Why is SOC 2 Important for FP&A Teams?

SOC 2 (System and Organization Controls 2) is an auditing standard developed by the American Institute of Certified Public Accountants (AICPA). It is designed to help service organizations demonstrate their ability to maintain the security, availability, processing integrity, confidentiality, and privacy of their customers’ data.

SOC 2 is important for FP&A (Financial Planning and Analysis) users and products because it ensures that the financial data they rely on is accurate and secure. When an organization undergoes a SOC 2 audit, an independent auditor evaluates the controls in place to protect data and ensure its accuracy. This provides assurance to FP&A users that the financial data they are analyzing is reliable.

What is SOC 2?

The SOC 2 (System and Organization Controls 2) framework was first introduced by the American Institute of Certified Public Accountants (AICPA) in 2010. It was designed as a set of auditing standards for service providers to demonstrate the effectiveness of their controls related to security, availability, processing integrity, confidentiality, and privacy. Since its introduction, SOC 2 has become a widely recognized standard for assessing and reporting on the security and privacy controls of service providers.

There are two types of SOC 2 reports:

Type I reports evaluate the design of the controls as of a specific date, while

Type II reports evaluate the effectiveness of the controls over a period of time, typically six months or more.

What is the main difference between SOC 2 Types I and II?

SOC 2 Type I is considered more important than SOC 2 Type II because it provides a higher level of assurance regarding the effectiveness of an organization’s controls over a period of time.

SOC 2 Type I reports on the suitability of the design of an organization’s controls at a specific point in time, while SOC 2 Type II reports on the effectiveness of those controls over a period of time, typically at least six months.

This means that a SOC 2 Type II report not only evaluates the design of an organization’s controls but also examines how well those controls are being implemented and operated over time. This provides a deeper understanding of an organization’s ability to meet its stated security, availability, processing integrity, confidentiality, and privacy (Trust Services Criteria) objectives.

At Firmbase, we take security seriously. At an early stage, we underwent the rigorous testing process and longer term maintenance practices to become fully SOC 2 Type II compliant with the aim of giving customers the peace of mind that their data is safe. It’s important to note: not all FP&A platforms are Type II compliant, and some are not SOC 2 compliant at all. When searching for an FP&A solution make sure it is in line with your own company’s safety protocols.

Why should FP&A teams care about SOC 2?

Data security: SOC 2 compliance ensures that data is securely managed and protected, which is crucial for FP&A teams who deal with sensitive financial data. It provides assurance that the organization has implemented appropriate controls to protect the confidentiality, integrity, and availability of financial data.
Compliance requirements: Many organizations require SOC 2 compliance as a prerequisite for doing business with them. As an FP&A team, you may be required to demonstrate SOC 2 compliance to your clients or partners.
Risk management: SOC 2 compliance helps to identify and manage risks associated with financial data. This is particularly important for FP&A teams, who need to assess and manage financial risks on an ongoing basis.
Reputation: SOC 2 compliance can help to enhance the reputation of an organization by demonstrating that it takes data security seriously. This is important for FP&A teams, who need to establish trust with clients, stakeholders, and investors.

Am I legally required to be SOC 2 compliant?

No, Soc 2 certification is not a legal requirement. However, it can be an important tool to demonstrate compliance. For example, in healthcare, SOC 2 can be used to show an organization has set up appropriate safeguards to protect electronic protected health information (ePHI) and adheres to the Health Insurance Portability and Accountability Act (HIPAA).