Key Differences at a Glance
| Aspect | SOC 1 | SOC 2 |
|---|---|---|
| Primary Focus | Financial reporting controls | Trust Service Criteria (security, availability, etc.) |
| Standard | SSAE 18 / ISAE 3402 | SSAE 18 / TSP Section 100 |
| Primary Users | Financial statement auditors | Management, vendors, customers, prospects |
| Distribution | Restricted (user entities and their auditors) | Type II: Restricted; Type III: Public |
| Audit Impact | Required for financial statement audits | Not for financial audits |
| Report Types | Type I or Type II only | Type I, Type II, or SOC 3 (summary) |
| Criteria Flexibility | Controls must relate to financial reporting | Can select 1 or more of 5 Trust Service Criteria |
| Common Examples | Payroll processors, claims administrators, loan servicers | SaaS platforms, cloud providers, data centers |
When to Use Each Report Type
Use SOC 1 When:
- Your services affect clients' financial reporting (e.g., payroll, transaction processing)
- Client auditors require it for financial statement audits
- You process financial transactions or maintain financial records
- Regulatory compliance requires financial control reporting
Use SOC 2 When:
- You need to demonstrate security and operational controls
- Clients request vendor security assessments
- You're a SaaS, cloud, or technology service provider
- You want to market your security posture to prospects and customers
Trust Service Criteria (SOC 2)
SOC 2 reports can address one or more of the five Trust Service Criteria:
🔒 Security (Required)
Protection against unauthorized access (physical and logical) to the system. This criterion is always required for SOC 2 reports.
⚡ Availability (Optional)
The system is available for operation and use as committed or agreed. Includes monitoring, incident response, and backup/recovery.
✓ Processing Integrity (Optional)
System processing is complete, valid, accurate, timely, and authorized. Focus on data quality and transaction processing.
🔐 Confidentiality (Optional)
Information designated as confidential is protected as committed or agreed. More restrictive than privacy.
👤 Privacy (Optional)
Personal information is collected, used, retained, disclosed, and disposed of in conformity with privacy commitments and regulations.
Can You Have Both SOC 1 and SOC 2?
Yes! Many organizations maintain both SOC 1 and SOC 2 reports because they serve different purposes and audiences:
- SOC 1 satisfies financial auditor requirements for clients
- SOC 2 demonstrates security and operational controls to prospects and existing customers
Example: A payroll processing company might maintain a SOC 1 report (required by their clients' financial auditors) AND a SOC 2 report (to demonstrate security controls to prospects and satisfy vendor security assessments).
Cost and Timeline Comparison
| Factor | SOC 1 | SOC 2 |
|---|---|---|
| Typical Cost | $15,000 - $50,000 | $20,000 - $100,000+ |
| Audit Duration | 2-4 months | 3-6 months |
| Renewal Frequency | Annually | Annually |
Quick Decision Framework
Ask yourself:
- 1.Does your service impact clients' financial reporting?
Yes → You likely need SOC 1 - 2.Are clients asking for security assessments?
Yes → You likely need SOC 2 - 3.Are you trying to win new business in regulated industries?
Yes → SOC 2 can be a competitive differentiator - 4.Do client auditors require SOC 1 reports?
Yes → SOC 1 is mandatory, not optional
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