What is a Third-Party Security Audit?

A third-party audit allows you to evaluate an organization's security posture and practices. This process covers a number of aspects, such as identifying risks and potential threats. Furthermore, the audit helps ensure compliance with standards (PCI DSS, SOC 2, ISO 27001, and others). The reason many organizations undergo third-party audits is often to obtain attestation/certification and to prove the security of their infrastructure to clients/partners.

A third-party cybersecurity audit includes several key aspects that organizations should focus on:

  • Scope. What systems, networks and data will be audited?

  • Regulatory Frameworks. What regulatory standards will be auditing?

  • Access. What access levels will auditors have?

  • Methodology. What methods will auditors apply to assess your security posture?

  • Reporting. The final report format, vulnerability classification, remediation plan, timeline, and retesting.

Audit findings and identified issues can then be converted into improvement recommendations to enhance overall security.

Although the audit process is time-consuming and complex, it is an excellent strategy for assuring potential clients that your business meets high industry-level security standards.​

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The Importance of Third-Party Security Audits

As new security threats and vulnerabilities emerge regularly, the issue of potential risks of breaches in the cybersecurity landscape remains critical. By identifying gaps and vulnerabilities, as well as assessing risks, security teams can gain valuable insights on how to strengthen their security posture.

Since attackers often target vendors, viewing them as a gateway into larger organizations, third-party audits are a valuable approach for both organizations that use third-party resources and third-party vendors that provide their services/platforms for others. Supply chain attacks are a common practice in this context. Even a single unpatched vulnerability in third-party services or platforms is enough to gain access across connected systems. Security incidents often result from exploits at third-party access points, so an audit helps address vulnerabilities before they cause damage.

Key reasons why third-party security audits are crucial include:

Compliance

Compliance with standards and requirements is essential in data security. Standards such as GDPR, HIPAA, GLBA, CMMC, PCI DSS, and others are among the primary focuses of third-party cyber risk assessments to determine how you protect, store, and interact with data.

For companies providing their solutions/platforms to other organizations, third-party security audits help avoid non-compliance, reputational damage, and significant fines. With security assessments, vendors can demonstrate due diligence to auditors and stakeholders, maintaining compliance.

Trust

Another aspect of the audit is evaluating your organization against predefined criteria and security controls to ensure compliance with industry standards, as well as assessing your security measures against current and evolving cyber threats. Audit results are essential factors that companies consider when selecting a new vendor or reviewing their existing partners. Because audits increase trust in third-party vendor services once successful, it's a win-win for both those who leverage and those who provide solutions.

Risk Visibility

An audit helps validate your security posture and assess the level of risk it poses. By identifying gaps and receiving recommendations from the audit, you can take remediation measures and make improvements.

Enterprise Readiness

Vendor-related vulnerabilities can often lead to a domino effect, disrupting operations and affecting business continuity. A third-party audit allows for the assessment of a vendor's resilience and readiness against cyberattacks before security breaches occur, providing potential partners with crucial information when it comes to business continuity planning, especially in industries where uptime and data integrity are critical.

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Benefits of Thorough Preparation

Thorough preparation is key when organizing any process. Properly planned steps and actions transform the audit from a stressful event into an opportunity to receive recommendations for improvement.

Identifying Vulnerabilities Before the Audit

Preparing for an audit allows you to discover and address vulnerabilities in advance. By identifying security gaps, organizations can avoid unpleasant surprises and damaging findings in the report.

Reducing Audit Time and Costs

With organized documentation, security risk evaluation, as well as clear processes and coordinated actions, you can significantly speed up auditors' work, reducing their billable hours and your costs.

Increasing Customer and Partner Trust

By successfully passing an audit with minimal issues, companies can demonstrate the reliability of their security practices and strengthen their reputation and trust, which is critical for building partnerships.

Improving Internal Security Processes

Because organizations need to systematize their policies, procedures, and controls during the preparation phase, they can find and identify gaps in documentation and inconsistencies between actual practices and documented ones.

Reducing Compliance Risks and Legal Consequences

Companies can ensure their systems comply with regulatory requirements. Compliance with standards such as GDPR, HIPAA, PCI DSS, and others helps avoid fines, lawsuits, and business interruptions.

Lower Stress via Clear Roles & Dry-Runs

A well-organized team feels confident during the audit, understands its roles and responsibilities, and this reduces stress, demonstrating the company's professionalism.

Competitive Advantage in the Market

Successful audits and certifications (e.g., SOC 2, ISO 27001, etc.) open doors to enterprise clients who require proof of security posture. A strong audit result sets you apart from competitors without such certifications.

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Pre-Audit Planning and Scope Definition

The first step is to define the scope of the future audit. List all systems, applications, and infrastructure that will be included in the scope, determine what data is processed in each system, and identify critical business processes and their dependencies. Then agree on a timeline.

The next step is to select the standard and requirements and assemble the team. Determine the standard to be audited, such as PCI DSS, GDPR, ISO 27001, SOC 2, etc. It's a good idea to obtain a requirements checklist from the auditor in advance and conduct a risk assessment.

Assign a coordinator and responsibilities by domain (e.g., application, data, physical, and network security). Additionally, you can use the RACI (Responsible/Accountable/Consulted/Informed) matrix for each domain to avoid confusion during evidence collection. Finally, when assembling the team, include representatives from DevOps, InfoSec, Legal, HR, and Compliance.

Another step is to create an evidence inventory template to track documentation. The template could be as follows:

  • Artifact name → Source → Owner → Retention period

Communication

This can be divided into three categories for convenience, namely: internal communication, communication with auditors, and staff training.

  • Internal Communication. Hold a kickoff meeting with all stakeholders in advance and create a dedicated channel for audit-related questions. Also, explain the importance and features of the audit to the team, and prepare a FAQ document with typical auditor questions.

  • Communication with auditors. Agree on preferred communication channels and response times, as well as establish contact points for different types of requests. When planning communication with auditors, agree on an NDA and rules for handling sensitive data, and discuss an escalation procedure for critical findings. Finally, agree on a format for providing information.

  • Staff Training. Conduct training for the technical team, so they know what to expect and how to answer questions. It's also crucial to explain what to do if an issue is discovered during the audit. It's helpful to prepare scripts for responses to typical questions in advance.

Documentation Readiness

Preparing security documentation is a complex step, as it requires attention to a wide range of documents, including security procedures and policies, technical and operational records, as well as HR and administrative documents.

The first step is to create a centralized repository and organize documents by category and standard. Ensure all documents are dated and version-controlled, check their relevance, and create an index document for easy retrieval.

  • Policies and procedures of interest to the auditor include:

  • Information Security Policy

  • Acceptable Use Policy

  • Incident Response Plan with examples of completed drill tests

  • Disaster Recovery and Business Continuity Plans

  • Change Management Policy with examples of change requests

  • Access Control Policy

  • Data Classification Policy

  • Vendor/Third-party Risk Management Policy

  • Password Policy

  • Encryption Standards

 

Regarding technical documents, the areas of interest include data flow, network, architecture diagrams, as well as system and asset inventories, API documentation, backup and recovery procedures.

For operational records, prepare your access logs for the last 3-6-12 months (depending on the standard), change logs and deployment history, and vulnerability scan reports for the last year. If you conducted penetration testing, don't forget to include the reports. Additionally, security incident reports and their resolution, employee training records, and background check records may be of interest to auditors.

Finally, compile a list of current employees with their roles and access rights, contracts with NDAs and security clauses, and security awareness training certificates, if any.

Technical Preparedness

Aspects to pay attention to include your infrastructure, access management, application, data, and network security.

Infrastructure Security Checklist:

  •  Conduct a vulnerability scan of systems & security risks assessment

  • Install the latest security patches

  • Verify baseline hardening configurations

  • Ensure time synchronization (NTP) across all systems

  • Check backup systems & perform a test restore

  • Review secrets management practices

Access Management Checklist:

  • Conduct an access review and remove inactive users

  • Ensure the principle of least privilege is applied

  • Ensure MFA is enabled for all privileged and remote accounts

  • Deactivate former employees across systems and applications

  • Review service account permissions and rotate credentials

Application Security Checklist:

  • Conduct a code review & run SAST/DAST scans

  • Generate SBOM and conduct SCA for third-party dependencies

  • Check API security

  • Test error handling for sensitive data disclosure

  • Install the latest patches and security fixes

Data Security Checklist:

  • Verify encryption at rest and in transit

  • Check database access controls

  • Test data backup and restore procedures

  • Ensure data retention and deletion procedures are in place

Network Security Checklist:

  • Check network segmentation and firewall rules

  • Verify IDS/IPS configurations and test functionality

  • Check VPN configurations for remote access

  • Ensure continuous monitoring

Logging & Monitoring Checklist:

  • Ensure logging is enabled on all systems

  • Verify logs are retained per retention policy and regulatory requirements

  • Confirm centralized log collection and SIEM integration

Risk Evaluation

During a pre-audit cyber risk assessment, use gap analysis and conduct an internal mock audit to identify weaknesses. Additionally, evaluate each risk based on its likelihood of detection and potential impact, and compile a risk register that includes all identified issues. For prioritization, use the labels Low, Medium, High, and Critical.

Vulnerabilities labeled High and Critical require an immediate mitigation plan. For Medium threats, prepare compensating controls or a remediation plan; if there are vulnerabilities you cannot or do not have time to fix, prepare an honest explanation and an action plan.

The next step is a risk response plan. It's a good idea to use the following matrix:

  • Risk → Root Cause → Current Control → Gap → Remediation →Timeline → Owner

Identify quick wins that can be implemented within a week. For complex findings, prepare a roadmap with realistic timelines.

Finally, compile a list of technical debt that can be seen by auditors and document compensating controls.

Pre-Audit Final Check and Launch

A final review should be conducted one to two weeks before the audit. This includes a walkthrough of all systems and security operations, and the availability of all documentation.

It's also crucial to ensure everyone understands their roles. Conduct a table-top or mock audit following real scenarios to practice responses.

When preparing the audit environment, create read-only accounts for auditors where necessary. Also, create a shared folder with organized documentation and controlled access for the auditors. Verify that all demo environments are operational.

Additionally, create a communication plan for the audit. This includes a procedure for ad-hoc requests, an escalation path for urgent issues, and a template for tracking audit requests. A good idea is to prepare a kanban board or tracking sheet for auditor requests with the following structure:

  • ID → Request → Status → Deadline → Owner → Link to evidence

Set up quick access to documents and systems, and have contact information for all responsible parties available. A week before the audit, focus on the team's mental preparedness. Remember that findings are primarily areas for improvement.

Post-Audit Process

Following the audit, it's worth conducting a hot debrief immediately after completing fieldwork and collecting feedback from the team. Also, document all findings and observations.

The next step is to review the draft audit report to verify the factual accuracy of all findings. Preparing a management response template can come in handy here. For example, you can use a standardized template that includes acknowledgment, proposed remediation, and committed timelines for each finding. Also, establish realistic remediation timelines and define SLOs (Service Level Objectives) for remediation based on finding severity.

When creating the remediation plan, include:

  • Description of finding

  • Root cause analysis

  • Timeline and milestones

  • Responsible person

  • Resources needed

  • Success criteria

Create a project plan for remediation efforts and assign clear ownership. Additionally, set intermediate checkpoints, conduct internal verification after remediation, and collect evidence to demonstrate compliance.

Then, conduct a lessons learned session with the team to identify process improvements, as well as update policies and procedures based on the audit and implement automated controls where possible. Focus on weaknesses identified by the audit and conduct additional training in problematic areas.

For reporting and communication, prepare an executive summary for management, present the remediation plan, and regularly update stakeholders on progress.

Preparing for the follow-up audit is crucial. Schedule and track follow-up verification for all findings to ensure auditors can validate remediation. Ensure that:

  • You've saved all evidence of remediation

  • You've documented the controls you've implemented

  • You've prepared before and after comparisons

  • You can demonstrate improvements

The final step is establishing ongoing compliance. Regular internal audits and continuous monitoring solutions are the way to accomplish it. Additionally, create metrics and KPIs for security posture, establish regular access reviews, and automate compliance checking.

Summary

An audit of your security posture and compliance by external security professionals is the best way to increase customer and partner trust in your organization by ensuring regulatory compliance and strengthening security measures in problem areas.

The audit provides a detailed report with identified vulnerabilities and recommendations for improvement, helping significantly reduce cybersecurity risks and prevent data breaches through robust system, network, apps, and data protection measures.

Preparing for the audit is key because the better you prepare, the higher your chances of passing it successfully. Contact Jappware to learn how you can navigate all audit steps smoothly.