Global information technology (IT) spending on devices, data center systems/software, and communications services reached $4.26 trillion in 2021 and is expected to increase to around 4.43 trillion U.S. dollars at the end of 2022. With this new, skyrocketing growth, organizations face complex new compliance and IT security challenges in how data and information are stored.
Every organization relies on certain auditing and compliance aspects because they’re essential in a company’s corporate governance. Combined, they ensure that the organization’s internal and external policies are in order and operating efficiently.
While compliance and auditing in IT security are two sides of the same coin that satisfies regulatory requirements, both have different roles with a slight nuance.
Understandably, since they overlap in the process of examining a company’s regulatory adherence, it’s not uncommon to find the terms used interchangeably.
This article explains how compliance and auditing work in IT compliance frameworks, how they differ from each other, and what their key roles are.
What is Compliance in Information Security?
In simple terms, compliance is an operational function in an organization or company, and it means an organization’s adherence to legal and regulatory obligations outside of the organization.
There are many definitions and types of compliance, such as industry-specific compliance requirements, such as healthcare, corporate, financial, HR, etc. But, when information security is in question, compliance is about meeting regulatory obligations for cybersecurity, most commonly to protect data and information assets. These regulations can be on local, state, and federal levels.
Otherwise, if a company fails to meet those requirements, not only does it risk data breaches, but it may also face financial penalties, lawsuits, and reputational damage.
In order to adhere to the aforementioned obligatory regulations, a company must follow certain IT security compliance frameworks.
Simply put, the main mandates of cybersecurity compliance are to secure and protect information assets and data and to prevent any potential cyberattacks and data theft. Additionally, complying with the newest information security standards can also mean better detection of potential cyberattacks, malware, phishing, etc.
In order for a company to stay compliant with these frameworks, compliance auditing comes into play.
What is a Compliance Audit in Information Security?
A compliance audit, also known as an external audit, is a comprehensive review of a company’s adherence to regulatory guidelines that can be carried out over a fiscal year. Compliance auditing helps to identify weaknesses in regulatory compliance processes, and it also recommends methods for improving compliance.
As present cybersecurity laws and regulations are constantly modified, so must compliance programs constantly shift with these tides. This is why regular compliance auditing is crucial, as it provides companies with a dynamic outline for their ever-changing internal processes as well as external factors.
What exactly a compliance audit examines greatly depends on multiple things, such as the type of data being handled, whether or not it transmits or stores sensitive data, and whether the company is public or private.
Over the course of a compliance audit review, a compliance auditor evaluates and reports the effectiveness of certain compliance preparations, security policies, user access controls, and risk management procedures. It’s important to follow the guidance of a compliance auditor to reduce risks while also steering clear of potential legal hardships and non-compliance fines.
What is Auditing in Information Security?
Simply put, auditing is a comprehensive review of whether a company does what it says it does. Auditing ensures that the company's established policies and procedures are properly implemented and are working as intended.
In information security, auditing is the systematic evaluation of an organization’s IT infrastructure, cybersecurity, and procedural performances.
Auditing helps with identifying vulnerabilities and weaknesses to prevent data breaches, which would otherwise allow bad actors to gain unauthorized access to sensitive information.
Security auditing can also be conducted after a data breach has occurred, as well as instances where employee negligence of internal practices results in security breaches.
The audit is usually conducted by a qualified auditor, in which they review:
- risk assessment procedures for identifying weaknesses,
- internal security controls and processes,
- employee performance,
- company documents,
- compliance procedures.
Depending on the company’s size and resources, information security auditing is done more frequently (monthly or quarterly) throughout the year, as opposed to compliance reviews that are done once or twice a year.
Regular routine audits help identify faulty procedures or anomalies in a company and encourage employees to follow an organization’s security practices for faster identification of vulnerabilities.
Audits can be extensive processes – it’s advised that organizations that have gone through significant operational changes conduct an audit. Such changes could include:
- Data breaches
- Data migration
- System upgrades
- Introduction of a new compliance standard
How Does Auditing Work?
The two main goals of information security auditing are to assess an organization’s compliance posture and ensure that IT security guidelines are followed.
Other goals include:
- Help protect critical data and company information;
- Establishing or updating security frameworks, procedures, and policies;
- Compliance with both internal and external security policies;
- Monitor the effectiveness of default security strategies;
- Comparison with upcoming audits and for future reference;
- Identifying redundant resources and security loopholes.
With a proper cyber security audit, organizations won’t have an issue assessing and resolving non-compliant processes, whether it’s the SOX Act, GDPR, PCI DSS, or other compliance and regulatory requirements. For a better outcome of the review, an external auditor can conduct a further review.
Security incidents from preventable errors may discourage suppliers, customers, and other key stakeholders from corresponding with the organization.
Compliance Audit Procedures
Compliance audits comprise meetings between company staff (commonly security professionals and corporate branches) and the compliance auditor, in which they outline the compliance tasks, checklists, and guidelines of the audit.
For a successful and thorough compliance review, organizations must produce audit trails via data from event logs and internal/external audits.
For a price, the compliance assessments can also be conducted by a third-party auditor from a cybersecurity advisory firm. An external audit is a requirement for some compliance standards, such as PCI DSS.
Before compliance auditing, it’s advised for IT administrators to track, find, and prepare essential documents, authentications, logs, and IT system controls via event log managers, governance, risk and compliance (GRC) software, and other change management software.
This way, Chief Information Security Officers (CISOs) can quickly and neatly finish auditing procedures in the interest of time.
Compliance auditors are also obliged to give the C-suite and IT administrators questionnaires regarding the timeline employment history, ID revocations, which IT administrators have access to important security systems, etc.
Additionally, the company’s staff needs to be informed on their company’s security policies, including how financial statements should appear, how ID is stored, firewall configuration, how to set up strong passwords, phishing identification strategies, and other security awareness strategies.
Compliance auditors then review compliance processes for a final report. They can provide the company executives with information on their organization’s compliance levels and possible violations, as well as offer suggestions for further improvement. The final report is often then released publicly.
How is Information Security Auditing Conducted?
Auditing procedures are not the same for every type of organization, but the following five steps are almost always a major part of security auditing:
1. Establish the audit’s main goals with the company’s stakeholders.
2. Define the scope of the audit, in which the company and the auditor make a list of the assets that should be audited, like devices, software, company data, documents, etc.
3. Conduct the audit. This phase identifies the weaknesses in which the auditor lists potential threats related to each auditable component, such as data loss, equipment malfunction, employee negligence or misconduct, faulty procedures, malware, unauthorized users, etc.
4. Evaluate security and risks. Assess the risk of each of the identified threats happening and how well the organization can defend against them.
5. Determine required controls. Identify what security measures must be implemented or improved to minimize risks.
The details of these steps generally apply to all industries, depending on the external security compliance measures an organization must adhere to.
An audit typically assesses an organization’s system security and its configuration, work environment, software, how the company handles information processes, and its employee work code. A full security audit often involves both internal and external auditors.
How a company performs on a security audit depends upon certain criteria an auditor lays out for evaluating an organization’s information systems.
During post-auditing, an organization may be subject to data privacy laws, which can lay out a complex net of requirements. The results of an assessment serve as a verification for vendors and stakeholders that the organization’s defenses are exemplary and up to standards.
Automating The Audit Process
For faster cybersecurity auditing, organizations can implement a complete attack surface management (ASM) solution.
ASM software instantly detects internal and third-party vulnerabilities, automates remediation workflows, and provides detailed executive reporting.
Security teams can use this reporting to inform executive management of high-risk security issues which should be prioritized post-audit.
Following Compliance Frameworks
Compliance is regulated by specific cybersecurity frameworks that define proper security practices for organizations to follow. In order for a company to achieve compliance, its IT security teams are in charge of implementing frameworks.
These frameworks are structured according to the newest state legislations, industry regulations, and best practice standards. Some compliance frameworks are obligatory, while other frameworks are optional but still affect the overall compliance score of a company.
A compliance auditor or regulator will review the company’s security practices, policies, procedures, security programs, and security controls and determine if they meet a compliance framework’s requirements.
For example, cybersecurity companies are usually compliant with the Sarbanes-Oxley Act, in which they prove that they’ve kept their financial records for seven years. Moreover, financial service companies that rely on credit card data transmission are subject to Payment Card Industry Data Security Standard (PCI DSS) requirements.
List of Compliance Frameworks, Regulations, and Standards
Here are some of the most crucial frameworks organizations are advised to comply with regularly.
The SOX Act (Sarbanes-Oxley Act)
The SOX Act (Sarbanes-Oxley Act) is one of the most important legislations that apply to a very broad spectrum of industries. SOX made major legislative changes and regulations for financial reliability and practice.
The main task of this compliance audit is to improve the financial accuracy and reliability of corporate disclosures. The SOX Act was passed by Congress in 2002 in the wake of the accounting scandals regarding Enron, Global Crossing, and World.com, where false financial statements were issued.
The act requires all public companies to keep their financial records for up to seven years. More specifically, it affects information security, requiring all IT communications to be backed up and secured with a disaster recovery infrastructure. Additionally, it has an effect on internal controls reporting, data protection, and accountability for executives.
The PCI-DSS (Payment Card Industry Data Security Standard), formed in 2006 by Visa, MasterCard, Discover, and American Express (AMEX), is a group of 12 security regulations for all companies that handle how customers’ credit card information and customer data is managed, transmitted, stored, and processed.
The act helps in clarifying operating guidelines for how businesses and organizations handle consumer credit card information and to protect consumer privacy and customer credit card information in order to reduce fraud.
The SOC 2 (Systems and Organizational Controls) compliance audit, as defined by the AICPA (The American Institute of Certified Public Accountants), is a strict data compliance standard that encompasses modern technology, information security companies, vendors, and service providers who store customer data and private information in the cloud.
SOC 2 compliance is in two parts, and it takes up to a year of careful preparations in which companies develop privacy policies and procedures, update and maintain security controls for reducing risk and confidentiality, and identify the scope of the audit for their enterprise.
The ISO (International Organization for Standardization) made the ISO 27000 family of internationally recognized security standards that apply to all kinds of businesses.
Specifically, the ISO/IEC 27001 (aka ISO 27001) is a widely-adopted security standard for cyber attack resilience that comprises data security policies and processes that offer companies guidance on better information security postures, maintenance, and management.
The purpose of this framework’s standards is to help businesses maintain their information security (InfoSec) management systems and code of practice for reducing security risks and protecting important information systems.
To meet these standards, organizations are required to implement certain security controls to assess the effectiveness of their cybersecurity practices. In most countries, complying with ISO/IEC 27001 is not mandatory but highly recommended for information security and financial sectors.
The ever-increasing demand for this certificate is owed to the fact that the framework offers advanced protection of sensitive data, as shown by the ISO Survey 2018.
The ISO 31000 family of standards governs the main principles of risk management guidelines and implementations.
Like the ISO 27000 family, this framework serves as an industry benchmark for customizable ERM processes (Enterprise Risk Management), helps assess the quality of organizations’ cybersecurity practices, and improves their risk identification and risk treatment resource allocation.
The NIST (National Institute of Standards and Technology) is the US equivalent of the International Organization for Standardization (ISO). Like the ISO, the NIST framework offers organizations customizable guidance for reducing and managing cybersecurity risk.
This framework combines various best practices, guidelines, and standards to achieve an acceptable cybersecurity standard. Organizations utilize the NIST framework for creating a common risk language for improving communication across industries.
NIST compliance is mandatory for all federal entities and their contractors but voluntary for private sectors and private healthcare. Namely, the NIST publication 800-53 covers a range of information security standards, including cybersecurity compliance.
The latest NIST 800-53 revision number 5 broadens its focus to apply to non-government entities and emphasizes data protection more than previous versions of the compliance, offering a unified set of controls for better coordination of multiple regulations.
Passed in 1996, the HIPAA (Health Insurance Portability and Accountability Act) is a law that regulates how the US healthcare industry shares personal health information and safeguards US patients' privacy and security of their medical information.
Additionally, the Act aims to simplify health record processing via electronic records to reduce healthcare fraud and ensure healthcare coverage for fired or transferred employees.
The act applies to every organization, including insurance companies, that stores and transmits healthcare data.