Six steps for conducting a SaaS compliance audit
Compliance and Security
Learn what compliance audits are, why they are critical, and how to run one in six repeatable steps effectively.
Enterprise computing and data are moving to the cloud, making compliance a more significant issue for today’s businesses. As a result, compliance is now a signaling effect and potential differentiator from competitors.
One particular standard SaaS providers choose for data security is System and Organizational Control (SOC 2). SaaS providers comply with this regulation because SOC 2 protects the organization's interests and its clients' privacy.
So, if company compliance is your goal, one of the first steps to meet the SOC 2 standard is to conduct a compliance audit. But what is a compliance audit exactly?
What is a compliance audit?
A compliance audit is an external or internal audit to check if an organization complies with regulatory guidelines.
After review, compliance auditors produce audit reports. These reports reveal the company’s strength and the comprehensiveness of its compliance readiness, risk management methods, information security policies, and user access controls. Organizations can then correct their process and policy shortcomings using a final analysis report.
Likewise, other audits, like IT audits, might review security issues, compliance with HR laws, or quality management systems.
Why is a compliance audit important?
Compliance auditing is essential for big or small businesses for many reasons. Performing a compliance audit can:
- Identify gaps in an organization’s regulatory compliance processes and internal controls
- Improve detection and prevention of noncompliance or compliance violations
- Create ways for process improvements
- Help protect your company from penalties and litigation
Why conduct a SaaS compliance audit?
As previously mentioned, some SaaS providers comply with SOC 2—an auditing process by The American Institute of Certified Public Accountants (AICPA) that ensures SaaS providers secure personal data.
Because it’s designed to protect a customer’s data, SOC 2 is a minimum compliance requirement that customers consider when examining SaaS services. In other words, if your company achieves and sustains SOC 2 compliance, it can attract more customers and increase sales.
Note: Some companies must comply with the Health Insurance Portability and Accountability Act (HIPAA) regulation for healthcare-related personal information and data.
Learn more in our guide: “What Every SaaS Business Should Know About Compliance.”
Examples of a compliance audit
SOC 2 audit
A third-party CPA firm typically performs a SOC 2 (System and Organization Control 2) audit. It confirms that your organization's IT controls effectively keep personal information (such as customer data) secure.
A HIPAA (Health Insurance Portability and Accountability Act) audit is specifically for health care providers and health coverage plan providers. It audits your company’s compliance with the act, focusing on adequate health information storage and security protocols.
This audit confirms your compliance with EPCRA (Emergency Planning and Community Right-to-Know Act), legislation governing the storage, use, and release of certain dangerous chemicals, and preparing and distributing emergency plans.
Challenges of a compliance audit
No existing audit trail
An audit trail is a chronological sequence of events occurring in a business process.
When audit trails don’t exist, it’s difficult for auditors to authenticate operational actions or changes and can put your business at risk of non-compliance with specific regulations.
Incomplete or inconsistent data
It’s difficult to authenticate and audit data if it’s missing, incomplete, or stored in different places, manners, or languages.
Companies that work in different digital workspaces run the risk of siloing data, making compliance audits more challenging.
Failure to learn from mistakes
Part of running a compliance audit is understanding where you might need to catch up on regulatory requirements and taking action to rectify such shortcomings.
If your team decides to use compliance audits to make effective changes, you won’t continue to encounter the same issues each time.
Differing understandings of control requirements
When a team sets out to perform a compliance audit, it’s vital that everyone first agrees on the scope of the audit.
In particular, it’s essential to ensure everyone interprets compliance regulations the same way to prevent the emergence of different data handling or storage protocols.
Insufficient time to prepare the audit
As we explore below, auditing can take up to a year, especially for larger companies, and may involve collaborating with third-party external auditors.
Please allow sufficient time to audit and report to impact your auditing standards positively.
Typical SOC 2 audit timeline
Completing a typical SOC 2 audit can take 6 to 12 months, depending on the type. In a nutshell, a standard compliance audit procedure consists of the following phases:
- Preparation: Develop a compliance program, create policies and procedures documentation, update internal business processes, and design employee training and education. This step typically takes 1 to 3 months.
- SOC 2 Type I audit: This is optional and incurs additional costs, but it’s a helpful tool when needed.
- Documentation: Organize your documents and evidence for auditors. This usually occurs in the 2 to 3 weeks following the audit.
- SOC 2 Type II audit: This on-site external audit takes two days.
- Final report: Once the audit is complete, you receive a draft report for review. Most auditors aim to deliver this within 2 to 3 weeks of the audit.
- Annual refresh: Repeat the process annually for continued compliance.
How to prepare for a SaaS compliance audit
Conducting a SaaS compliance audit is a big deal, specifically if a SOC 2 standard is involved. We put together the “Ultimate SOC 2 Compliance Checklist” to help you prepare. As a summary, you should:
- Define your organization’s goals
- Choose your auditor
- Define the scope
- Choose the type of SOC 2 report
- Define your process for assessment and improvement
How to conduct a SaaS compliance audit (step-by-step)
After preparing for the compliance audit, continue with the following steps:
1. Determine your workforce’s security intelligence
Look at how your employees understand and adhere to your company’s policies for a good peek into your organization's overall security.
Check and ensure employees:
- Have and use only their private accounts
- Receive the proper privilege levels
- Use strong passwords and multi-level authentication (MLA)
Evaluate your team’s competency to determine if they need additional security awareness training. Compliance officers can help train your team and manage your company’s compliance. They can also serve as internal auditors and recommend corrective action based on risk assessments.
2. Assess your customers’ security knowledge
Because protecting your customers’ data is the goal, assessing your customers’ security awareness is a must. They should know how your application’s MLA works and what to do should a security incident occur.
3. Check data protection
At the core of this audit is examining how the customer’s data is protected. In particular, review how the company protects data during its three states: data at rest, data in use, and data in transit.
Data at rest
In this state, data is usually in the cloud, protected by firewalls and antivirus programs. Cloud providers might also include additional defensive layers to protect against hackers. Moreover, an added security benefit of the cloud is that it stores data across multiple locations, reducing the chances of total data loss.
Data in use
When data is in use, it’s more vulnerable when at rest. This added vulnerability is because the more people with access, the more at-risk data is to compromise. To lessen this risk, companies authenticate and control who gains access to the data, tracking and reporting any relevant activity that looks suspicious.
Data in transit
Data is most vulnerable because cyber criminals with the right tools can intercept it as it moves. To ensure its protection, transmit the data through an encryption platform that integrates with your systems and workflows. In addition, make sure the data is:
- Validated and sanitized on entry
- Encrypted, with the encryption keys adequately handled
- Protected, with a tested recovery plan
- Following a strict retention policy
4. Measure code quality
Code quality can determine the application’s security level. For this reason, detecting potential vulnerabilities early in the software development life cycle is crucial.
To measure code quality, look at efficiency, maintainability, reliability, and security. Here’s how these areas break down:
- Ensure the code complies with object-oriented programming best practices.
- Check that the code follows database and SQL best practices.
- Scan for and evaluate computations in loops that could be costly.
- Scrutinize static connections against connection pools.
- Check that the code follows garbage collection best practices.
- Ensure the code is well-structured.
- Examine the cyclomatic complexity.
- Analyze the dynamic coding level.
- Scan for and manage the over-parameterization of methods.
- Watch for hard coding of literals.
- Inspect and control superfluous component size.
- Ensure thread safety in multi-threaded environments.
- Review for the safe use of inheritance and polymorphism.
- Examine the resource bounds management and complex code.
- Look at allocated resources and timeout management.
- Check for hard-coded credentials use.
- Scan for buffer overflows.
- Look for missing initializations.
- Ensure array indices are validated correctly.
- Inspect for and ensure proper locking.
- Review for no uncontrolled format strings.
5. Inspect the application’s platform’s security
The platform on which your application lives is as vital to security as it is to the application. Many established SaaS vendors include security measures, but you should also verify them.
In addition, ensure the proper security measures are in place and that the platform follows the appropriate safety standards.
6. Evaluate the application against the compliance standard
After conducting an audit, evaluate how it complies (or doesn’t) with the standard, like SOC 2. The process can be as hands-on as reviewing a compliance audit checklist or as hands-off as employing a professional security team to conduct an external compliance audit.
Do you meet the standard? What needs corrective action? Of course, most external auditing firms will follow up to help you fix risks or deficiencies.
How Vendr can help with your compliance audit
Vendr is suited to complement and support compliance audits—from reviewing your SaaS tools and SaaS purchasing to checking compliance and security (SaaS management). In particular, our platform helps procurement teams automate their workflows for faster and more frequent interviews, data collection, and analysis automation.
Vendr can also trigger stakeholders’ notifications to complete open tasks or deliver regular reminders to ensure everything gets done. By maintaining one record system, Vendr keeps the right stakeholders involved and communication lines open.