SOC 1 VS SOC 2
SOC 1 focuses on controls relevant to financial reporting (for payroll processors, payment platforms, etc.), while SOC 2 focuses on security, availability, and data protection controls (for SaaS companies, cloud services, etc.). The choice depends on what your customers need assurance about.
You need **SOC 1** if your services affect your customers' financial reporting - payroll processing, payment handling, loan servicing, etc. You need **SOC 2** if customers want assurance about security, availability, and data protection - this applies to most SaaS and cloud companies. Some companies need **both** if they provide financial services AND technology services.
At A Glance
| Feature | SOC 1 | SOC 2 |
|---|---|---|
| Primary Focus | Financial reporting controls (ICFR) | Security & operational controls |
| Framework | Control objectives (custom) | Trust Service Criteria (AICPA) |
| Common Users | Financial services companies | SaaS & technology companies |
| Customer Need | SOX/audit compliance | Security assurance |
| Report Audience | Customer auditors & management | Customers, prospects, partners |
| Request Frequency | Less common (financial services) | Very common (most enterprises) |
About SOC 1
A report on Controls at a Service Organization Relevant to User Entities' Internal Control over Financial Reporting (ICFR). Used when your services impact customers' financial statements.
Pros
- Required by many financial services customers
- Addresses ICFR compliance needs
- Supports customer SOX compliance
- Well-established (formerly SAS 70)
Cons
- Narrow scope (financial reporting only)
- Not suitable for general security assurance
- Less commonly requested than SOC 2
- Doesn't address availability/privacy
About SOC 2
A report on Controls at a Service Organization Relevant to Security, Availability, Processing Integrity, Confidentiality, or Privacy (Trust Service Criteria). The standard for SaaS and cloud services.
Pros
- Most commonly requested by customers
- Flexible scope (choose relevant criteria)
- Covers security comprehensively
- Industry standard for tech companies
Cons
- Doesn't address financial reporting controls
- Not suitable for ICFR assurance
- Annual recurring audit costs
- Customers may also need SOC 1
Frequently Asked Questions
Can one report replace the other?
No, they serve different purposes. SOC 1 assures financial reporting controls; SOC 2 assures security controls. If a customer specifically requests one, the other won't satisfy that requirement.
What is SOC 3?
SOC 3 is a public-facing summary of a SOC 2 report without detailed control descriptions. It's useful for marketing but rarely satisfies customer due diligence requirements. Most companies skip SOC 3 unless specifically requested.
Do I need both SOC 1 and SOC 2?
Only if you provide both financial-impact services AND general technology services. For example, a payroll SaaS company might need SOC 1 (for payroll processing) and SOC 2 (for their cloud platform). Many companies only need SOC 2.
Which is more expensive?
Costs are similar, typically $20,000-$50,000 for either Type 2 report. SOC 1 audits may involve more accounting expertise, while SOC 2 audits may have broader technical scope. If you need both, many auditors offer combined pricing.
Still Not Sure Which to Choose?
Our experts can help you evaluate your specific business needs and customer requirements to pick the right path.