9 Best Internal Control Examples

When developing a compliance plan for your company one of the first tasks is identifying how your information security management system operates. Below we have provided several internal controls examples to demonstrate the types of polices, procedures, and technical configurations a company may establish to build a strong control environment. Ideally, a pre-cursor to establishing internal controls is a risk analysis.

Controls are a means to mitigate risk. Adding a control could be seen as slowing down business, so it’s necessary to ensure that only the right controls are prioritized and implemented. You may be asking, what are internal controls? It can be anything from a policy that directs what should be done, a procedure which describes how something should be done to reduce risk, a technical configuration to prevent information exposure, or monitoring to detect malicious activity. Controls are generally categorized as preventive or detective.

Below are 9 examples of common internal controls:

Information Security Policy – a foundational document that defines the administrative, technical, and physical security requirements of an organization. It is a document that defines how information confidentiality, integrity, and availability is protected.

Annual Security Policy Review – a procedure to ensure that the information security policy remains up to date. Over time company goals change, there are personnel changes, and new threats emerge. Reviewing your information security policy annually will keep your company current.

Confidentiality Agreement – a legal document that employees typically sign that requires them to keep all company and customer data confidential. The purpose of this is to prevent information leakage.

Encryption Policy – a document that describes how and when a company uses encryption. An example encryption policy may state that all customer data in transit or at rest must be encrypted. Policies typically also specify encryption algorithms and key lengths.

Change Management – a process that enables the secure and structured approach to management changes to system configurations or application code. Change management is a category that often includes controls as testing and QA, source code versioning, peer review, and segregation of duties between developers and production engineers.

Backup and Recovery – a process that ensures that data remains available when needed. Companies often focus a lot on backup but fall short when developing recovery plans. Backups should be tested on a regular basis.

Security Awareness Training – people are often the weakest link in any information security program. Regular security training, reminders, and documentation to prove it occurred goes a long way in keeping auditors happy.

Semi-Annual Review – just as policies and procedures go stale, this control ensures that accounts and configurations on systems remain up to date. New employees are hired, job responsibilities change, and terminations happen. This ensures that system access control remains consistent with the workforce.

Vendor Patching – keeping software such as applications and operating systems up to date is one of the best ways to prevent getting hacked. Software patching should occur on a regular basis for normal updates and immediately for critical updates.

Our cloud provider already has a SOC 2 and other certifications, do we still need to do it?

If your company is using an IaaS (Infrastructure as a Service) provider such as AWS (Amazon Web Services), you’re probably impressed with number of certifications they have collected. A SOC 2 Type II from an IaaS provider will often cover most of the physical security requirements. Depending on how your system is configured, it may cover backup & recovery, and disaster recovery portions. A SOC 2 Type II from your cloud provider will not cover your application, your internal policies, etc. Using cloud services are helpful, but will not give you 100% coverage.

How long does it take to prepare for a SOC 2 audit?

On average, going from zero to SOC 2 Type II will take from 8 months to a year. Smaller companies that don’t have many systems can often complete the process faster. To further expedite the process, it is advisable to not create all policies and procedures from scratch. Many security & compliance consultants have built vast libraries of policies and procedures that can be customized for your business and make your life easier.

We already have good security, is that enough for SOC 2?

Having good security practices in place is certainly a good start, but often not sufficient for compliance. Security does not equal compliance, and vice versa. Preparing for SOC 2 may include Security (logical & physical), Availability, Integrity, Confidentiality, and Privacy. Newer/smaller companies often prepare for a SOC 2 by creating many of these policies for the first time. The creation of new policy will often lead to the implementation of new preventative and detective controls.

Who typically leads a SOC 2 compliance effort in a company?

Large organizations typically appoint a Chief Security or Chief Compliance Officer to manage audits from beginning to end. Smaller companies tend to outsource expertise and form a team to prepare for compliance. It is best implemented as a team effort because policies changes will impact everyone in your company. As with any major project, executive buy-in is key. The value of compliance isn’t always apparent and having the right people on board will help immensely.

How do companies prepare for SOC 2?

SOC 2 preparation usually happens in a few stages. First, your company should identify all “key systems” and perform a gap analysis against all requirements documented in the Trust Services Principles and Criteria. Next, existing security controls should be identified and policies and procedures should be written to meet all requirements. This can take anywhere from a few weeks to up to 6 months, depending on the size and maturity of your company. At this point you are ready for the SOC 1 Type I audit. A SOC 2 Type II audit is typically performed 6 months later.

What is the difference between a SOC 2 Type I and SOC 2 Type II audit?

A SOC 2 Type I audit is an audit reporting on the policies and procedures a company has established at a particular point in time. It is generally the first step taken and is often referred to as “test of design.” It will answer the question, “are the controls properly in place?” A SOC 2 Type II audit is a “test of effectiveness” over a period of time. The “period of time” is generally no less than 6 months and no more than a year. It will answer, “is your company following it’s own policies?”

How is SOC 2 different from SSAE 16?

When the industry replaced SAS-70 reports with SOC 1 and SOC 2 reports as the new standard, there was initially a lot of confusion. SOC 1 reports are often referred as “SSAE 16.” These reports typically only cover the controls that support financial reporting. SOC 2 on the other hand is an audit against the Trust Services Principles and Criteria. SOC 2 reports are generally best for technology service providers that extend beyond financial services. SOC 2 is the best choice for most businesses.

How will a SOC 2 audit benefit my business?

If you’re selling services to mid-market and enterprise companies you may be asked, “Do you have a SOC 2 Type II report?” If the answer is “no” your company may find it more and more difficult to make these sales. With almost daily headlines of companies being breached, the need for information security and compliance (with laws and industry standards) continues to increase. A SOC 2 report will help your company sell to bigger and bigger customers.

What kind of businesses should be thinking about SOC 2?

A SOC 2 report will help your customers trust that you follow security best practices. SOC 2 reports are generally carried out by businesses performing information systems processing or technical services to other business. The SOC 2 report provides third party assurance that an adequate baseline of Information Security controls have been put in place. Businesses of all sizes can have a SOC 2 audit, however, it is most beneficial for businesses looking to sell in the enterprise market.