How Cannabis Businesses Can Prepare for an IT Compliance Audit

The cannabis industry’s rapid growth has brought increased attention from regulators, investors, and consumers—especially when it comes to data security and compliance. Service organizations across the sector, including cultivators, distributors, and cannabis tech platforms, manage sensitive information such as patient data, financial records, and supply chain details. As the industry matures, the need for robust security frameworks that offer operating effectiveness has become a business imperative.

SOC 2 compliance offers cannabis companies a way to demonstrate strong data protection practices and build trust in a highly regulated environment. Developed by the AICPA, the SOC 2 audit process evaluates how well a company safeguards customer information using strict security, availability, confidentiality, and privacy controls—making it a critical benchmark for operational credibility.

Is SOC 2 Applicable to the Cannabis Industry?

Yes, SOC 2 is highly applicable to the cannabis industry, especially for service organizations that store, process or transmit sensitive data. As cannabis businesses increasingly rely on technology—such as seed-to-sale systems, ERP platforms, and digital dispensary services—they must establish strong internal controls to protect information and maintain compliance.

The SOC 2 audit process evaluates the design and operating effectiveness of controls across key Trust Services Criteria, including processing integrity, confidentiality, and security. For cannabis companies, achieving SOC 2 compliance demonstrates a commitment to safeguarding sensitive customer data and ensures that their systems function reliably and as intended.

This is especially critical in a market where operational transparency and data protection are closely tied to business credibility and regulatory trust.

Why SOC 2 Compliance Matters in the Cannabis Industry

In the cannabis industry, where businesses handle sensitive data and operate under strict regulatory oversight, SOC 2 compliance is more than a checkbox—it’s a competitive advantage.

It helps service organizations prove they have effective internal controls in place to ensure security, privacy, and building trust with regulators, partners, and consumers alike.

1. Data Protection and Privacy

Cannabis businesses routinely manage sensitive information, including:

• Customer identification and medical records for medical cannabis patients
• Detailed prescription and purchase histories
• Payment information and financial records
• Employee data and background checks
• Supply chain tracking and inventory management information.
• Proprietary cultivation and manufacturing processes

A SOC 2 audit rigorously evaluates how well a cannabis company protects this data. The framework ensures that robust security measures, availability safeguards, and confidentiality standards are implemented and maintained. For businesses managing medical cannabis information, these protections align with healthcare privacy requirements, providing an additional layer of compliance assurance.

  

2. Building Trust with Customers and Partners

Trust remains a cornerstone issue for the cannabis industry as it continues to overcome historical stigma and demonstrate legitimacy. Regulatory bodies, financial institutions, dispensaries, and consumers all demand exceptional levels of security and compliance from cannabis businesses before entering partnerships or transactions.

Achieving SOC 2 compliance signals to these stakeholders that a cannabis business has undergone rigorous independent verification of its security practices. This third-party validation demonstrates a serious commitment to protecting data and following the industry’s best practices, fostering stronger relationships with customers, investors, banking partners, insurance providers, and business collaborators.

3. Mitigating Cybersecurity Risks

The cannabis industry has become an increasingly attractive target for cybercriminals due to the following factors:

• High transaction volumes with significant cash components
• Valuable customer and patient data
• New digital infrastructure in these businesses
• Complex supply chain networks with multiple vulnerability points

Cyber threats, including ransomware attacks, data breaches, and social engineering schemes, pose substantial financial and reputational risks to cannabis operations. SOC 2 compliance helps businesses implement comprehensive cybersecurity practices, including threat detection, incident response protocols, employee training, and regular security assessments. These measures significantly reduce vulnerability to attacks and provide structured response mechanisms when incidents occur.

4. Regulatory Compliance Alignment

The cannabis industry operates under an intricate patchwork of regulations that vary by authority and continue to evolve rapidly. These include:

• State-specific track-and-trace requirements for cultivation, manufacturing, and sales.
• HIPAA regulations for medical cannabis providers
• Financial reporting requirements from banking partners
• Payment Card Industry (PCI) compliance for transactions
• Age verification and customer identification protocols

SOC 2 compliance provides a structured framework that naturally aligns with the regulatory requirements. By implementing robust SOC 2 controls, cannabis businesses can streamline their overall compliance efforts, reducing duplication and creating a foundation that adapts to changing regulatory landscapes.

5. Competitive Advantage in the Market

As competition in the cannabis industry intensifies and markets mature, businesses must find meaningful ways to differentiate themselves beyond product quality and pricing. SOC 2 compliance is a powerful market differentiator that signals professionalism, maturity, and commitment to operational excellence.

For cannabis technology providers, payment processors, and platform services, SOC 2 compliance is becoming an entry requirement when working with larger enterprise clients. For consumer-facing businesses, advertising SOC 2 certification can reassure privacy-conscious customers about data protection practices, potentially attracting a more discerning clientele.

Key SOC 2 Trust Service Criteria for Cannabis Businesses

The SOC 2 audit process evaluates internal controls based on five Trust Services Criteria, with Security being mandatory. Cannabis businesses may also include Confidentiality, Privacy, or Processing Integrity, depending on their services and risk profile. A licensed Certified Public Accountant (CPA) plays a critical role—not only in auditing control effectiveness but also in helping select the most relevant criteria for the organization.

1. Security

This criterion focuses on protecting systems and data from unauthorized access or breaches. For cannabis operators, this means securing everything from POS systems and customer profiles to cultivation records and facility access points.

Implementing strong internal controls—such as user authentication, role-based access, firewalls, and intrusion detection—is essential to prevent data theft and ensure compliance with state-mandated security standards.

2. Availability

Availability measures whether systems remain accessible and functional as expected. In the cannabis sector, disruptions in e-commerce platforms, seed-to-sale systems, or inventory management tools can halt operations and trigger compliance issues. SOC 2 helps cannabis businesses demonstrate that they’ve implemented measures like backup systems, disaster recovery plans, and performance monitoring to maintain uptime and meet service-level commitments.

3. Processing Integrity

This criterion ensures that data processing is accurate, complete, and timely. For cannabis businesses, processing integrity is especially vital when submitting compliance data to regulators, reconciling sales transactions, or reporting inventory changes.

A failure in data accuracy could result in fines, license suspensions, or loss of consumer trust. SOC 2 audits assess the design and operating effectiveness of systems that manage these core processes.

4. Confidentiality

Confidentiality focuses on protecting non-public information that’s critical to competitive advantage. This may include proprietary cultivation methods, product formulations, strategic partnerships, or wholesale pricing data.

SOC 2 requires businesses to apply strict access controls, encryption, and secure disposal protocols to keep such sensitive information safe from leaks or internal misuse.

5. Privacy

Privacy governs how personal data is collected, used, retained, and disclosed in accordance with a company’s policies and applicable laws. For cannabis businesses—especially medical dispensaries and patient management platforms—handling sensitive data such as medical history, identification, and purchase behavior requires robust privacy protections.

SOC 2 validates that businesses have the policies, consent mechanisms, and data-handling practices needed to meet industry expectations and protect consumer rights.

Best Practices for SOC 2 Compliance in the Cannabis Industry

SOC 2 compliance in the cannabis industry requires more than implementing generic security tools. Cannabis businesses must take deliberate steps to align their systems and internal controls with industry-specific risks—such as data protection, regulatory oversight, and third-party scrutiny. Below is a more comprehensive, tailored roadmap for achieving and maintaining SOC 2 compliance.

1. Define Your Compliance Scope and Objectives
   Start by identifying which systems, services, and data flows are in scope for the SOC 2 audit. Cannabis businesses often operate across retail, cultivation, logistics, and software—each with unique compliance touchpoints.

• Define which Trust Services Criteria apply (Security is mandatory; Confidentiality, Privacy, and Processing Integrity are often relevant).
• Determine which operations handle sensitive data (e.g., POS systems, seed-to-sale platforms, or patient portals).
• Set internal objectives for the audit, such as building investor trust, preparing for partnerships, or aligning with regulatory expectations.

2. Conduct a Cannabis-Specific Readiness Assessment
   A readiness assessment evaluates your current state against SOC 2 requirements. In the cannabis sector, this means reviewing both cybersecurity and operational workflows.

• Assess existing internal controls, data handling, and access policies.
• Identify gaps in key areas like system monitoring, role-based permissions, and regulatory documentation.
• Prioritize remediation based on risk exposure to patient data, compliance mandates, and operational continuity.

3. Implement Risk-Based Security and Privacy Controls
   Once gaps are identified, targeted security controls must be implemented to mitigate them—tailored to the cannabis industry’s specific threats.

• Encrypt patient and transaction data in all systems (e.g., dispensary platforms, inventory tracking).
• Enforce access controls with audit logs and multi-factor authentication.
• Deploy real-time monitoring tools to detect and respond to unusual system behavior.
• Build physical security measures into your IT policies for facilities and hardware handling.

4. Formalize and Document Policies and Procedures
   Documentation is critical not just for audit success but for day-to-day operational consistency in a regulated industry.

• Develop formal data handling and retention policies for medical and customer records.
• Establish documented SOPs for incident response, access provisioning, and vendor management.
• Implement change management protocols that log system updates—especially for applications tied to compliance or product traceability.
• Ensure your policies align with state-level cannabis laws and evolving privacy regulations.

5. Strengthen Organizational Awareness and Training
   Human error is a leading cause of security breaches. Training programs ensure staff understand how to support SOC 2 compliance in practice.

• Provide security awareness training focused on phishing, physical access, and privacy.
• Educate employees on how their role supports SOC 2 controls, especially in high-risk areas like POS usage or customer data handling.
• Build a compliance culture through regular refreshers, updated protocols, and manager-led sessions.

6. Establish Vendor and Third-Party Oversight
   Cannabis businesses often rely on third-party software or logistics partners, which introduces external risk.

• Maintain a vendor inventory with clear risk classifications and access privileges.
• Conduct due diligence on cloud platforms, SaaS providers, and analytics tools handling sensitive data.
• Require SOC 2 reports from high-risk partners or conduct independent assessments.

7. Engage a CPA for the SOC 2 Audit Process
   Working with a licensed Certified Public Accountant (CPA) is required to complete a SOC 2 audit. Cannabis businesses should seek a CPA firm that understands both the audit process and the regulatory challenges unique to the cannabis sector.

• The CPA will help determine whether a Type 1 or Type 2 audit is appropriate based on your goals, timeline, and control maturity:
  • Type 1:
    • Evaluates the design of internal controls at a specific point in time.
    • Ideal for startups or cannabis companies in the early stages of implementing controls.
    • Faster to complete and useful for establishing baseline trust with partners and investors.
  • Type 2:
    • Assesses both the design and operating effectiveness of controls over a defined period (typically 6 to 12 months).
    • Provides stronger assurance for ongoing operations, making it more suitable for mature cannabis businesses or those seeking to build long-term enterprise partnerships.
    • Often preferred by financial institutions, distributors, and state-level regulators who expect demonstrated operational reliability.

8. Undergo the Formal SOC 2 Audit
   The audit itself will assess the design—and in the case of Type 2, the operating effectiveness—of your controls over a defined period.

• Ensure systems are operating as described in your documentation.
• Respond promptly to auditor requests for evidence, walkthroughs, and clarification.
• Address any audit findings through corrective action plans.

9. Review the Report and Leverage It Strategically
   A successful SOC 2 report is more than a security milestone—it’s a trust signal.

• Share your SOC 2 report with partners, investors, or regulators who require assurance of compliance.
• Use the report findings to further strengthen your internal controls.
• Incorporate audit outcomes into your annual business risk review.

10. Maintain and Improve Through Continuous Monitoring
    SOC 2 compliance is ongoing, not a one-time certification. Staying compliant requires vigilance and adaptability.

• Schedule recurring internal audits, risk assessments, and penetration tests.
• Keep up with regulatory changes in the cannabis space that may impact control requirements.
• Update policies, training, and infrastructure as your business evolves or expands into new markets.

Securing the Future of Cannabis with SOC 2

As the cannabis industry matures, the pressure to prove operational trust, data security, and regulatory compliance is only intensifying. With sensitive data flowing through every corner of the supply chain, SOC 2 compliance offers cannabis businesses a concrete way to protect customer information and prove they take security seriously.

At The Pun Group, we help cannabis companies—from dispensaries and cultivators to software platforms and logistics providers—achieve SOC 2 compliance with confidence. Our team understands the nuances of the cannabis sector and guides you through every stage: readiness assessments, control implementation, documentation, audit execution, and ongoing compliance management. Whether you’re looking to build investor trust, secure partnerships, or stay ahead of regulations, we tailor our approach to meet your exact needs.

Next Steps for Your Cannabis Business:

1. Identify which systems and data flows in your cannabis operation require IT compliance—especially those handling patient, payment, or supply chain data.
2. Schedule a cannabis-specific readiness assessment to find compliance gaps and strengthen your internal controls before the audit.
3. Reach out to The Pun Group to work with a licensed CPA firm that understands both SOC 2 audits and cannabis industry compliance.

Don’t wait for a breach or regulatory issue to force your hand. Let’s build a secure and credible operation that earns trust at every level. Contact The Pun Group today to get started with SOC 2 compliance.