SOC 1

SOC 1 is an audit report that evaluates the internal controls at a service organization relevant to user entities' financial reporting (ICFR).

SOC 1 reports focus on controls relevant to financial reporting. They're required when a service organization's controls affect clients' financial statements.

SOC 1 examples: - Payroll processors - Payment processors - Claims processors - Loan servicers - Data centers (financial data)

Report types: - Type 1: Point-in-time control design - Type 2: Operating effectiveness over 6-12 months

Key difference from SOC 2: - SOC 1: Financial reporting controls - SOC 2: Security, availability, etc.

Why It Matters

SOC 1 reports are essential for service organizations whose processing affects client financial statements. If your clients' auditors need assurance about your controls, a SOC 1 report eliminates the need for each client to audit you individually—saving both you and your clients significant time and cost. Many financial services organizations require SOC 1 Type 2 reports from critical vendors as a contractual obligation.

Key Points

Focuses on internal controls over financial reporting

Required by many financial services clients

Type 2 covers operating effectiveness

Based on SSAE 18 standards

Auditor is typically a CPA firm

Applicable Compliance Frameworks

SOC 2

Related Terms

SOC 2

SOC 2 is an auditing framework developed by AICPA that evaluates how service organizations manage customer data based on five Trust Service Criteria.

Controls Testing

Controls testing is the process of evaluating whether security and compliance controls are properly designed and operating effectively to achieve their intended objectives.

Evidence Collection

Evidence collection is the process of gathering documentation and artifacts that demonstrate security controls are designed properly and operating effectively.

SOC 1 vs SOC 2