SOC 1 vs. SOC 2: Differences, Execution, and Legalities

Your clients have asked for proof that you safeguard data. You're thinking about SOC 1 vs. SOC 2. Which report will satisfy your clients?

The SOC in both reports refers to "service organization control." In these reports, the "control" refers to plans and procedures you have developed. The difference involves the type of data and the scope of the review.

SOC reports were developed by AICPA. The organisation confirms that certified public accountants (CPAs) complete the audits. The suite of reports means companies can get just the sorts of reviews their clients demand.

Let's dig deeper into SOC 1 and SOC 2, so you can make an informed choice.

What is SOC 1?

Choose a SOC 1 audit, and a CPA will examine your plans, policies, and procedures relating to financial information. 

Your auditor could examine the way you:

• Process. How do you manipulate data for your clients? How do you ensure you don't change anything you shouldn't?
• Secure. How do you keep client information safe from outside manipulation?

Prepare for the audit with a report that details the way you handle financial data. Your auditor uses this as a starting point as the work moves ahead.

The length of the audit depends on the type you choose:

• Type 1: This report highlights one moment in time. Your auditor looks over pertinent information, and then moves on.
• Type 2: Your auditor examines procedures and processes for an extended time to ensure they work as intended.

Any company that has the potential to manipulate financial data likely needs a SOC 1 audit. 

What is SOC 2?

Choose a SOC 2 audit, and a CPA will have a much larger scope. The report has multiple points, and in each one, you must prove that you meet what is considered an industry standard.

A SOC 2 audit includes an examination of your internal controls as they relate to:

• Security
• Availability
• Processing integrity
• Confidentiality
• Privacy

You could ask an auditor to look through all five aspects, or you could cherry-pick the items that apply to your specific business.

Once again, you have two types of reports available. Type 1 examines a moment in time, and Type 2 involves a lengthier examination.

SOC 1 vs. SOC 2

If you deal exclusively with financial information, getting a SOC 1 audit makes sense. If you don't handle financial data but do deal with customer information, SOC 2 could be a better fit. Some organisations need both reports.

AICPA says many organisations choose SOC 1 reports. But, as awareness of security problems grows, more are adding on SOC 2 reports.

This quick comparison chart could make your decision clearer.

References

System and Organization Controls: SOC Suite of Services. AICPA.

System and Organization Controls (SOC) Survey. (2021). AICPA.