beneficial for businesses that require a more comprehensive and internationally recognized information security management system. Conversely, if your business operates in sectors that deal directly with storing or processing client data, like a SaaS, then SOC 2 could be more advantageous since it’s purposefully designed for companies that provide services that rely on stored customer data.

In making this decision, it’s wise to conduct a thorough risk assessment and consider which framework aligns best with your long-term business goals and customer expectations. AuditBoard’s Risk Management Software can be used to save time by streamlining and centralizing risk management.

Once you have decided on the appropriate compliance frameworks for your organization, using AuditBoard’s CrossComply Software your team can expedite compliance actions and workflows, including those related to maintaining your organization’s ISO 27001 compliance activities. Compliance Automation included in CrossComply can also reduce the time and resources spent on SOC 2® initiatives and ultimately simplify continuous monitoring and ongoing compliance.

 Frequently Asked Questions About ISO SOC 2 vs 27001

What is SOC 2?

SOC 2® involves Type 1 audits, Type 2 audits, and related attestations. SOC 2 can provide an excellent perspective of an organization’s security posture. The SOC 2 framework is widely used in the SaaS Industry.

What is ISO 27001?

One of several in the broader ISO/IEC 27000 series of standards that collectively focus on information security. The requirements set forth by ISO 27001 enable organizations to effectively manage information security programs in support of cybersecurity activities.

Which is better for my business: ISO 27001 vs SOC 2?

The choice between ISO 27001 and SOC 2 depends on the organization’s nature, global reach, and the industry. ISO 27001 is beneficial for businesses that require a more comprehensive and internationally recognized information security management system. SOC 2 is primarily adopted in North America and appropriate where businesses have some level of responsibility for client data.

Shehan

Shehan Jayakody, CPA, is a Senior Manager of Product Solutions at AuditBoard, where he works as a CrossComply and RiskOversight product specialist. An Ernst & Young alum, Shehan has over seven years of audit and compliance experience. Connect with Shehan on LinkedIn.