SOC 1 vs SOC 2: What’s the Difference?

Service Organization Controls (SOC) reports are independent verification by a certified third party that an organization has strong internal controls. Developed by the American Institute of Certified Public Accountants (AICPA), these reports help service providers show customers, regulators, and stakeholders that they’re meeting compliance obligations.

SOC 1 and SOC 2 are the two most common types of reports. Even though their names are similar, they serve very different purposes. In this article, we’ll walk through what sets SOC 1 and SOC 2 apart, where they overlap, and how to determine which SOC report you need.

What Is SOC 1?

A SOC 1 report evaluates how effectively a service organization’s internal controls support financial reporting. Specifically, it focuses on Internal Control over Financial Reporting (ICFR). This helps assure that third-party services do not introduce risks to the accuracy of a company’s financial statements.

A certified public accountant (CPA) conducts the audit and reviews the service provider’s controls that may impact a client’s financial data. The report assesses whether those controls are operating as intended.

Publicly held companies must comply with the Sarbanes-Oxley Act (SOX), which requires them to maintain effective ICFR. If they use third parties for financial reporting, the organization needs a SOC 1 report to show they have secure ICFR and won’t pose a risk to the company.

What Is SOC 2?

A SOC 2 report evaluates how well an organization’s controls protect customer data across five categories known as the Trust Services Criteria: 

1. Security
2. Availability
3. Processing integrity
4. Confidentiality
5. Privacy

Unlike SOC 1, which focuses on financial reporting, SOC 2 addresses cybersecurity controls, including governance, risk management, vendor oversight, and internal processes related to data protection.

SOC 2 reports are especially relevant for Software-as-a-Service (SaaS) providers, data centers, and cloud service organizations. They’re often shared with customers, regulators, and business partners to demonstrate that the company maintains strong controls for handling sensitive data and operating securely.

Differences Between SOC 1 and SOC 2

Here are some of the significant differences between SOC 1 and SOC 2 reports:

Aspect	SOC 1	SOC 2
Primary focus	Internal control over financial reporting	Data security, availability, processing integrity, confidentiality, and privacy
Purpose	Assures that financial data handled by third parties is properly controlled	Demonstrates that customer data is protected through strong cybersecurity controls
Relevant audience	External auditors, financial stakeholders, publicly held companies	Customers, regulators, business partners, board members, senior management
Type of controls covered	Entity-level controls over financial reporting	Cybersecurity and risk management controls

Similarities Between SOC 1 and SOC 2

SOC 1 and 2 reports only have a few things in common:

• Both SOC audits are conducted by CPAs following AICPA standards.
• Both reports are used to assure external parties (e.g., clients, regulators, partners) about the service organization’s reliability.
• Each report supports overall risk management efforts and helps organizations demonstrate compliance with applicable regulatory or contractual obligations.

Types of SOC Reports

SOC 1 and SOC 2 reports are each available in two forms:

• Type 1 reports. Assess whether the organization’s internal controls are properly designed and whether management’s description of them is accurate at a specific point in time.
• Type 2 reports. Include everything in a Type 1, but also evaluate the operational effectiveness of controls over a period of time, typically ranging from six months to one year.

Additional SOC 2 Report Types

Beyond the standard SOC 2 reports, the AICPA has developed additional reporting options to address industry-specific requirements.

For cloud service providers, the AICPA collaborated with the Cloud Security Alliance (CSA) to incorporate criteria from the Cloud Controls Matrix (CCM) into the SOC 2 report. This version assesses the design and operating effectiveness of internal controls and provides added assurance that the provider is aligned with cloud security standards.

Another option focuses on healthcare organizations. In partnership with the Health Information Trust Alliance (HITRUST), the AICPA created a SOC 2 report that integrates the HITRUST Common Security Framework (CSF). This allows entities subject to Health Insurance Portability and Accountability Act (HIPAA) regulations to demonstrate compliance with both trust services criteria and healthcare-specific controls.

SOC 1 vs SOC 2: Which One Should You Choose For Your Business

Choosing between a SOC 1 and SOC 2 report depends on the nature of your services and the expectations of your stakeholders:

• Choose SOC 1 if your services affect your clients’ financial reporting. This is especially relevant for payroll providers, financial institutions, and other businesses where internal control over ICFR is essential.
• Choose SOC 2 if your clients need assurance around how you manage data security, availability, confidentiality, or privacy. 

FAQs About SOC 1 and SOC 2

How Long Does Preparing for a SOC 1 And 2 Report Take?

The amount of time needed to get ready for a SOC 1 audit engagement depends on the maturity of the organization’s existing controls. On average, expect several months of preparation to implement necessary controls, write policies and procedures, and gather required documentation.

For SOC 2, organizations should budget four to nine months for pre-audit preparation. More time is usually needed for an initial SOC 2 engagement versus renewal audits.

Can a Company Be Both SOC 1 and SOC 2 Compliant?

Yes, an organization can comply with both SOC 1 and SOC 2 standards. Some companies, particularly those that provide services relevant to both financial reporting and data security or privacy, may pursue both reports to meet the needs of different stakeholders.

Is SOC 2 Type 2 Better than Type 1?

SOC 2 Type 2 reports are often seen as more valuable than Type 1. They assess both the design of controls and how well those controls operate over time. This provides stronger assurance to customers and stakeholders.

However, Type 2 audits take more time and cost more. Organizations should weigh the added value against their compliance goals and client expectations.

Which Industries Typically Require a SOC 1 or SOC 2 Report?

Industries that handle sensitive data or provide critical services to other organizations require SOC reports. It includes cloud service providers, data centers, managed service providers, SaaS companies, and healthcare, finance, and e-commerce organizations that must meet data security standards such as PCI DSS or SAS 70.

How Do SOC 1 and SOC 2 Audits Differ From ISO 27001 Certification?

ISO 27001 focuses on continuous risk management across the organization, while SOC reports assess control performance at a point in time or over a period. Many businesses choose both to address different security and compliance goals.

Achieve SOC Readiness Faster with ZenGRC

Preparing for a SOC audit is time-intensive, from risk assessments and documenting processes to control testing and remediation. ZenGRC simplifies the entire process. The centralized platform helps you map controls to SOC requirements, track audit readiness in real time, automate evidence collection, and flag any gaps for corrective action. 
Schedule a demo to see how ZenGRC can help your organization meet SOC requirements with greater efficiency.