What is the Difference Between SOX and SOC Compliance?

What is SOX Compliance?

SOX (Sarbanes-Oxley) compliance refers to a company’s adherence to the regulations and requirements of the Sarbanes-Oxley Act, a federal law passed in the United States in 2002. This act was introduced after numerous high-profile financial scandals in order to increase transparency and accountability in corporate governance. The SOX Act established new requirements for public companies and firms, including provisions for financial reporting and internal access controls.

SOX compliance involves implementing measures to ensure that companies are following the guidelines set out in the act. This can include creating a code of ethics or an internal controls to prevent fraud, and implementing regular financial reporting processes to ensure accuracy and transparency. Compliance with SOX is mandatory for all publicly traded companies in the United States, and failure to comply can result in fines, legal action, and reputational damage.

What is SOC Compliance?

SOC (System and Organization Controls) compliance refers to a set of standards and guidelines developed by the American Institute of Certified Public Accountants (AICPA) for evaluating the controls and processes of service organizations.

There are several types of SOC standards, including SOC 1, SOC 2, and SOC 3.

• SOC 1 reports are used to evaluate the internal controls related to financial reporting. They are designed to help auditors assess the impact of a service organization’s processes on their clients’ financial statements.
• SOC 2 reports are used to evaluate the effectiveness of a service organization’s controls related to security, availability, processing integrity, confidentiality, and privacy.
• SOC 3 reports are similar to SOC 2 reports but are designed to be more general and can be shared publicly.

To adhere to SOC standards, companies must undergo an independent audit by a third-party auditor. The auditor evaluates the service organization’s controls and processes to determine if they meet the AICPA’s standards. Once the audit is complete, the auditor issues a report outlining their findings and whether the service organization is SOC compliant.

SOC compliance is important for service organizations because it demonstrates their commitment to protecting customer data and maintaining a secure and reliable service. It can also provide assurance to customers and stakeholders that the service organization is following security best practices for managing risk and protecting sensitive information.

What are the differences between SOX and SOC 2 compliance?

SOX (Sarbanes-Oxley Act) compliance and SOC (System and Organization Controls) compliance are two different types of compliance frameworks. SOX compliance stems from a US federal law that applies to publicly traded companies in the United States. SOX compliance is focused primarily on financial controls and reporting, and it requires the CEO and CFO to certify the accuracy of financial statements.

SOC 2 compliance, on the other hand, is focused on security, availability, processing integrity, confidentiality, and privacy of data. SOC 2 is a voluntary framework that requires an independent auditor to evaluate compliance regulations and is typically only shared with customers or clients as part of the sales process.

Importance of Implementing SOX and SOC 2 Compliance

Implementing SOX and SOC 2 compliance requires a commitment from the company to develop and maintain a comprehensive internal control environment related to financial reporting and access controls. The process can take time and resources, but achieving SOX and SOC 2 compliance can provide valuable assurance to stakeholders that the company is following best practices for managing risk and ensuring the accuracy of financial statements.

Implementing access controls to adhere to the principle of least privilege is essential for SOC 2 and SOX based compliance frameworks. It can be hard to know where to start when making the shift toward least privilege. A few practical steps to take are:

1. Birthright access should be minimal and focused on productivity-centric access

2. An access control matrix should dictate who can access what

3. Sensitive systems and permissions should be gated through requests and provisioned just in time

4. Remove sensitive access once the justification is lost

5. Periodically review sensitive accounts and access rights

Learn more about implementing SOC 2 and access controls in our bloghere.

Summary -

SOX compliance refers to a business’s ability to follow the regulations and requirements of the Sarbanes-Oxley Act, while SOC 2 compliance specifically addresses the responsibilities of a company’s auditors with a focus on the security and privacy of data. Both SOX and SOC 2 compliance are strictly enforced, security and access control best practices that are a growing priority for many companies across the US. Automating comprehensive audit reports can save significant amounts of time and effort for IT and security teams while also staying up to date with SOC and SOX compliance regulations.