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Side-by-Side Comparison

SOC 1 vs SOC 2: Which Audit Does Your Service Organization Need?

SOC 1

SOC 1 Type II Report

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SOC 2

SOC 2 Type II Report

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SOC 1 and SOC 2 reports both attest to a service organization's controls but address fundamentally different audiences. SOC 1 focuses on controls relevant to a customer's financial reporting; SOC 2 focuses on operational controls around security, availability, processing integrity, confidentiality, and privacy. Choosing the wrong report wastes audit budget and fails to meet customer expectations.

Detailed Comparison

Primary Purpose

SOC 1

Demonstrates controls over financial reporting that affect a user entity's financial statements.

SOC 2

Demonstrates controls relevant to security, availability, processing integrity, confidentiality, and privacy of customer data.

Audience

SOC 1

User entity auditors performing financial statement audits — controllers, CFOs, external CPAs.

SOC 2

Customer security teams, procurement, vendor risk management, CISOs, and compliance teams.

Standard

SOC 1

Based on SSAE 18 / ISAE 3402, focused on internal controls over financial reporting (ICFR).

SOC 2

Based on the AICPA Trust Services Criteria covering five categories.

Typical Service Provider

SOC 1

Payroll processors, claims processing, transaction processing, financial software providers, accounting service bureaus.

SOC 2

SaaS platforms, cloud infrastructure providers, data centers, managed security providers, any service handling sensitive customer data.

Trust Service Criteria

SOC 1

Not applicable — controls are scoped to financial reporting impact only.

SOC 2

Security is mandatory; Availability, Processing Integrity, Confidentiality, and Privacy are optional based on commitments.

Type I vs Type II

SOC 1

Both available — Type I is point-in-time, Type II covers a 6-12 month observation period.

SOC 2

Both available — same Type I/II distinction; Type II is the market expectation.

Cost

SOC 1

Typically $20,000-$80,000 for Type II depending on scope and complexity.

SOC 2

Typically $20,000-$100,000 for Type II depending on number of TSCs and locations.

Public vs Restricted

SOC 1

Restricted-use report — only shared with user entities and their auditors under NDA.

SOC 2

Restricted-use report — same NDA model; SOC 3 is the public-facing summary version.

Control Examples

SOC 1

Transaction completeness, data input validation, access controls over financial data, change management for financial systems.

SOC 2

Encryption, access management, vulnerability management, incident response, vendor management, business continuity.

When You Need It

SOC 1

When customers' auditors need to rely on your controls for their financial statement audit.

SOC 2

When customers' security or procurement teams require evidence of operational security controls.

Our Recommendation

You probably need SOC 2 — it's the standard for technology service providers handling customer data. SOC 1 is only required if your service directly impacts customers' financial reporting (payroll, transaction processing, financial systems). Many organizations need both: SOC 1 for accounting customers and SOC 2 for security-conscious enterprise customers.

Frequently Asked Questions

Not as a single report, but the same auditor can perform both audits with overlapping fieldwork to reduce cost. Plan for 6-9 months for the combined engagement and 30-50% cost savings versus separate audits.

It depends on your customer base. ISO 27001 is broadly accepted internationally; SOC 2 is the standard for North American enterprise customers. Many SaaS companies pursue both to satisfy global customer requirements.

SOC 3 is a general-use report based on the same SOC 2 audit but with a less-detailed report suitable for marketing materials and public websites. It's typically obtained as an add-on to a SOC 2 audit.