Budgeting SOC 2: What is the Cost of SOC 2 Audit for Your Business?
Explore how much you need to spend on a SOC 2 audit.
Key things businesses have to invest in are time, money, and effort, and SOC 2 compliance is no exception. It’s an investment in a company’s future, a necessary step for organizations to establish their diligence in managing data.
The question often arises, “What is the cost of SOC 2 audit ?” This comprehensive guide will walk you through each aspect of the costs of SOC 2 audit involved.
The Framework of Cost of SOC 2 Audit
Before understanding the cost breakdown of a SOC 2 audit, it’s essential to comprehend the variables affecting the potential cost of SOC 2 audit.
Variable 1: Type of SOC 2 Audit — Type 1 or Type 2
The SOC 2 audit type that your organization chooses will significantly influence the overall cost. A SOC 2 Type 1 audit focuses on the design of the controls at a specific point in time.
On the other hand, the SOC 2 Type 2 audit centers on the operating effectiveness of those controls over a set period.
Since the Type 2 audit is more in-depth, requiring ongoing evaluation and documentation, it is usually more costly.
The cost for a Type 1 audit is anywhere from $10k-$20k , and approximately $30k-$60k for a Type 2 audit.
Variable 2: Trust Service Criteria Scope
The number and specific Trust Service Criteria (TSC) included in your audit also contribute to the cost. These criteria focus on aspects like privacy, security, availability, processing integrity, and confidentiality.
The more TSCs included, the more extensive your audit, hence the higher the audit cost.
Variable 3: Size of Your Organization
The size of your organization has a direct impact on the SOC 2 audit cost. Larger organizations usually have more intricate systems and processes, requiring a more intensive examination, driving up the audit cost.
However, smaller companies aren’t always cheap to audit, due to potential deficiency in formal procedures or lack of staff to coordinate audit activities, which might elongate the audit process and increase expenses.
Variable 4: Complexity of Systems and Internal Control Policies
The complexity of an organization’s systems and internal policies also affect the cost.
An organization with multiple systems across various locations or those following complex internal procedures will require more time for the auditor to adequately assess the controls, leading to an increased charge.
Variable 5: Outsourced Services
Companies often hire external service providers to assist with audit readiness or to perform the audit. The cost for such services, like hiring a CPA firm, can add a significant amount to the overall SOC 2 audit cost.
Other associated outsourced services may include security tools or employee training to close any gaps that the auditor identifies.
SOC 2 Type 1 and Type 2 Audit Costs
If we make a direct comparison, you could anticipate the SOC 2 Type 1 audit to range around $10–20k for the audit alone, while the SOC 2 Type 2 audit cost averages between $30–60k.
The Cost of SOC 2 Type 1 Audit
The Type 1 report is a representation of a company’s security systems, a snapshot if you will, for that given moment of the audit. These reports tend to run less detailed than Type 2, hence they are also less expensive. You can estimate the cost to start around $5k.
Some companies are ditching the Type 1 report in favor of Type 2 audit, considering it as a more cost-effective route for their operations.
The Cost of SOC2 Type 2 Audit
One key difference in SOC 2 Type 1 and Type 2 reports is the period that’s being evaluated.
Type 2 reports scrutinize a company’s security controls over time, usually for a span of 3–12 months. The more areas to review is one reason for a higher cost associated with Type 2 audit.
For the audit alone, it may cost an average of $30–60k, and the total tally can even cross the $100k mark for some companies.
Additionally, there are costs like readiness assessments, team training, and potential loss of productivity.
Additional Costs of SOC 2 Audit
The standard quote for a SOC 2 audit typically ranges from $5,000 to $60,000. It’s worth noting that these costs include more than just the auditor’s fees.
A firm certified by the AICPA to conduct SOC 2 audits, for instance, charges $20,000 for a SOC 2 Type I audit and $30,000 for a SOC 2 Type II. On top of this, they offer a gap assessment service at an extra charge of $15,000.
They also offer remediation services for SOC 2 at variable additional costs. When all these costs are combined, the final total can swiftly approach six figures.
Numerous associated costs need to be accounted for as well:
Setup Costs: $15k-$85k
Preparing for a SOC 2 report may cost between $15k and $85k. These costs might include new software or improving current controls.
It’s advisable to carry out a readiness assessment, even though it’s optional, as it helps avoid re-auditing and identify important rules for your report. A professional to conduct this check and a gap analysis costs around $15k.
Legal Cost: Variable
An often overlooked expense during this process are the legal fees associated with reviewing agreements with customers, vendors, contractors, and employees — as their data protection policies can affect audit readiness.
Tools and Training Cost: Variable
After the gap analysis, the next step is addressing identified deficits that may impact your SOC 2 report’s outcome negatively. These could range from new security tools and team training to hiring additional resources.
Companies often bring the firm that conducted its readiness assessment on board to help bridge identified gaps before the audit. If you go this route, be prepared to spend an additional $25,000 to $85,000, depending on your systems’ scope.
Audit Costs: $5–60k
The cost of the audit hinges on several factors. The more Trust Services Criteria you opt for, the higher the expense due to the expanded audit scope and required auditing procedures.
The size of your firm also influences the audit fee, with larger entities generally facing higher costs. Moreover, the CPA firm you engage plays a part in determining the price — experienced SOC 2 auditors might charge more, but their reports usually carry considerable influence.
Maintenance Costs
The validity of a SOC report is typically limited to 12 months after its publication. Consequently, to maintain SOC 2 compliance, an annual audit is required.
Miscellaneous Costs
Additionally, there are many subtle ongoing costs to keep in mind when undergoing a SOC 2 audit.
Such costs include productivity expenses (when key personnel must redirect their focus to SOC 2 compliance) and regular security training costs.
Conclusion
So, the cost of a SOC 2 audit can range widely depending on various factors.
SOC 2 compliance is not a one-time event, but rather an ongoing commitment to maintaining set controls and procedures for data security, affecting cost over time.
While it is an investment, achieving SOC 2 compliance demonstrates your organization’s dedication to data security, therefore, safeguarding reputation and establishing greater trust among clients and potential customers.
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