SOC 2 budgeting – How much does SOC 2 cost in 2023?

SOC 2 compliance is a set of standards created by the American Institute of CPAs that outlines how customer data should be managed using five trust principles: security, availability, processing integrity, confidentiality, and privacy.

The purpose of this guide is to provide a clear understanding of some of the key SOC 2 issues related to budgeting.

There are two types of SOC 2 audits, and the total cost of either is very different from that of SOC 1 audits. In short, SOC 2 audits are expensive, and understanding the above criteria is crucial to determining their total cost.

Quoting a SOC 2 audit price without additional context or information is difficult. There’s no single SOC 2 audit size that fits all organizations. Final audit reports may be as short as 25 or more than 100 pages. It’s obvious why a service auditor cannot quote a flat rate for every SOC 2 engagement.

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How much does a SOC 2 Type 1 audit cost?

Generally, you can expect a starting cost of between $20,000 and $60,000 for a SOC 2 Type 1 audit. A SOC 2 Type 1 audit involves passing the SOC 2 audit and proving that the business’ policies, procedures, and technologies comply with the framework’s current requirements.

These estimates don’t account for additional compliance-related expenses such as:

• Readiness assessment, which is an independent assessment made by a consultant as to whether your systems will pass SOC 2
• Dedicated in-house employee(s) or consultants
• The technical work, cultural changes, or training your business needs for putting appropriate controls in place
• Legal fees associated with reviews of agreements with outside vendors

Readiness assessments are optional reviews, and although they add to the overall audit cost, they help ensure a smooth Type 1 report process. The size of your company and the level of support needed also contribute significantly to the cost.

It’s important to review all customer agreements, vendor and contractor agreements, and employment agreements, as their data protection policies affect your data and, thus, your SOC 2 readiness. These agreements build a robust framework of responsibility assignment, allowing you to make policy assertions concerning confidentiality, privacy, and security. These may require annual revisions with each audit, something to factor in regarding ongoing SOC 2 cost. Companies often use compliance management software to help simplify this process.

How much does a SOC 2 Type 2 audit cost?

SOC 2 Type 2 certifications are a natural progression from the Type 1 report. The full cost of a SOC 2 Type 2 typically ranges from $20,000 to more than $80,000. The complexity of the infrastructure plays a crucial role in determining the total cost. This type of audit can take a while—anywhere between 6 months to a year.

The factors that play into the cost of a SOC 2 Type 2 audit include:

• The scope of services in the report
• The trust services criteria (TSC) you choose to include
• The size of your organization
• The number of in-scope processes and systems

As a given, the more systems and processes need to be audited, the more expensive your audit will be, and every system that affects client data must be audited.

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Other potential SOC 2 costs

Productivity costs

Remember that the employees committing their time to the SOC 2 process will need to do so throughout the project. They’ll take time away from their regular tasks to focus on the audit.

This loss in productivity is not something many businesses consider (at least not early enough). The primary reason is that it’s not an obvious cost to account for.

Managing a SOC 2 audit is not a job for your junior staff, IT, or security team. It’s an initiative that requires a person familiar enough with technical systems to manage the team’s time efficiently.

Staff training

Staff training is a vital SOC 2 audit cost. Beginning annual security awareness training, an educational program designed to integrate data security into your employee’s processes can be helpful. This training is either provided by a third party (usually a cybersecurity firm) or completed in-house. A typical third-party program's starting cost is ~$1000 for 50 employees.

Build vs. buy decisions

Your current infrastructure and security outlook may demand that you roll out new tools, especially as your SOC 2 program garners steam. These tools will:

• Collect asset inventory
• Generate tickets to capture compliance tasks
• Manage security and compliance reporting
• Detect threats and intrusions
• Monitor file integrity
• Manage vulnerabilities

There is usually constant debate about whether to build or buy these tools. Consider building them if you have the in-house resources to create these systems. On the other hand, if your business is smaller or doesn’t have development resources, it might be best to buy these systems.

Time and budget go a long way to determine whether you build or buy. For example, would you opt for open-source access onboarding and termination policy tools from the get-go, or would adopting another solution to move faster be better?

Each option’s total cost depends on firm size, but a mid-market company can expect to spend around $5K to $15K here.

Related: How to prepare for a SOC 2 audit.

What does the cost of a SOC 2 audit depend on?

The type of audit

The most significant factor driving the cost of this undertaking is which kind of SOC audit you opt for.

As discussed above, SOC Type I audits are more cost-effective than Type II audits, which can cost as much as $80,000 (or more for enterprise-level customers).

The scope of the audit

Your company size will have a massive impact on the cost of your SOC report.

Larger companies often have more locations and more detailed security practices. They are more likely to be using various digital workspaces (which increases the likelihood of a data breach and the amount of time an audit takes).

The maturity of your internal controls

This generally comes as part and parcel of scale (larger companies generally have more complex security tools, protocols, and controls). However, it can act as a separate variable impacting the cost of your SOC 2 audit.

Who does the audit

While you can have any certified public accountant complete a SOC audit for you (assuming it’s a service they offer), larger accountancy firms like Deloitte charge more than the small guys, meaning who you choose to complete the job will have a large impact on the final bill.

SOC 2 audit services

The auditing firm you choose is essential to the SOC 2 auditing process. As we’ve said, it doesn’t have to be a big firm, but you want to prioritize choosing a firm with extensive auditing experience.

The firm you select should then identify the employees who will complete your audit. They need to conduct background checks on those who will have access to your customer data.

Something that other businesses overlook but which holds excellent potential for the outcome of the SOC 2 audit process is to check references before hiring an audit firm. The chosen firm should also have experience in your industry or domain.

In general, your first options for a SOC 2 audit service provider include:

1. The Big 4 accounting firms: These are the firms you probably dream of engaging: Deloitte, Ernst & Young, KPMG, or PricewaterhouseCoopers. Their footprint is everywhere. One big downside is their sky-high fees. As a startup, consider other options suitable for your current financial position.

2. Mid-tier and boutique accountancy firms: While you may prefer to work with a Big 4 firm, note that your auditor’s global reputation only matters to a certain extent. Because they are smaller, they maintain a lower opportunity cost, and their fees are more moderate.

3. Cybersecurity CPA firms: These firms understand the business of accounting. More importantly, they know the domains of IT and information security. Their focus is SOC 2 and related technology, not financial statement audits.

Those who own and run these firms usually have as much experience and expertise as any Big 4, but their costs are significantly lower.

Use SaaS management for your SOC 2 audit

Visibility is priceless in distributed IT management, making SOC 2 compliance even more critical. One comprehensive tool to help with your SOC 2 audit is SaaS management. By streamlining complex and time-intensive processes, SaaS management offers a more comprehensive and straightforward overview of SaaS apps across your organization.

SaaS management helps onboard employees with the appropriate apps before they hit the ground running. It allows finance teams to get a better hold on company spending.

Additionally, SaaS management empowers your organization throughout the SOC 2 audit process, helping you manage third-party vendors and implement a stringent IT approval process. Once your process is in one place, your chosen auditor can get to work quickly.

With SaaS management, your company’s entire SaaS footprint is always organized. It provides workflows and automation to manage, control, and track organizational changes.

SaaS management tells your teams what they need to know in real-time.

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