SOC 2 Audit Cost: The Complete Guide
SOC 2 audits are crucial for tech businesses that store customer data in the cloud and offer services to various organizations.
SOC 2 audited companies certify that they use adequate data security measures to ensure that customer information is secure from any kind of manipulation, unauthorized access, theft, and misuse.
Their claims are verified through a SOC 2 audit by an independent audit firm commissioned by the American Institute of Certified Public Accountants (AICPA)
How much does a SOC 2 audit cost? Unfortunately, there’s no simple answer to this question since it depends on various factors.
In this in-depth guide, we’ll break down all the primary factors that impact a SOC 2 audit cost to help you determine a ballpark figure for budgeting.
What is a SOC 2 Audit Anyway?
A SOC 2 audit is a company-wide certification that evaluates an organization’s standards regarding its core data security infrastructure, information handling practices, consumer privacy, and confidentiality.
For this purpose, an SOC 2 auditor needs to evaluate various aspects of a company’s systems and processes. Some of them are:
- Server management and infrastructure
- Data access rights
- Data security checks
- User accessibility hierarchy
- Data handling processes and documentation
- Information access details and protocols
- Disaster management plan
Apart from these areas, an auditor also evaluates the expertise and skill levels of a company’s data security teams and any employees involved in customer data handling.
SOC 2 Costs by Audit Type
Because of these variables within the scope of the audit itself, the ultimate cost of the SOC 2 audit heavily depends on the size of an organization and its existing security protocols.
Larger organizations with more complex hierarchies often have to spend more on their audits than startups and smaller tech companies.
Also, the fees you pay for the audit itself are the beginning, not the end. Often there will be pre-audit and post-audit expenses to cover as well. We’ll talk about those a bit later in this post.
And as if that weren’t enough, there are multiple types of SOC audit reports your company may need, and each type has its own separate cost.
So while the final cost of a SOC 2 audit can fall anywhere between $10,000 to $100,000 depending on various factors, that’s not a particularly useful range to leave you with.
To narrow it down some more, let’s start by looking at the different audit types. There are two types of SOC 2 audit reports.
The SOC 2 Type 1 Audit Report
SOC 2 Type 1 audit report evaluates the security practices, infrastructure, employee skill level, and an organization’s overall ability to securely manage customer data at a specific date.
SOC 2 Type 1 reports are usually smaller in size, cost significantly less money than a Type 2 report, and give the readers a snapshot of a company’s data privacy standards at a given date. It can take a company between 2-6 months to prepare for a Type 1 audit, and the audit itself can take 4-6 weeks to complete.
A SOC 2 Type 1 report’s estimated cost is anywhere between $10,000-$60,000 depending on the company’s size and existing privacy standards.
The SOC 2 Type 2 Audit Report
SOC 2 Type 2 audit reports are much more comprehensive and detailed than Type 1 audits. Unlike Type 1 reports, SOC 2 Type 2 audits analyze an organization’s data security and consumer privacy practices over a more extended period of time.
The preparation time for a Type 2 audit is similar to a Type 1 audit. However, the duration of a Type 2 audit is significantly longer and can take between 6-18 months, depending on the scope of the audit.
In addition to covering everything the Type 1 audit does, this audit evaluates the consistency and reliability of your systems, effectiveness of your policy implementation, skill development of your teams, and various other important aspects related to the security of customer data. Ultimately the Type 2 audit serves as a complete manual for your company’s information security standards–a valuable asset to share with potential partner orgs before they start working with you.
A SOC 2 Type 2 audit report’s estimated cost can be anywhere between $30,000 to $100,000. Once again, the final costs will be determined by the company’s size, existing policies and systems, and the audit scale.
Okay, so now we have a sense of the two different audit types and how they differ in both scope and cost range. Now let’s look at the other costs you’ll need to keep in mind.
To calculate the actual cost of SOC 2 audits, you need to consider the various expenses you’ll need to bear before, during, and after the audit process.
Plus, you also need to consider the time your employees will dedicate to this audit and its impact on their original operational activities.
Pre-Audit Costs
The pre-audit phase of the SOC 2 audit consists of activities that an organization needs to perform to ensure it is ready for the audit.
This is where you’ll be spending the bulk of your money, especially if your organization doesn’t have existing security infrastructure or is investing in a SOC 2 audit for the first time.
Here are some of the main costs you’ll need to incur at this stage.
Internal Team Development
When your organization starts preparing for a SOC 2 audit, it needs to create an internal team of employees to oversee and manage the whole process.
This team would be responsible for every task related to the SOC 2 audit preparations. Ideally, it should be led by a senior executive in your company or a decision-maker with complete authority so that it can act fast without unnecessarily waiting for approvals and other bureaucratic hurdles.
This team should consist of members from your core data security, server management, legal, customer services, and product teams. They’ll work independently to ensure that your organization is fully prepared for the SOC 2 audit when you finally initiate it.
Since SOC 2 audits can take anywhere from six months to more than a year, your internal team will need to work on this project diligently to ensure it gets done in time.
Your company would also need to ensure that there are no unnecessary changes to the team so that its members can work smoothly without any interruptions.
When calculating a SOC 2 audit cost, you’ll need to consider the payroll and overhead costs associated with these team members.
Internal Requirement Gathering
Once your internal audit team is formed and ready to go, it needs to start work by doing a comprehensive analysis of your existing security standards given the SOC 2 certification requirements.
For this purpose, the team would need to get familiar with the SOC 2 audit requirements and evaluate each aspect of your company’s systems to see where you currently stand.
This process could take anywhere from a few weeks to several months, depending on the size of your company.
At the end of this step, you should have an assessment report by your internal team that clearly highlights how your systems and processes stack up against the recommended standards of SOC 2 certification.
System Upgrades
Preparing for a SOC 2 audit and complying with the minimum requirements often means that companies need to upgrade their hardware and software infrastructure.
This could mean investing in a completely new system or bringing the existing systems in line with audit requirements.
You also may need to invest in better servers, security software, and technologies such as two-step authentication and biometric verification. You’d also need to set up backup servers, refine your access controls, and invest in various software licenses to ensure that your consumer data is completely secure.
The total cost of these upgrades would depend on your hardware and software choice, plus the scale of implementation.
Nevertheless, you’ll need to consider these costs as a part of the pre-audit process.
Hiring, Training, And Team Building
SOC 2 audit also requires that you appoint skilled and well-trained professionals to oversee the data security in your company.
For this purpose, you might need to hire new employees, train the existing ones to improve their skill sets, and work on the overall team building for your company’s information security team.
The cost of this step would again depend on your team’s existing skillset and structure.
Processes and Documentation
SOC 2 audit requires that a company has well-defined and documented processes for collecting, securing, managing, and accessing customer data.
If you haven’t documented your security processes yet, you’ll need to do it before going into the audit process. Your internal team could do this in coordination with a processes and documentation expert.
Readiness Assessment
Once you’ve aligned your company’s procedures and systems with the requirements defined in SOC 2 audit certification, you should ideally go for a professional readiness assessment before heading into an official audit.
Most organizations hire external firms to conduct a readiness assessment in coordination with their internal team. However, your internal team can also perform a readiness assessment if it has the necessary skillset.
Audit-Specific Costs
After the pre-audit phase is complete, you’ll head into the audit phase, which comes with its own set of costs and expenses.
Let’s break them down one by one.
Hiring An Auditor
Only an AICPA-approved audit firm can conduct a SOC 2 Type 1 and Type 2 audit. However, you still have various options when choosing an audit firm.
If you go for one of the world’s top firms like KPMG or Fergusons, your audit cost could go up significantly (as in, by several hundred thousand dollars).
If you’re looking for a cheaper option, you could go for a smaller firm approved by the AICPA and has the necessary expertise in information security audits.
You could also hire an AICPA-approved consultant firm or a cybersecurity CPA firm with experience in conducting SOC 2 audits. Many of these firms only conduct SOC 2 and other related information security audits and are much cheaper than the bigger audit firms.
Paying The Audit Fee By Type
We’ve already discussed SOC 2 audit types and their costs in detail. Your overall audit costs rely heavily on the type of audit you’re performing. Many organizations go directly for a Type 2 audit since it covers both Type 1 and Type 2 audit requirements for one price rather than two separate ones.
Managing The Audit Process
Your internal team will remain engaged with the audit firm throughout the SOC 2 audit process. The auditors will either visit your premises or stay in touch with you over the internet.
In either case, your internal team will need to accompany them and assist them throughout the process.
Your company might also bear any overheads and entertainment expenses of the auditors if they choose to conduct the audit on your office premises.
Legal Fees For Contract Reviews
SOC 2 audits also govern your company’s various contracts and agreements with other service providers and vendors. You’ll need to pay separately for the legal review of these documents by a competent legal firm/expert.
Post-Audit Costs
The bulk of your SOC 2 audit costs are incurred in the pre-audit and audit phases. However, the post-audit phase also includes certain expenses you’ll definitely want to plan for.
Maintaining Standards
Becoming a SOC 2 certified company means you’ve committed to specific information security and data privacy standards. Your primary expense in the post-audit phase is maintaining the minimum standards required in a SOC 2 certification.
Annual Re-Audits
SOC 2 certified companies need to apply for a re-audit every year to keep their certification active. The re-audit phase does not cost as much as the first audit since you’ve already invested in your infrastructure and personnel. However, you’ll still need to pay the audit fees to remain a SOC 2 certified company.
