If you are a business owner or in the management that holds sensitive data or provides services to businesses, you have most likely been asked for a SOC 1 or a SOC 2 report. But what does that mean? If you are thinking this, you are certainly not alone. There are more vendors and partners requesting these reports and it is important to be well-informed about how these reports work and the potential implications they have for your company’s reputation and compliance status.
In this blog, we will help you uncover the differences between SOC 1 and SOC 2 reporting in simple explanations, without jargon, so that you can make the best decision for your business. Whether you are just starting to think about compliance or are about to do your first audit, we hope to provide a practical advice.
SOC Reports: A Basic Overview
Let’s start simple. SOC stands for “System and Organization Controls.” These reports are designed to show how a business protects both its own and its clients’ information and assets. Created by the American Institute of Certified Public Accountants (AICPA), SOC reports help organizations prove they’re running a tight ship—especially when it comes to sensitive data and operational best practices.
There are a few types of SOC reports, but by far the most asked-about are SOC 1 and SOC 2. These are the ones clients and partners mention when they want proof your business can be trusted
Introducing SOC 1 Reporting
SOC 1 is all about financial information. In other words, if your service could affect someone else’s financial statements—like if you process payroll for companies, handle customer billing, or manage financial transactions—SOC 1 reporting is probably something you’ll need to consider.
SOC 1 reports reassure your clients that their financial data is safe with you. Auditors look at your processes and controls to make sure everything is accurate and reliable. If you think about companies that outsource things like accounting or employee benefits, a SOC 1 report is what tells them their money-related data won’t end up causing problems in their financial records.
What Gets Checked?
Instead of following a strict checklist, SOC 1 audits are tailored to your specific services. Auditors look at your unique control objectives and how you meet them—whether it’s your IT setup, policies for processing payments, or just making sure information is complete and correct.
Who Wants SOC 1 Reports?
Mostly, you’ll get requests from folks who care about financial risk—think CFOs, compliance people, external auditors, or anyone involved with financial reporting. If any of your customers have obligations to prove their financials are in order, they’ll want your SOC 1.
SOC 2 Reporting: Focusing on Data Protection and Trust
SOC 2, on the flip side, is less about money and more about trust. This type of report digs into how your company keeps information secure, confidential, private, and available for use. It’s especially relevant to tech service providers—companies offering cloud platforms, SaaS, data hosting, or any business that stores or processes sensitive data.
With SOC 2, the goal is to show how well you manage risks around sensitive customer information. The criteria are clear and well-defined, so both your clients and the auditor know exactly what’s being assessed.
What’s Covered in a SOC 2 Audit?
SOC 2 audits look at five areas called the Trust Services Criteria:
- Security (always covered): Are your systems protected from unauthorized access?
- Availability: Can clients rely on your service being up and running when they need it?
- Processing Integrity: Is data handled accurately and on time?
- Confidentiality: How do you keep restricted or sensitive info out of the wrong hands
- Privacy: Do you manage personal information in a way that respects legal and ethical standards?
You can pick which of these categories your SOC 2 audit should include, but Security is always required.
Who Looks for SOC 2 Reports?
SOC 2 audits interest a wide variety of people - IT teams, compliance professionals, business partners, and even end-users concerned about their information. As data privacy laws get stricter, more clients and partners want the added assurance that a SOC 2 report brings.
Who Looks for SOC 2 Reports?
SOC 2 audits interest a wide variety of people - IT teams, compliance professionals, business partners, and even end-users concerned about their information. As data privacy laws get stricter, more clients and partners want the added assurance that a SOC 2 report brings.
A Clear Breakdown of SOC 1 and SOC 2 Difference
Understanding the Key Difference Between SOC 1 and SOC 2 Reports:
Getting Ready for a SOC Audit
Preparing for SOC 1 or SOC 2 isn’t just a box-ticking activity. The process requires thought, teamwork, and an honest look at your day-to-day operations. Here’s a straightforward approach to getting started:
- Decide Which Report Fits Best
Reflect on what your customers want and the type of service you provide. Are you being asked to protect financial data or demonstrate strong data security? This is the foundation of your compliance strategy.
- Run a Readiness Assessment
Before bringing in an outside auditor, take stock of your existing processes and controls. Are there gaps? Do you have the documentation and evidence you’ll need? A readiness review can help you find weak spots early.
- Get Your Documentation in Order
Auditors need proof—not just promises. Be sure your policies and records are organized, up-to-date, and accessible. This makes the process smoother and shows you take compliance seriously.
- Educate Your Team
Everyone at your company should understand why the audit matters and what their role is. From IT folks to operations and HR, keeping your team informed helps prevent surprises and ensures everyone is rowing in the same direction.
- Find an Experienced Auditor
Not all auditors are created equal. Choose one with a track record in your industry and a clear approach to explaining the process.
Why These Reports Matter
SOC 1 and SOC 2 reports may seem like just more compliance documentation, but they typically serve a greater purpose. These reports help you build client trust, win new business, and avoid surprises during contract negotiations. They can be excellent tools to demonstrate your commitment to transparency and responsibility, which is a message your customers and partners want to hear.
Whether you’re being asked for your first SOC 1, need to update your SOC 2, or want to learn more about the overall process, tackling these reports does not have to be difficult. The most important thing is to find the right version for your business and to make compliance a process and priority beyond just a once-a-year activity.
If you have any questions about SOC 1 vs SOC 2 reporting on getting started, our team can help.