When the California Privacy Rights Act (CPRA) was enacted, it created the California Privacy Protection Agency (CPPA) and delegated to the CPPA significant regulatory authority. One of the areas of that authority is cybersecurity, which includes performing cybersecurity audits annually. On September 8, 2023, the CPPA considered a draft set of regulations that would establish rules for conducting cybersecurity audits.

It is important to note that California currently mandates certain businesses to maintain reasonable security procedures and practices to protect personal information.

• Civil Code Section 1798.100(e), under the CCPA, provides:

A business that collects a consumer’s personal information shall implement reasonable security procedures and practices appropriate to the nature of the personal information to protect the personal information from unauthorized or illegal access, destruction, use, modification, or disclosure in accordance with Section 1798.81.5.

• Civil Code Section 1798.81.5, provides:

(b) A business that owns, licenses, or maintains personal information3 about a California resident shall implement and maintain reasonable security procedures and practices appropriate to the nature of the information, to protect the personal information from unauthorized access, destruction, use, modification, or disclosure.

(c) A business that discloses personal information about a California resident pursuant to a contract with a nonaffiliated third party that is not subject to subdivision (b) shall require by contract that the third  party implement and maintain reasonable security procedures and practices appropriate to the nature of the information, to protect the personal information from unauthorized access, destruction, use, modification or disclosure

A couple of observations about these provisions:

• Section 1798.100 which is part of the CCPA, applies to “businesses” that are subject to the CCPA. Section 1798.80(a) defines “business” more broadly to include “a sole proprietorship, partnership, corporation, association, or other group, however organized and whether or not organized to operate at a profit.” For example, while the CCPA generally applies to for-profit entities, this section of the Civil Code applies to businesses whether or not organized for profit.

• As the CPPA begins to establish regulations around a set of personal information for one set of “businesses,” those covered under the CCPA, there is also guidance in California for businesses covered by Civil Code Section 1798.81.5 which includes audit requirements as well. In February 2016, the then-California Attorney General and now Vice President, Kamala D. Harris, issued a California Data Breach Report. According to that report, a business’s failure to implement all of the controls set forth in the Center for Internet Security’s Critical Security Controls constitutes a lack of reasonable security. Of course, the CCPA appears to incorporate the requirements of Civil Code Section 1798.81.5. Nonetheless, businesses will need to figure out which cybersecurity standard applies to them.

So, what do the draft CCPA cybersecurity audit regulations say? Here is a summary of just some of the proposed requirements for such audits:

• The requirement for a covered business to complete the audit will be based on whether the business’s processing of personal information presents a significant risk to consumers’ security. The draft regulations are beginning to craft the factors for determining when there will be a significant risk. One factor that would trigger the audit requirement is that the business derives 50 percent or more of its annual revenues from selling or sharing consumers’ personal information. However, the CPPA is considering other factors, such as the business having more than a to-be-determined amount of gross revenue or number of employees.  
• Cybersecurity audits would be required to be performed by “qualified, objective, independent professional [auditor] using procedures and standards generally accepted in the profession of auditing.” However, the auditor would not need to be external to the business, provided such an auditor can exercise impartial judgment – e.g., such an auditor should not be auditing the cybersecurity program the auditor helped to create.  The audit would need to include the auditor’s name, affiliation, and relevant qualifications to complete the cybersecurity audit in such detail as necessary to fully describe the nature of their qualifications; and the number of hours that each auditor worked on the cybersecurity audit.
• The cybersecurity audit would need to:
  • Assess, document, and summarize each applicable component of the business’s cybersecurity program;
  • Specifically, identify any gaps or weaknesses in the business’s cybersecurity program;
  • Specifically, address the status of any gaps or weaknesses identified in any prior cybersecurity audit; and
  • Specifically, identify any corrections or amendments to any prior cybersecurity audits.
• The audit would have to assess and document certain components of the cybersecurity program with “specificity.” One such component is the safeguards the business has in place, such as multi-factor authentication, encryption, zero trust architecture, access management, audit log management, response to security incidents, etc. If a component is not available, the audit would be required to document and explain why it is not necessary and how other safeguards provide at least equivalent security; a standard not too dissimilar to the “addressable” rule for implementation specifications under the HIPAA Security Rule.
• The cybersecurity audit would need to be reported to the business’s board of directors or governing body, or if no such board or equivalent body exists, to the highest-ranking executive in the business responsible for the business’s cybersecurity program. Notably, the audit would need to include certain statements, such as a certification that such governing body or highest-ranking executive has reviewed the cybersecurity audit and understands its findings.
• If the business provided notifications to affected consumers under California’s breach notification law for businesses, the cybersecurity audit would have to include a description of those notifications and, where applicable, a description of the notification to the California Attorney General.
• Service providers and contractors would be required to cooperate with businesses completing such audits, including making available all “relevant information that the auditor deems necessary for the auditor to complete the business’s cybersecurity audit.”
• A written certification of completion of the audit would be required to be submitted to the CPPA, signed by a member of the board or highest-ranking executive.