Audit Evolution: Thriving in the Era of SOC 2 Automation

The SOC 2 compliance market is undergoing a pivotal transformation. Recent years have seen the entrance of multiple SOC 2 automation platforms. These software providers are changing the way organizations and audit firms approach SOC 2 compliance work, bringing a complex duality for CPAs in the space - a challenge and an opportunity.

On one hand, the traditional role of CPAs in the SOC 2 market is being disrupted. Automated tools and software platforms are increasingly capable of performing tasks that were once performed manually by auditors. This shift raises pressing questions about the changing role of CPAs in SOC 2 audits and whether the importance of their expertise might be diminished in the face of technological innovation.

On the other hand, this paradigm shift presents a unique opportunity for CPAs. Rather than being viewed only as a threat to the status quo, the rise of automation can be a catalyst for CPAs to redefine their roles, expand their skill sets, and offer more specialized services. In this new era, the expertise, judgment, and advisory capabilities of CPAs become more crucial. Their ability to interpret complex data, provide strategic insights, and offer industry-specific advice can set them apart in a marketplace transformed by integrations and automations.

By embracing both the technological advancements and their unique professional capabilities, CPAs can navigate this changing landscape successfully. The disruption brought about by automation is not just a challenge to be met but an opportunity to be seized, paving the way for CPAs to reinvent their roles and continue to be vital players in SOC 2 audits.

Understanding SOC 2 Compliance

SOC 2 is a framework for evaluating control over information security at businesses, especially organizations that manage or process customer data on behalf of another business. Developed by the American Institute of Certified Public Accountants (AICPA), the SOC 2 framework is seen today as a cornerstone of trust and security in third-party risk management in the United States. This framework sets benchmarks for managing customer data based on five key principles known as the Trust Service Categories, and each category has numerous criteria.

The five Trust Services Categories and Criteria:

• Security: As the foundation of the SOC 2 framework, this category includes criteria that address the protection of systems and data from unauthorized access. CPAs can play a pivotal role in evaluating the effectiveness of security controls, guiding clients in implementing robust cybersecurity measures, and advising on best practices for data protection.

• Availability: This category addresses system availability as per agreed-upon commitments. CPAs can help clients assess their system performance, advise on improving operational efficiency, and develop strategies to minimize downtime, thus ensuring continuous service delivery.

• Processing Integrity: It focuses on delivering the right data at the right time. Here, CPAs can contribute by assisting clients in establishing reliable and accurate data processing systems, which are crucial for maintaining trust and integrity in financial and other reporting.

• Confidentiality: Protecting confidential information is vital in today’s digital landscape. CPAs are well-positioned to advise on strategies to safeguard sensitive data, ensuring compliance with this confidentiality agreements and helping clients manage their information security risk effectively.

• Privacy: With increasing concerns over personal data handling, CPAs can guide clients in adhering to privacy regulations. This involves consulting on data collection, use, and disposal practices, ensuring they align with legal and ethical standards.

As cyber threats grow more sophisticated and data privacy laws become more stringent, SOC 2's role in ensuring secure and responsible data handling practices becomes increasingly significant. Its relevance spans across various industries, from tech companies and cloud service providers to healthcare organizations and financial institutions.

The Wave of Automation in SOC 2 Auditing

The landscape of SOC 2 compliance is being fundamentally transformed with the emergence of automation platforms, which signal important changes in how SOC 2 compliance is approached and managed.

These platforms are designed to address the complexities and challenges inherent in SOC 2 compliance. They provide solutions that encompass many aspects of the compliance journey, from initial assessment to ongoing monitoring. This innovation is especially relevant in a landscape where compliance is not a one-time event but a continuous commitment.

The value proposition of these platforms is the use of systems and technology to make SOC 2 compliance processes and reporting more efficient. By leveraging integrations and by standardizing audit requests, these platforms seek to streamline and automate tasks that were traditionally tedious and time-consuming.

Specific features such as automated evidence collection, real-time monitoring, and automated report generation illustrate how these platforms potentially reduce the workload for organizations. They simplify the compliance journey, making it more manageable and less prone to human error.

Examples of SOC 2 Automation Platforms

Vanta: offers a user-friendly platform focused on Software-as-a-Service (SaaS) providers. It simplifies the compliance process for businesses, making the concepts accessible even for those without in-depth technical knowledge. The company may quote the fee of an audit engagement directly to its prospective customers, before the service organization speaks to an auditor. When quoting the audit fee directly, Vanta reduces the role of the auditor in the customer relationship.

Drata: offers a more functionality-focused platform suitable for larger companies looking to enhance their existing compliance processes. It is an automated platform that includes its integration capabilities with various tech stacks, making it versatile for different business needs. The company maintains an auditor directory and may encourage customers to find the right auditor that fits their needs.

SecureFrame: seeks to provide adaptability by focusing on a risk assessment to drive evidence collection and audit preparation procedures. The company may offer readiness assistance services directly, a service sometimes offered by CPA firms.

OneTrust: initially was created to help organizations comply with global privacy regulations, such as the European Union’s General Data Protection Regulation (GDPR); however, with the acquisition of TugboatLogic, OneTrust’s Certification Automation platform today addresses SOC 2 and other compliance frameworks.

The Impact on CPA Roles in SOC 2 Audits

The traditional roles CPAs have played in SOC 2 audits are being reshaped. As automated platforms assume more direct roles with the auditee and take over tasks like evidence collection, basic compliance checks, and routine report generation, the demand for assistance from CPAs for these traditional tasks is waning. This shift prompts a reassessment of the CPA’s role in the SOC 2 compliance process.

The skill set required for CPAs also may be transforming. No longer is it sufficient to rely solely on experience in explaining frameworks and controls or in assisting with report drafts. The CPA of the future should be adept at managing and interpreting the outputs of these automated systems and their implications for the organization. Moreover, there's an expanding need for advisory services that involve guiding businesses on the strategic implementation of SOC 2 compliance activities, advising on risk management, and leveraging compliance reports for competitive advantage.

Although this shift is disrupting the direct communications with some of the organizations being audited, it also may open new horizons for CPAs. By moving beyond the mechanical aspects of compliance, auditors can position themselves as more strategic advisors. In this reimagined role, CPAs can offer deeper insights into aligning compliance strategies with broader business objectives, and advising on continuous improvements in data security and privacy practices.

The Strategic Edge of Niche Specialization

In this evolution of the CPA’s role, niche specialization emerges as one potential tactic for CPAs to maintain and increase their relevance and value. In a market where standard compliance tasks are increasingly automated, specializing in a particular niche allows CPAs to shift their activities to ones of higher value. Specialization provides value that software alone cannot replicate, especially in complex and nuanced areas of compliance.

There are many ways to specialize in relation to SOC 2 audits. Some examples include the following:

• Focusing on in-depth expertise in a specific industry is more beneficial than a broad but superficial understanding across all industries. This is particularly true in dealing with industry-specific compliance issues where deep knowledge can make a significant difference. Industries such as healthcare, finance, or technology can be highly regulated for certain activities. Helping organizations address these challenges and nuances can be extremely valuable.

• Looking for sectors or business types that are underserved by existing automated solutions provides another path for specialization. Areas like cryptocurrency, IoT, or AI are burgeoning fields with a growing need for specialized knowledge in data security and privacy. CPAs with expertise in these areas may be in increasing demand as these technologies continue to evolve. By identifying these types of gaps, CPAs can position themselves as essential partners for these businesses.

• There are areas where demand is high, but automation falls short. For example, organizations with significant physical security requirements, like datacenters, would not receive as much benefit from an automated solution as a SaaS provider would. With the globalization of business, there also is a growing need for expertise in international compliance. CPAs who can navigate the complexities of mapping SOC 2 standards across different regulatory landscapes will be invaluable to businesses operating internationally.

Becoming a thought leader in a chosen niche like the ones described above can set CPAs apart. This can be achieved through publishing articles, participating in industry events, and being active in professional groups, thereby solidifying their status as experts.

Examples of Niche Market Strategies by CPA Firms

The concept of niche specialization is not new to CPAs. Many firms have successfully carved out unique market spaces by focusing on specific client segments or service areas. Below are three illustrative examples of CPA firms that have effectively utilized niche market strategies in other practices besides SOC 2 auditing, and those ideas can serve as inspiration in this area:

All About Accounting: Specializing in Virtual Education Sellers

• Targeting a Unique Market: All About Accounting has honed its focus on a very specific niche: virtual education sellers, particularly those in the “teachers pay teachers” sector. By specializing in this area, the firm addresses the unique financial and compliance needs of educators and content creators in the digital space.

• Understanding Sector-Specific Challenges: Their specialization allows them to deeply understand the challenges and opportunities specific to digital education platforms. This includes navigating online revenue models, digital royalties, and the nuances of intellectual property in the education sector.

• Tailored Services: The firm offers tailored services that cater to the specific accounting, tax, and compliance needs of their clients in this niche, setting them apart from generalist accounting firms.

DeafTax: Providing Tax Preparation Services for the U.S. Deaf Community

• Addressing a Community's Needs: DeafTax offers a unique and vital service by providing tax preparation and accounting services specifically for the U.S. Deaf community. This specialization not only meets a market need but also addresses an often-overlooked aspect of accessibility in financial services.

• Accessible Communication: A key feature of their service is the provision of accessible communication in American Sign Language (ASL). This ensures that clients receive financial advice and services in a manner that is both comprehensible and culturally sensitive.

• Building Trust and Loyalty: By focusing on the Deaf community, DeafTax has built a strong sense of trust and loyalty with its clients, demonstrating how niche specialization can lead to deep, long-lasting client relationships.

Kruze Consulting: Focused Services for Funded Startups

• A Niche in the Startup Ecosystem: Kruze Consulting has carved out a niche in providing accounting services specifically for funded startups. This focus allows them to cater to the unique needs of rapidly growing companies in the tech and startup space.

• Expertise in Startup Challenges: Their services are tailored to address the specific challenges startups face, such as managing venture capital funding, burn rate analysis, and R&D tax credits.

• Comprehensive Service Offering: Kruze Consulting offers a range of services including accounting, tax, finance, bookkeeping, and HR expertise, all customized for the needs of over 800+ funded startups. This comprehensive approach positions them as a one-stop-shop for their chosen niche.

These examples demonstrate how CPA firms can successfully adopt niche market strategies, offering specialized services that cater to the unique needs of specific client segments. A similar approach could be adopted by a firm or practice specialized in SOC 2 audits. They could differentiate themselves in a crowded market and find creative ways to add value for their clients, building strong reputations and sustainable business models in the process.

Broadening the CPA Role Beyond Compliance

In addition to specialization, the role of CPAs is ripe for expansion into advisory, consulting, and educational initiatives, providing invaluable insights and services to their clients.

CPAs can consult on implementing best practices in data security and compliance. This role goes further than just meeting standards; it involves advising on how these practices can be seamlessly integrated into business operations and aligned with industry standards.

There’s also significant opportunity for CPAs to provide specialized risk management consulting. This service is crucial for businesses to understand and assess the risk associated with data security and compliance, and to develop strategies to mitigate this risk effectively.

If businesses are beginning to incorrectly perceive that SOC 2 compliance can be completely automated, the need for CPAs to educate their clients about SOC 2 compliance is more important than ever. By conducting workshops, training sessions, or webinars, CPAs can help clients understand the intricacies of SOC 2 compliance and its impact on their business operations—included which parts can be automated and which parts cannot.

In situations where incidents and compliance issues escalate into crises, the expertise of CPAs becomes crucial as well. They can play a pivotal role in crisis management, helping businesses navigate through these challenges while mitigating risks and overseeing response strategies.

By embracing advisory, consulting, and educational roles, they offer more than mere compliance services; CPAs become integral partners in their clients' business strategies, leveraging compliance for broader business benefits and ensuring their indispensable value in a technologically advancing business environment.

Preparing for a Future Shaped by Innovation

As the landscape of SOC 2 compliance and accounting technology continues to evolve rapidly, CPAs must not only adapt to the present but also prepare for the future. This preparation involves understanding potential future possibilities of disruption, committing to continuous learning, and implementing strategies to remain relevant and competitive in a dynamic professional environment.

CPAs can anticipate future technological advancements and their impacts on the profession. To do so, they should stay informed about (and sometimes adopt) emerging technologies that could impact SOC 2 compliance and accounting practices. These include advancements in AI, which are likely to further automate compliance processes and data analysis.

As businesses increasingly rely on digital platforms, the role of CPAs in advising on and auditing data security measures will become even more crucial. This trend is expected to grow, with a focus on protecting sensitive financial information from cyber threats. The integration of new digital platforms into business operations will require CPAs to have a nuanced understanding of these tools, not only for compliance purposes but also for strategic business advising.

Accountants should commit to continuous learning. This could involve pursuing additional certifications in areas like data analytics, cybersecurity, or any emerging field relevant to SOC 2 compliance. When technological changes are viewed as learning opportunities, rather than as threats, CPAs can focus on enhancing their service offerings and provide greater value to their clients.

CPAs must also remain adaptable, adjusting their services to meet the evolving needs of their clients. As businesses grow and change, so too will their compliance and financial advisory needs. Seek inspiration by engaging in networking and professional development opportunities. Staying connected with industry peers and thought leaders can provide insights into emerging needs, trends, and service offerings.

As CPAs navigate a future shaped by constant innovation, their success will largely depend on their ability to anticipate changes, continually enhance their skill sets, and adapt their services to meet the changing needs of the market. By doing so, they can ensure that they not only remain relevant but also thrive in the evolving landscape of SOC 2 compliance and accounting technology.

Conclusion

The dual nature of disruption and opportunity is evident in the automated SOC 2 era. While automation presents challenges to traditional CPA roles, it also opens doors to new possibilities, service areas, and ways of adding value to clients. CPAs who recognize and capitalize on these opportunities can not only survive but thrive in this new environment.

The future for CPAs in the era of automation is still bright, but it requires a proactive approach. By embracing change, specializing in niche areas, expanding their service offerings, and committing to lifelong learning, CPAs can ensure that their role remains not just relevant but indispensable. The evolving landscape presents an exciting opportunity for professionals to redefine their value propositions and continue to play a critical role in the world of business.