Part One – Preparing for an Audit
The Importance of Compliance
As a startup, it can be challenging to navigate the complex world of compliance. From financial regulations to data privacy laws, there are many different rules and regulations that a new business must adhere to.
However, achieving good compliance is essential for the long-term success of any startup. A well-designed compliance program can not only help a startup avoid legal and reputational risks, but it can also improve overall efficiency, productivity, and business growth.
Understandably so, compliance tends to be a pain point for most businesses, and it doesn’t help that it can present itself unexpectedly at times. When the Head of Sales is trying to finalize a deal with an enterprise client and that client requests a SOC 2 report, would you be prepared in this scenario?
These are the most common reasons we see startups beginning the compliance process:
- A prospect has an audit requirement that you haven’t obtained (yet)
- Your company has a goal to grow into the enterprise segment
- You’re in a highly competitive and regulated market where compliance is table stakes
In this guide, we’ll explore what good compliance looks like for startups, and provide tips and best practices for achieving compliance excellence in the early stages of your business.
Let’s begin your startup’s roadmap to readiness.
Step 1: Define Your Audit Objectives
For ease and simplicity, we’ll walk through our process with a SOC 2 attestation as the goal. Before you throw yourself and your team into the bottomless pit known as audit preparation, you may want to take a few minutes (or days) to get aligned around why you’re pursuing SOC 2 compliance in the first place. Whether it’s one of the reasons above or something else, what information is your customer hoping to learn from the audit, and by what date are they expecting to see a report?
Why is asking questions important?
Accurately defining your audit objectives will help you better determine the scope of your audit and what evidence and documentation you will need to submit to an auditor. For example, if your customer is concerned about data confidentiality, then you may want to consider adding the ‘Confidentiality’ and ‘Privacy’ categories and their corresponding set of criteria to your audit scope.
When should I start preparing for a SOC 2 audit?
Equally important as determining the scope of the audit is having a clear understanding of your audit target date. Generally speaking, since the audit process can be lengthy and can involve work you haven’t yet accounted for, you should get started as early as possible.
Additionally, some SOC compliance tasks may require the purchase of a third-party tool (for example, a tool that helps you with vulnerability scanning or endpoint management) and kicking off the process as soon as you can allow you more time to plan, discover, integrate, and become familiar with using such tools.
What type of audit should I pursue?
You can choose to pursue SOC 2 Type I, or SOC 2 Type II. There are valid reasons to choose either one, and your decision will depend on your specific requirements. A Type I audit is quicker than the more comprehensive Type II, mostly because the Type II process involves a three to six-month observation period, whereas, in Type I, your controls are verified only once. If your customer wants to see something quickly, you may decide to show a Type I attestation while you and your team work towards a Type II report.
Step 2: Determine the Scope of Your Audit
Once you’ve defined your audit objectives, you will need to determine the scope. As you may expect, the bigger the scope, the more time-consuming the process. Unless you’ve got unlimited resources, you will need to tightly manage the scope of your audit.
What do you mean by “scope”?
As part of a SOC 2 audit, you will show how your infrastructure, software, procedures, policies, people, and data adhere to the Trust Service categories (security, availability, confidentiality processing integrity, and privacy) that are part of your scope. Reducing scope — by choosing fewer of these categories — means that fewer of your resources may need to be examined by an auditor. Your scope will be based on your objectives.
When it comes to SOC 2, there isn’t a one-size-fits-all approach, so the good news is that you get to decide what aspects of your business you would like observed and audited as a part of this process. This is why we highly, highly recommend that you define your audit objectives well in advance.
Check out our Audit scope article for a deep dive and guidance on how to define your scope.
Step 3: Enable Your Team
After you’ve made the decision to pursue an attestation whether it’s SOC 2 (or something else), here’s something to keep in mind when drafting your audit preparation strategy. You may want to create a task force of employees from the IT or security team, with support from team members familiar enough with your technical systems. Having an executive or manager own this process with the team will also be hugely beneficial.
The SOC 2 compliance process requires commitment, and team members may need to take time away from their other tasks to focus on preparing for an audit. You should account for a loss in productivity and ensure you are staffed accordingly.
Having a strong compliance program is important for your startup – it allows you to operate within the bounds of the law, protects the business and its parties, and can give you a competitive edge if utilized properly.
So now that you’ve learned how to:
- Define Your Audit Objectives
- Determine the Scope of Your Audit
- Enable Your Team
You may be wondering, what’s next?
Stay tuned for the next stop on your compliance journey in Part Two – Conducting a Readiness Assessment.