Microsoft Office 365 Security Audit: The Complete Guide for Businesses in 2026

Microsoft tracks more than 600 million identity attacks against Microsoft 365 and Entra ID every single day, and over 7,000 password attacks per second — 97% of them password spray. Multi-factor authentication blocks over 99% of these attacks outright. Which means the gap between a secure Microsoft 365 tenant and a breached one usually isn’t a sophisticated exploit. It’s a setting nobody turned on.

A Microsoft Office 365 security audit is a structured review of a tenant’s identity controls, email security, data protection, device management, compliance logging, and Teams governance — six areas that together determine how exposed an organization is to breach or data loss. Most businesses find 10–20 critical gaps on their first Microsoft Office 365 security audit, and most of those gaps take under an hour to fix once identified.

Even Microsoft is not immune to this exact failure pattern. The 2024 Midnight Blizzard breach — a nation-state actor compromising Microsoft’s own executive email accounts — traced back to a legacy test account with a weak password and no MFA, found through simple password spraying. If a gap like that can sit undetected in Microsoft’s own environment, it can sit undetected in yours.

Key Takeaways

• A Microsoft 365 security audit covers 6 core areas: identity, email, data, devices, compliance, and Teams.
• Microsoft operates on a shared responsibility model — Microsoft secures the platform infrastructure; the tenant owner is responsible for configuration, access, and data controls.
• The most common critical finding in a Microsoft 365 security audit is admin accounts without MFA enforced — despite MFA blocking over 99% of identity-based attacks.
• A DMARC policy set to p=none provides monitoring only and does not block spoofed email.
• Microsoft 365 tenants should be audited at minimum annually, with identity and sharing settings reviewed quarterly.
• This guide uses the NG 6-Layer Cloud Audit, a structured framework developed by NG Cloud Security for auditing Microsoft 365 tenants.

Why This Guide Is Different

Most Microsoft Office 365 security audit guides fall into two camps: generic checklists that could apply to any cloud platform, or dense enterprise frameworks built for companies with dedicated security teams. Neither directly answers the question most businesses actually have: “Is our Microsoft 365 tenant secure, and what do we fix first?”

This guide is built from hands-on Microsoft Office 365 security audits for small and mid-sized businesses at NG Cloud Security, using the NG 6-Layer Cloud Audit methodology. Every finding referenced below reflects patterns observed in real client tenants, supported by current industry data on how these gaps actually get exploited.

• What a Microsoft Office 365 security audit covers
• The NG 6-Layer Cloud Audit — six layers, in the order attackers actually exploit them
• A practical checklist you can run yourself
• When to run a DIY review vs. bring in a professional Microsoft Office 365 security audit

What Is a Microsoft Office 365 Security Audit?

A Microsoft Office 365 security audit is a review of a tenant’s configuration across six core areas: identity, email, data, devices, compliance, and administrative access. NG Cloud Security structures this review using the NG 6-Layer Cloud Audit — six layers, checked in the order attackers typically move through an environment. The purpose is to find settings that were never configured, changed by accident, or left open for convenience and forgotten.

Microsoft 365 operates on a shared responsibility model: Microsoft secures the underlying platform and infrastructure; the tenant owner is responsible for configuration — multi-factor authentication, conditional access, sharing permissions, and mailbox forwarding rules. Most breaches investigated in Microsoft 365 environments do not involve a sophisticated exploit. They involve a setting that was never turned on. Industry-wide, compromised credentials remain a leading initial access vector into cloud environments, which is exactly why identity sits at the top of this framework.

Why Microsoft 365 Tenants Drift Out of Compliance

Microsoft 365 environments do not stay secure by default. Security posture degrades over time unless actively maintained, for five common reasons:

• New employees are added with default, often excessive, permissions
• Departing employees’ accounts and access are not fully deprovisioned
• IT admins enable a setting temporarily for testing and forget to revert it
• SharePoint sites accumulate sharing links nobody remembers creating
• Security tools such as Microsoft Defender are enabled but never tuned

Data point: the average tenant reviewed by NG Cloud Security has gone 5+ years without a formal security review. That tracks with the broader market — independent benchmarking puts the average enterprise Microsoft Secure Score at just 35–50%, well below the 75%+ threshold typically targeted for regulated industries.

The NG 6-Layer Cloud Audit: What Every Microsoft 365 Security Audit Should Cover

The NG 6-Layer Cloud Audit is a six-layer framework for auditing Microsoft 365 tenants. Each layer builds on the one before it — identity is audited first because it is the most common entry point for attackers, and every downstream layer (email, data, devices) depends on identity being locked down.

Layer	Focus Area	Primary Risk If Misconfigured
1	Identity & Access Management	Full tenant compromise
2	Email Security	Business Email Compromise (BEC), phishing
3	Data Protection & Sharing	Unauthorized data exposure
4	Device & Endpoint Management	Data loss via unmanaged devices
5	Compliance & Audit Logging	Undetected incidents
6	Microsoft Teams Governance	External data leakage

Layer 1: Identity and Access Management

Compromised credentials are the most common entry point for attackers into Microsoft 365 environments, making identity the highest-priority layer in any Microsoft 365 security audit. Microsoft’s own telemetry backs this up directly: more than 600 million identity attacks hit Microsoft 365 and Entra ID every day, 97% of them password spray — and enforcing MFA alone blocks over 99% of them.

What to check:

• Is MFA enforced for every account — including admins, service accounts, and break-glass accounts?
• Are there Conditional Access exclusions that quietly bypass MFA?
• Is legacy authentication (POP, IMAP, SMTP AUTH) still enabled? These protocols bypass MFA entirely.
• How many Global Administrators exist, and does each one need that access today?
• Is Privileged Identity Management (PIM) active, or are admin roles permanently assigned?
• Are guest users and external identities reviewed on a schedule?

Finding: It is common for tenants to have 3–5x more Global Administrators than needed, often including former employees or vendors no longer affiliated with the business. This is precisely the pattern behind the 2024 Midnight Blizzard breach — a single legacy account without MFA gave attackers a foothold in Microsoft’s own corporate environment.

Layer 2: Email Security

Business Email Compromise (BEC) is one of the costliest attack types for small and mid-sized businesses because it requires no malware — only a convincing email and one careless click.

What to check:

• Are Safe Links and Safe Attachments applied to all users, or only a legacy pilot group?
• Is external forwarding restricted at both the tenant and mailbox level?
• Do hidden inbox rules exist that auto-forward or delete messages?
• Is DMARC set to p=quarantine or p=reject — or still at p=none (monitoring only)?
• Are SPF and DKIM correctly configured for every sending domain?
• Do executives and finance staff have enhanced anti-phishing protection?

Finding: A p=none DMARC policy is one of the most common Microsoft 365 email security gaps — it appears active but does not block spoofed email from reaching inboxes.

Layer 3: Data Protection & Sharing Controls

Unchecked sharing settings are the most common cause of accidental data exposure in Microsoft 365 — no attacker is required.

What to check:

• Is SharePoint/OneDrive external sharing set to “Anyone” with no expiration?
• Are anonymous links allowed, and do they expire?
• Have externally shared files ever been reviewed?
• Are Data Loss Prevention (DLP) policies active, or sitting in test mode (logs only, does not block)?
• Are sensitivity labels deployed and enforced, or just available and unused?

Finding: A single forgotten “Anyone with the link” share on a finance folder can expose years of sensitive documents indefinitely — and as Copilot rolls out, that same forgotten link becomes directly surfaceable in a Copilot search result, not just a link someone has to stumble onto.

Layer 4: Device & Endpoint Management

Device management is frequently overlooked, but critical for organizations with remote teams or personal-device (BYOD) usage.

What to check:

• Are Intune device compliance policies enforced by Conditional Access, or just defined and unused?
• Is BitLocker encryption required on company-managed devices?
• Are unmanaged or personal devices restricted from syncing sensitive SharePoint or OneDrive content?
• Is there a documented offboarding process to revoke device access?

Layer 5: Compliance & Audit Logging

Without audit logging, incident investigation, insurance questionnaires, and client security reviews cannot be completed.

What to check:

• Is the Unified Audit Log enabled tenant-wide?
• What is the audit log retention period — 90 days on standard licensing, or longer for regulated industries with extended retention add-ons?
• Are alert policies configured for high-risk activity, such as mass downloads or new forwarding rules?
• Is there a documented process for reviewing logs on a schedule?

Layer 6: Microsoft Teams Governance

Microsoft Teams is now a primary entry point for external collaboration, and its default settings favor convenience over security.

What to check:

• Is external access restricted to an approved allow-list, or open to all external domains?
• Can external participants join meetings anonymously via a forwarded link?
• Do guest accounts have scoped access, or can they see every channel and file by default?

Common Microsoft 365 Security Audit Findings and Business Impact

Finding	Frequency	Business Impact
Admin accounts without MFA	Very common	Full tenant compromise from one stolen password
Legacy authentication still enabled	Common	Silent MFA bypass
DMARC set to p=none	Very common	Domain can be spoofed for phishing
SharePoint “Anyone” links with no expiry	Very common	Long-term, untraceable data exposure
DLP policies in test mode only	Common	Sensitive data leaves with zero blocking
No documented log review process	Very common	Incidents go undetected for weeks or months

Not Sure How Many of These Gaps Are Sitting in Your Tenant? NG Cloud Security runs Microsoft 365 security audits using the NG 6-Layer Cloud Audit framework — finding the hidden forwarding rules, permission inheritance issues, and forgotten sharing links a quick admin-center scan misses.

DIY Microsoft 365 Security Audit vs. Hiring a Professional

Factor	DIY Review	Professional MSP Audit
Coverage	Catches obvious gaps (MFA, basic sharing, HIPPA)	Full identity, email, data, device, compliance review
Time required	1–2 weeks, part-time, alongside daily IT work	Delivered as a focused, structured engagement
Commonly missed	Root-cause misconfigurations, permission inheritance, hidden forwarding rules	Reviewed against a structured, repeatable framework
Remediation support	Self-directed	Prioritized roadmap with hands-on fixes available

Recommendation: Businesses with in-house IT and available time can start with the checklist below. Tenants that have not been reviewed in over a year, or that need to meet a compliance requirement (HIPAA, cyber insurance, SOC 2), typically benefit from a professional Microsoft 365 security audit — particularly for permission inheritance issues and hidden mail rules that a quick admin-center scan does not surface.

Microsoft 365 Security Audit Checklist

Identity

☐  MFA enforced for 100% of accounts, no unexplained Conditional Access exclusions

☐  Legacy authentication (POP/IMAP/SMTP AUTH) disabled tenant-wide

☐  Global Administrator count reviewed and reduced to the minimum needed

☐  PIM active for privileged roles

☐  Guest/external accounts reviewed in the last 90 days

Email

☐  Safe Links and Safe Attachments applied to all users

☐  External forwarding restricted at tenant and mailbox level

☐  DMARC set to p=quarantine or p=reject

☐  SPF and DKIM validated for every sending domain

☐  Executive/finance accounts have enhanced anti-phishing protection

Data

☐  SharePoint/OneDrive external sharing reviewed and restricted

☐  Anonymous link expiration enforced

☐  DLP policies confirmed in enforcement mode (not test mode)

☐  Sensitivity labels deployed and applied to sensitive content

Devices

☐  Intune compliance policies enforced via Conditional Access

☐  BitLocker required on managed devices

☐  Offboarding process removes device access immediately

Compliance

☐  Unified Audit Log enabled and retention confirmed

☐  Alert policies active for high-risk activity

☐  Documented log review cadence in place

Teams

☐  External access restricted to an allow-list

☐  Anonymous meeting join disabled or restricted

☐  Guest access scoped per team, not tenant-wide

How Often Should You Audit Microsoft 365?

A Microsoft 365 security audit should be conducted on the following schedule:

• Annually, at minimum — a full pass through all six layers of the NG 6-Layer Cloud Audit
• Quarterly — identity and sharing settings specifically, since these change fastest
• After major events — bulk new hires, a security incident, a merger, or the rollout of new Microsoft 365 features such as Copilot

Note on Copilot: Microsoft Copilot inherits existing user permissions. An overshared SharePoint site or unreviewed sharing link becomes directly surfaceable in a Copilot search result — increasing the priority of a Microsoft 365 security audit before Copilot deployment.

Frequently Asked Questions About Microsoft 365 Security Audits

What is a Microsoft Office 365 security audit?

A Microsoft Office 365 security audit is a structured review of a tenant’s identity, email, data, device, compliance, and Teams settings, designed to identify security gaps such as missing MFA, weak email authentication, and overshared files.

How long does a Microsoft Office 365 security audit take?

A DIY review using a checklist typically takes a few days of part-time effort. A professional Microsoft Office 365 security audit at NG Cloud Security is delivered as a focused, structured engagement, including a prioritized remediation roadmap.

What is the most common finding in a Microsoft Office 365 security audit?

The most common critical finding is admin accounts without MFA enforced, followed closely by legacy authentication protocols left enabled — both allow attackers to bypass modern security controls. This matters because MFA alone blocks over 99% of identity-based attacks, the single largest attack category against Microsoft 365 tenants.

Does Microsoft Secure Score replace a full Microsoft 365 security audit?

No. Microsoft Secure Score is a useful baseline but does not evaluate permission inheritance, hidden mail rules, or how sharing settings interact with tools like Copilot. It is a starting point, not a complete audit — and industry benchmarking shows the average enterprise Secure Score sits at just 35–50%, well short of the 75%+ level typically targeted for regulated industries.

How much does a professional Microsoft 365 security audit cost?

Cost varies based on scope and tenant size. Contact NG Cloud Security for a scoped quote based on your environment.

Do I need Microsoft 365 E5 to be secure?

No. Microsoft 365 E3 covers core controls including MFA, Conditional Access, and basic DLP. E5 adds advanced protections such as Defender for Endpoint P2 and extended audit log retention, which matter more for regulated industries.

Who is responsible for Microsoft 365 security — Microsoft or the customer?

Microsoft 365 operates on a shared responsibility model. Microsoft secures the underlying platform and infrastructure. The tenant owner is responsible for identity configuration, access controls, data sharing settings, and device management.

Summary: Microsoft Office 365 Security Audit

A Microsoft Office 365 security audit evaluates six layers of a tenant’s configuration — identity, email, data, devices, compliance, and Teams — to identify gaps such as missing MFA, weak DMARC policies, and overshared files. Most tenants have not been reviewed in 5+ years and carry 10–20 unaddressed findings. Businesses should audit Microsoft 365 at least annually, with identity and sharing settings reviewed quarterly, using either the checklist above or a professional audit such as the NG 6-Layer Cloud Audit.

Get a Real Microsoft 365 Security Audit, Not Just a Checklist Checklists are a useful starting point, but the gaps that most often cause breaches — hidden forwarding rules, permission inheritance issues, and forgotten sharing links — typically do not surface in a quick admin-center scan. NG Cloud Security runs Microsoft 365 security audits for small and mid-sized businesses, using the NG 6-Layer Cloud Audit framework. Findings are delivered in plain language, with a prioritized list of what to fix first.