6 Steps for Conducting a SaaS Compliance Audit

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 a potential differentiator from competitors.

One particular standard SaaS providers choose is System and Organizational Control (SOC 2). SaaS providers comply with this regulation because SOC 2 protects the interests of the organization and the privacy of its clients.

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. They assess the company’s strength and comprehensiveness of its compliance readiness, risk management methods, information security policies, and user access controls. And from a final analysis compliance report, organizations can correct process and policy shortcomings.

Likewise, other audits, like an IT audit, might review security issues, HR laws compliance, 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 choose to comply with SOC 2—an auditing process that ensures SaaS providers secure personal data by The American Institute of Certified Public Accountants (AICPA).

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: For healthcare-related personal information and data, your company would want to comply with the Health Insurance Portability and Accountability Act (HIPAA) regulation.

Learn “What Every SaaS Business Should Know About Compliance.”

Typical SOC 2 audit timeline

A typical SOC 2 audit timeline can take six to 12 months to complete, depending on the audit type. In a nutshell, a standard compliance audit procedure consists of the following phases:

  1. Preparation: Develop a compliance program, creating policies and procedures documentation, update internal business processes, and design employee training and education. Time: One to three months
  2. SOC 2 Type I audit: This type of audit is optional and incurs additional costs, but it’s a helpful tool when needed.
  3. Documentation: Organize your documents and evidence for auditors. Time: Two to three weeks before the audit
  4. SOC 2 Type II audit: This is the on-site external audit. Time: About two days
  5. Final report: Recieve a draft report for review. Time: Two to three weeks after the audit
  6. Annual refresh: Repeat the process annually.

Typical SOC 2 timeline graphic

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. So, we’ve put together the “Ultimate SOC 2 Compliance Checklist” to help you prepare. As a summary, you should:

  1. Define your organization’s goals.
  2. Choose your auditor.
  3. Define the scope.
  4. Choose the type of SOC 2 report.
  5. Prepare, assess, and improve.

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

How your employees understand and adhere to your company’s policies provides a peek into the organization’s overall security. This is because gathering a team’s competency can help you determine if they need additional security awareness training. Thus, security points to review are to ensure employees:

  • Have and use only their private accounts
  • Receive the proper privilege levels
  • Use strong passwords and multi-level authentication (MLA)

Compliance officers can help train your team as well as manage your company’s compliance. They can also serve as internal auditors and recommend corrective action based on risk assessments.

Read more about “The role of HR in ensuring SaaS security compliance in your company.”

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, you’ll 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 include additional defensive layers to protect against hackers, in addition. Moreover, an added security benefit of the cloud is that it stores data across multiple locations, reducing the chances of a total data loss.

Data in use

When data is in use, it’s more vulnerable than when it’s at rest. This added vulnerability is because the more people with access, the more 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

In this case, data is most vulnerable because cybercriminals 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 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 lifecycle is crucial.

To measure code quality, you’ll look at efficiency, maintainability, reliability, and security. Here’s how these areas break down:

Efficiency

  • 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.

Maintainability

  • 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.

Reliability

  • 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 timeouts management.

Security

  • 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 as part of their services, but you should also verify them.

Also, 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

Now that you’ve conducted an audit, evaluate how it complies (or doesn’t) to the standard, like SOC 2. With this in mind, 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 Blissfully can help with your compliance audit

Blissfully is suited to complement and support compliance audits—from reviewing your SaaS tools and SaaS spending to checking compliance and security (SaaS management). In particular, our platform can help automate your workflows for faster and more frequent interviews, data collection, and analysis automation.

It can also trigger stakeholders’ notifications to complete open tasks or set regular reminders to ensure everything gets done. By maintaining one record system, the platform can keep the right stakeholders involved and open communication lines.

To learn more about how Blissfully can help with your compliance audits, request a demo today.