TL;DR
Service Organization Control (SOC) 1 and SOC 2 are both audit reports governed by the American Institute of Certified Public Accountants (AICPA) and completed by certified public accountants. SOC 1 focuses narrowly on financial data controls, while SOC 2 covers a broader range of customer data protections across up to five trust service principles. Organizations may need one or both reports depending on the nature of the data they handle, and each report type comes in a point-in-time (Type 1) or extended-review (Type 2) format.
SOC 1 vs. SOC2: Choosing the right report for your business
Your clients have asked for proof that you safeguard data. You're thinking about SOC 1 vs. SOC 2. Which report will satisfy your clients?
The SOC in both reports refers to "service organization control." In these reports, the "control" refers to plans and procedures you have developed. The difference involves the type of data and the scope of the review.
SOC reports were developed by the American Institute of Certified Public Accountants (AICPA). The organization confirms that certified public accountants (CPAs) complete the audits. The suite of reports means companies can get just the sorts of reviews their clients demand.
Let's dig deeper into SOC 1 and SOC 2, so you can make an informed choice.
What is SOC 1?
Choose a SOC 1 audit, and a CPA will examine your plans, policies, and procedures relating to financial information.
What does a SOC 1 audit examine?
Your auditor could examine the way you:
- Process. How do you manipulate data for your clients? How do you ensure you don't change anything you shouldn't?
- Secure. How do you keep client information safe from outside manipulation?
Prepare for the audit with a report that details the way you handle financial data. Your auditor uses this as a starting point as the work moves ahead.
The length of the audit depends on the type you choose:
- Type 1: This report highlights one moment in time. Your auditor looks over pertinent information, and then moves on.
- Type 2: Your auditor examines procedures and processes for an extended time to ensure they work as intended.
Any company that has the potential to manipulate financial data likely needs a SOC 1 audit.
What is SOC 2?
Choose a SOC 2 audit, and a CPA will have a much larger scope. The report has multiple points, and in each one, you must prove that you meet what is considered an industry standard.
What does a SOC 2 audit examine?
A SOC 2 audit includes an examination of your internal controls as they relate to:
- Security
- Availability
- Processing integrity
- Confidentiality
- Privacy
You could ask an auditor to look through all five aspects, or you could cherry-pick the items that apply to your specific business.
Once again, you have two types of reports available. Type 1 examines a moment in time, and Type 2 involves a lengthier examination.
How do SOC 1 and SOC 2 compare?
If you deal exclusively with financial information, getting a SOC 1 audit makes sense. If you don't handle financial data but do deal with customer information, SOC 2 could be a better fit. Some organizations need both reports.
How do you choose between SOC 1 and SOC 2?
AICPA says many organizations choose SOC 1 reports. But, as awareness of security problems grows, more are adding on SOC 2 reports.
This quick comparison chart could make your decision clearer.
SOC 1 | SOC 2 | |
Scope | Financial data | Any type of customer data |
Audience | Potential clients and your office | Potential clients, your office, regulators |
Controls examined | Financial information controls | Any of the five service principles (security, confidentiality, processing integrity, privacy, availability) |
Report types | Type 1 and Type 2 | Type 1 and Type 2 |
Controls reference | Undefined | Defined |
Distribution | Restricted | Restricted |
Frequently asked questions
What does SOC stand for in SOC 1 and SOC 2?
The acronym SOC refers to Service Organization Control — a framework for auditing the internal controls that service organizations use to manage and protect data on behalf of their clients.
Who conducts SOC 1 and SOC 2 audits?
Independent audits for both report types must be performed by licensed CPAs operating under standards set by the AICPA, ensuring a consistent and credible review process.
What is the difference between a Type 1 and Type 2 SOC report?
The key distinction is duration: a Type 1 report is a snapshot assessment of controls at a single moment, whereas a Type 2 report evaluates whether those controls functioned effectively over an extended period — making Type 2 a more rigorous and comprehensive validation.
What are the five trust service principles examined in a SOC 2 audit?
A SOC 2 audit can examine security, availability, processing integrity, confidentiality, and privacy. Organizations can choose to be audited on all five or only the principles most relevant to their specific business operations.
Does my organization need both a SOC 1 and SOC 2 report?
The need for one or both reports depends on the nature of the data your organization handles. Those focused solely on financial data may find SOC 1 sufficient, while organizations managing broader customer data may require SOC 2 — and some will need both.
Who can see a SOC 1 or SOC 2 report?
Both report types carry restricted distribution. SOC 1 reports are generally shared with potential clients and internal teams, while SOC 2 reports may extend to regulators as well, reflecting their broader scope of data protection coverage.
References
System and Organization Controls: SOC Suite of Services. AICPA.
System and Organization Controls (SOC) Survey. (2021). AICPA.
