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Confused by SOC reports? You're not the only one. Plenty of companies struggle to tell the difference between SOC 1 and SOC 2—and picking the wrong one can waste time, budget, and trust. Worse, it can leave you with a report your clients don’t care about.
Here’s the simple version.
SOC 1 is narrow and financial. It focuses on internal controls that impact your clients’ financial reporting—things like payroll systems, invoicing platforms, or any service that touches their accounting. If what you do ends up in someone’s audit, SOC 1 is probably what you need.
SOC 2 is broader and deeper. It assesses how well you protect customer data, based on five Trust Services Criteria: security, availability, processing integrity, confidentiality, and privacy. If you're a SaaS provider or handle sensitive information, this is the report your customers are likely expecting.
In short:
SOC 1 = financial control.
SOC 2 = data trust.
Choosing the right SOC report isn’t just about ticking a box. It’s about proving your controls work, protecting client data, and building trust that lasts.
SOC reports are independent audits that check how well your internal controls work. SOC 1 and SOC 2 sound similar, but they tackle very different risks: one focuses on financial reporting, the other on data security and trust.
SOC 1 checks the controls that affect a client’s financial reporting. Think payroll systems, billing platforms, or financial reporting tools—anything that touches accounting data. These audits follow the SSAE 18 AT-C 320 standard and help auditors confirm your financial information is accurate and reliable.
You’ll need SOC 1 if your service directly affects transactions or feeds into a client’s financial statements. At its core, SOC 1 asks one simple question: Are your financial controls built right, and do they actually work?
SOC 2 is all about data trust. It looks at how well your systems protect customer information and stay secure, available, and reliable. Audits focus on the Trust Services Criteria: Security, Availability, Processing Integrity, Confidentiality, and Privacy.
SaaS platforms, cloud providers, and any business handling sensitive data use SOC 2 to show customers they take security seriously. It’s the proof that your systems safeguard data, keep services running, and earn trust without clients having to check for themselves.
SOC 1 and SOC 2 are independent audits that validate internal controls but address different risks. SOC 1 focuses on financial reporting accuracy, while SOC 2 evaluates data protection and system reliability to help businesses choose the right report.
SOC 1 is built around financial assurance. It evaluates controls that influence a client’s financial reporting and ensures transactions are processed accurately and consistently for audit purposes.
SOC 2 focuses on operational trust, assessing how well systems safeguard data and maintain secure, dependable services.
SOC 1 audits examine internal controls over financial reporting (ICFR), including transaction processing, financial data accuracy, and system reliability supporting accounting processes.
SOC 2 audits review controls aligned with the Trust Services Criteria: Security, Availability, Processing Integrity, Confidentiality, and Privacy.
SOC 1 uses customized control objectives tailored to how a service impacts financial workflows, meaning audit scope varies by organization.
SOC 2 follows a standardized framework based on the Trust Services Criteria, providing consistent evaluation of security and operational controls across industries.
SOC 1 is commonly pursued by payroll processors, billing platforms, financial software providers, and loan servicing organizations whose systems affect accounting records.
SOC 2 is widely adopted by SaaS companies, cloud providers, managed service providers, and businesses handling sensitive customer or operational data.
SOC 1 primarily provides assurance to auditors and finance teams that financial controls are reliable.
SOC 2 demonstrates to customers and partners that an organization protects data, maintains uptime, and operates securely—making it a key trust signal in modern technology environments.
Here’s a quick SOC 1 vs SOC 2 comparison to see the differences at a glance.
| Aspect | SOC 1 | SOC 2 |
|---|---|---|
| Primary Focus | Financial reporting controls | Data security and operational trust |
| Main Objective | Ensure accuracy of financial data | Protect systems and customer information |
| What It Evaluates | Internal Controls over Financial Reporting (ICFR) | Trust Services Criteria (Security, Availability, Processing Integrity, Confidentiality, Privacy) |
| Framework | Customized control objectives | Standardized Trust Services Criteria |
| Typical Users | Payroll, billing, financial service providers |
Choose SOC 1 if you impact financial reporting. Choose SOC 2 if you handle customer data and need to demonstrate security and trust.
SOC 1 and SOC 2 audits don’t just differ in purpose—they follow fundamentally different frameworks that determine what auditors test and how assurance is measured.
In simple terms:
SOC 1 uses customized control objectives, while SOC 2 follows a standardized framework called the Trust Services Criteria (TSC).
SOC 1 focuses on controls tied directly to financial reporting. Instead of using a fixed checklist, auditors define control objectives based on how a service impacts a client’s financial processes.
Typical objectives include:
Because every service provider affects financial workflows differently, SOC 1 audits are flexible in scope. However, one element remains consistent: IT General Controls (ITGCs) play a critical role. Access management, system changes, backups, and operational controls all help ensure financial data remains accurate and dependable.
SOC 2 follows the AICPA’s Trust Services Criteria—a standardized framework designed to evaluate security and system reliability across organizations.
The five criteria include:
Only Security is mandatory; the remaining criteria are included based on business operations and customer expectations.
SOC 1 asks whether controls protect financial accuracy.
SOC 2 asks whether controls protect systems and data.
Financial service providers often pursue SOC 1 Type 2 reports to demonstrate consistent financial control performance, while technology companies rely on SOC 2 Type 2 to prove long-term security and operational reliability.
Once you’ve chosen between SOC 1 and SOC 2, there’s one more decision to make: Type 1 or Type 2. Both report types exist for each framework, but they differ in timing and depth of assurance.
SOC Type 1 reports evaluate whether controls are properly designed at a specific point in time. Think of it as a snapshot—it confirms systems are built correctly but doesn’t prove they operate effectively over time.
Because they require less historical evidence, Type 1 audits are faster and often used by organizations beginning their compliance journey. They help establish a baseline and demonstrate that foundational controls are in place.
SOC Type 2 reports go further by testing how controls perform over an extended period, typically 6–12 months. Auditors review real operational evidence such as logs, monitoring reports, and audit trails to confirm controls work consistently.
This makes Type 2 the gold standard for both SOC 1 and SOC 2. It answers the question customers and auditors care about most: do your controls actually work in practice, not just in design?
Many companies begin with Type 1 to validate control design quickly and prepare for a longer audit cycle. After several months of stable operations, transitioning to Type 2 provides stronger assurance and greater customer trust.
Understanding Type 1 and Type 2 helps organizations choose the right compliance path—whether proving financial accuracy with SOC 1 or building data trust through SOC 2.
Choosing between SOC 1 and SOC 2 depends on how your service affects customers—whether it impacts financial reporting, protects sensitive data, or both—and the level of risk involved.
SOC 1 is for businesses impacting client financial reporting. If your service handles transactions or accounting data, auditors and customers expect proof of accurate controls.
Common SOC 1 use cases include:
These companies must demonstrate strong Internal Controls over Financial Reporting (ICFR) to support reliable audits.
SOC 2 applies to organizations responsible for protecting customer or operational data. It focuses on security, availability, and privacy—making it especially important for technology-driven businesses.
SOC 2 is commonly pursued by:
While technically voluntary, SOC 2 has become a baseline trust requirement in modern tech ecosystems.
Some companies operate in both financial and data-sensitive environments. You may need SOC 1 and SOC 2 if:
Financial risk points to SOC 1. Data trust points to SOC 2. If your service covers both, pursuing both reports provides complete assurance.
Choosing between SOC 1 and SOC 2 isn’t just compliance—it’s strategic. The right report builds client trust, meets expectations, and avoids wasted time or audit gaps.
Your clients’ audit needs should guide your first step. Many request SOC 1 or SOC 2 reports when onboarding vendors, and some contracts specify standards like SSAE 18. Frequent vendor questionnaires signal it’s time to invest in a SOC report. Knowing client expectations ensures you provide the assurance they truly care about.
How your service affects clients determines the SOC report you need. Consider the type of risk you introduce and choose accordingly:
It’s about how clients rely on your systems, not just what your company does.
Industries often have default expectations for SOC reports. Knowing the norm can guide your selection and reduce unnecessary audits:
Understanding industry norms helps align client expectations with your audit
A readiness assessment ensures your audit runs smoothly. Preparing early reduces stress and prevents costly surprises:
Focusing on service impact and client expectations ensures you select the right SOC report—SOC 1, SOC 2, or both—and deliver assurance your clients trust.
Choosing between SOC 1 and SOC 2 comes down to how your service impacts clients. Financial reporting systems—like payroll, billing, or accounting—call for SOC 1 to prove controls are solid. Handling customer data or cloud infrastructure? SOC 2 shows your clients you take security and reliability seriously.
Next is the type: Type 1 is a snapshot of control design, while Type 2 proves controls perform consistently over 6–12 months. Many companies start with Type 1 for a quick compliance check, then move to Type 2 to demonstrate long-term reliability.
Some businesses, like FinTech platforms, need both reports. Covering financial workflows and sensitive data isn’t overkill—it’s smart assurance. Before any audit, a readiness assessment flags gaps early and prevents surprises.
A SOC report isn’t just paperwork—it’s proof. Done right, it demonstrates strong controls, reduces risk, and builds lasting trust with clients who rely on your services.
Take control of compliance, reduce risk, and build trust with UprootSecurity — where GRC becomes the bridge between checklists and real breach prevention.
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Senior Security Consultant
| SaaS, cloud providers, MSPs, tech companies |
| Primary Audience | Auditors and finance teams | Customers, partners, and security teams |
| Business Value | Financial assurance | Customer trust and security validation |
