SOC 1 vs SOC 2

If your customers are asking for a SOC report, the first question is usually: SOC 1 or SOC 2?

Although both are independent attestation reports developed under the AICPA’s System and Organization Controls framework, they serve different purposes. SOC 1 focuses on controls relevant to a customer’s internal control over financial reporting, while SOC 2 evaluates controls related to security and other Trust Services Criteria.

Choosing between SOC 1 and SOC 2 is therefore not about picking the more comprehensive or popular option. It is about determining what your customers need assurance over, what your organization does, and which risks your controls are designed to address.

For SaaS companies, financial service providers, healthcare organizations, technology providers, and other service organizations, understanding the difference between SOC 1 vs SOC 2 can help avoid unnecessary compliance work and ensure the resulting report meets customer expectations.

Key Takeaways

• SOC 1 is designed around controls relevant to internal control over financial reporting.
• SOC 2 evaluates controls against the AICPA Trust Services Criteria.
• The five SOC 2 Trust Services Criteria are security, availability, processing integrity, confidentiality, and privacy.
• SOC 1 and SOC 2 can both be issued as Type 1 or Type 2 reports.
• A SOC 1 report may be appropriate when a service organization’s controls affect a customer’s financial reporting.
• SOC 2 is commonly relevant to organizations that provide technology services or handle customer data.
• Some organizations may require both SOC 1 and SOC 2 because they address different assurance needs.
• The right SOC report depends on the organization’s services, systems, risks, customer contracts, and assurance requirements.

What Is SOC 1?

SOC 1 is an attestation report that examines controls relevant to a service organization’s customers’ internal control over financial reporting (ICFR).

In simple terms, SOC 1 matters when the services a company provides can affect how a customer prepares, processes, or reports financial information.

For example, consider a company that provides payroll processing. Its customers may rely on that service to calculate employee compensation and generate information that ultimately feeds into financial reporting. Controls around that service can therefore be relevant to the customer’s financial statements.

SOC 1 can also be relevant to organizations providing accounting, transaction processing, billing, or other services that have a direct connection to customers’ financial reporting processes.

The key question is:

Could a failure in the controls surrounding your service affect your customer’s financial reporting?

If the answer is yes, SOC 1 may be the appropriate report to consider.

What Is SOC 2?

SOC 2 is an attestation report that evaluates controls against the AICPA Trust Services Criteria.

The Trust Services Criteria cover:

• Security
• Availability
• Processing integrity
• Confidentiality
• Privacy

Security is the common criterion for a SOC 2 examination. Depending on the organization’s services and commitments, additional criteria may be included in the scope. SOC 2 is particularly relevant to organizations whose customers need assurance about how their systems and information are protected. That makes SOC 2 common among:

• SaaS companies
• Cloud service providers
• Managed service providers
• Technology companies
• Data processing organizations
• Healthcare technology providers
• Fintech companies
• Business process service providers

However, being a SaaS company does not automatically mean an organization needs SOC 2. The decision should be driven by the nature of the services provided and the assurance customers require.

SOC 1 vs SOC 2: What Is the Difference?

The simplest way to understand SOC 1 vs SOC 2 is to look at the question each report is designed to answer.

SOC 1 asks:
Are the service organization’s controls relevant to the customer’s internal control over financial reporting appropriately designed and, for a Type 2 examination, operating effectively?

SOC 2 asks:
Are the service organization’s controls designed and, for a Type 2 examination, operating effectively against the applicable Trust Services Criteria?

That distinction is important because the same organization can potentially have a need for both reports.

For example, a financial technology provider may process transactions that affect customer financial reporting while also operating a platform that stores sensitive customer information. SOC 1 could address the financial reporting-related controls, while SOC 2 could assure security and other applicable Trust Services Criteria.

Neither report is simply a “better” version of the other.

They answer different assurance questions.

SOC 1 vs SOC 2: Which One Does Your Business Need?

There is no one-size-fits-all answer.

The right report depends on your services, customer expectations, contractual requirements, systems, and risk profile. Your business may need SOC 1 if:

Your organization provides services that directly affect customers’ financial reporting processes. This can include:

• Payroll processing
• Financial transaction processing
• Billing services
• Accounting services
• Certain financial technology services
• Other outsourced processes that are relevant to customer financial reporting

Customer auditors may also request information about your controls when assessing their own organization’s financial reporting controls.

Your business may need SOC 2 if:

Your customers need assurance about the security and operation of the systems used to deliver your services. SOC 2 may be relevant if your organization:

• Stores customer information
• Processes customer data
• Provides cloud-based services
• Operates a SaaS platform
• Hosts applications or infrastructure
• Provides managed technology services
• Handles sensitive or confidential information

Customer security questionnaires and vendor risk assessments frequently ask service providers for independent assurance over their controls. A SOC 2 report can help address those requirements.

Your business may need both

SOC 1 and SOC 2 are not mutually exclusive.

An organization may need both reports when it has financial reporting-related controls as well as broader technology, security, availability, confidentiality, or privacy requirements. The decision should begin with customer and business requirements rather than assuming that one report can replace the other.

SOC 1 Type 1 vs Type 2

Once you determine that SOC 1 is appropriate, you also need to understand the difference between a SOC 1 Type 1 and SOC 1 Type 2 report.

A Type 1 report evaluates whether controls are suitably designed as of a specified date.

A Type 2 report goes further by examining the operating effectiveness of those controls over a defined period.

That makes Type 2 particularly important when customers want evidence that controls were not only established but consistently operated during the examination period.

SOC 2 Type 1 vs Type 2

The same fundamental distinction applies to SOC 2. A SOC 2 Type 1 report evaluates the design of controls at a specific point in time.

A SOC 2 Type 2 report evaluates both the design of controls and their operating effectiveness over a specified period.

For organizations that are building their compliance program, Type 1 can provide an assessment of the control environment at a point in time. Type 2 provides a longer-term view of whether those controls operated effectively throughout the examination period.

The appropriate approach depends on customer expectations, business requirements, and the organization’s compliance maturity.

What Are the SOC 1 Requirements?

SOC 1 requirements are driven by the controls relevant to internal control over financial reporting for the services being examined. That means there is no universal SOC 1 checklist that every organization follows in the same way. The organization and its service auditor first need to establish an appropriate scope and identify the controls relevant to the examination. Depending on the service, these may involve areas such as:

• Transaction processing
• Financial data processing
• Change management
• Access controls
• Data processing controls
• System operations
• Business processes
• Supporting technology controls

The important consideration is whether the controls are relevant to the financial reporting objectives of the user entities.

What Are the SOC 2 Requirements?

SOC 2 requirements are based on the applicable AICPA Trust Services Criteria. Security is the required criterion for a SOC 2 examination. Organizations may also include availability, processing integrity, confidentiality, and privacy based on their business and customer requirements. SOC 2 controls can cover areas such as:

• Access management
• Identity and authentication
• Risk management
• Change management
• Incident response
• Security monitoring
• Vendor management
• Data protection
• Business continuity
• System operations
• Vulnerability management
• Privacy practices

The specific controls and evidence required depend on the organization’s systems, services, scope, and selected criteria.

SOC 1 vs SOC 2 Audit: What Does the Process Look Like?

A successful SOC engagement starts well before the auditor begins testing controls.

Organizations typically move through several stages.

1. Define the scope: First, determine which services, systems, processes, locations, and controls are included. An overly broad scope can create unnecessary work. An overly narrow scope can leave important customer requirements unaddressed.
2. Identify applicable controls: Next, identify the controls relevant to the selected SOC framework and examination objectives. For SOC 1, the focus is on controls relevant to internal control over financial reporting. For SOC 2, controls are evaluated against the applicable Trust Services Criteria.
3. Perform a readiness assessment: A readiness assessment helps identify gaps before the formal examination. This is where organizations can discover issues such as incomplete policies, inconsistent access reviews, missing evidence, ineffective monitoring, or controls that exist but are not operating consistently. Addressing these gaps before the examination can make the formal audit process significantly more predictable.
4. Collect and organize evidence: Evidence is a critical part of any SOC examination. Organizations may need to demonstrate that controls were implemented and, for Type 2 examinations, operated consistently throughout the examination period. Without a structured evidence process, teams can end up searching through emails, spreadsheets, screenshots, tickets, documents, and multiple business systems.
5. Remediate control gaps: Identified gaps need to be addressed before or during the examination, depending on their nature and the engagement timeline. Remediation can involve updating policies, strengthening access controls, improving monitoring, implementing technical safeguards, or establishing repeatable processes.
6. Undergo the independent examination: A qualified service auditor performs the examination and evaluates the controls within the defined scope. The resulting SOC report provides customers and other authorized users with independent assurance about the controls examined.

How Long Does a SOC 1 or SOC 2 Audit Take?

There is no fixed timeline for every SOC engagement. The duration depends on factors such as:

• Scope
• Number of systems and locations
• Number and complexity of controls
• Existing compliance maturity
• Availability of evidence
• Remediation requirements
• Type 1 versus Type 2
• Auditor availability
• Customer deadlines

A well-defined scope and organized evidence collection process can reduce unnecessary delays. For organizations pursuing a Type 2 report, planning is particularly important because operating effectiveness must be demonstrated over the defined examination period.

SOC 1 vs SOC 2: Common Mistakes to Avoid

Organizations often make the same mistakes when preparing for a SOC engagement.

Choosing a report based only on industry

Being a SaaS company does not automatically mean SOC 2 is the only appropriate report. The actual question is what assurance customers need.

Treating SOC compliance as a documentation exercise

Policies alone do not demonstrate that controls operate effectively. Organizations need processes, technical controls, evidence, ownership, and consistent execution.

Starting evidence collection too late

For Type 2 examinations, evidence must demonstrate control operation throughout the examination period. Waiting until the end can make missing evidence difficult to reconstruct.

Defining an unnecessarily broad scope

Every additional system, process, and location can increase the work required to maintain and demonstrate controls.

Scope should be aligned with the services and requirements that actually matter.

Assuming one SOC report satisfies every customer

Different customers may have different assurance requirements. A SOC 2 report does not automatically address requirements that are specifically focused on financial reporting, just as a SOC 1 report is not designed to provide broad assurance across all Trust Services Criteria.

Can SOC 2 Replace SOC 1?

Not necessarily.

SOC 1 and SOC 2 address different objectives. If a customer or its auditor requires assurance over controls relevant to internal control over financial reporting, a SOC 2 report does not automatically provide that assurance. Similarly, if customers need assurance around security and other applicable Trust Services Criteria, a SOC 1 report does not automatically satisfy that requirement. The right approach is to map the organization’s services and customer requirements to the appropriate examination.

Can a Company Have Both SOC 1 and SOC 2?

Yes.

Organizations with multiple assurance requirements may pursue both. For example, a service provider could have controls that affect customers’ financial reporting while also operating systems that store sensitive information and require assurance around security, availability, confidentiality, or privacy. In that scenario, SOC 1 and SOC 2 can serve complementary purposes.

How Accorian Helps Organizations Prepare for SOC 1 and SOC 2

Preparing for a SOC examination requires more than checking boxes against a control list. Organizations need to understand their scope, identify control gaps, establish sustainable processes, collect evidence, and maintain those controls throughout the examination period.

Accorian helps organizations navigate the SOC 1 and SOC 2 lifecycle through compliance readiness, assessment, remediation, and audit support.

Accorian’s cybersecurity and compliance experts work with organizations to evaluate their control environment, identify gaps, strengthen controls, and prepare the evidence required for an independent examination. For organizations managing multiple compliance requirements, GORICO, Accorian’s AI-powered continuous compliance and GRC platform, can further streamline the process.

GORICO helps organizations centralize evidence, automate repetitive compliance workflows, map controls across frameworks, monitor readiness, and maintain continuous visibility into their compliance posture.

Instead of managing compliance through disconnected spreadsheets, screenshots, emails, and manual evidence requests, teams can use a centralized platform to make compliance more structured and repeatable.

This becomes particularly valuable for organizations managing SOC 2 alongside frameworks such as HIPAA, HITRUST CSF, ISO 27001, PCI DSS, CMMC, and NIST CSF.

Frequently Asked Questions About SOC 1 vs SOC 2

1. What is the main difference between SOC 1 and SOC 2?

SOC 1 focuses on controls relevant to internal control over financial reporting, while SOC 2 evaluates controls against the AICPA Trust Services Criteria, including security and, when applicable, availability, processing integrity, confidentiality, and privacy.

2. Is SOC 2 better than SOC 1?

Neither report is universally better. SOC 1 and SOC 2 address different assurance objectives. The appropriate report depends on the organization’s services and what customers or other authorized users need assurance about.

3. Do SaaS companies need SOC 1 or SOC 2?

Many SaaS companies pursue SOC 2 because customers want assurance over security and related controls. However, a SaaS company may also need SOC 1 if its services are relevant to customers’ internal control over financial reporting.

4. What is the difference between SOC 1 Type 1 and Type 2?

SOC 1 Type 1 evaluates the design of controls at a specified date. SOC 1 Type 2 evaluates both control design and operating effectiveness over a defined period.

5. What is the difference between SOC 2 Type 1 and Type 2?

SOC 2 Type 1 evaluates control design at a point in time. SOC 2 Type 2 evaluates control design and operating effectiveness over a specified period.

6. Does SOC 2 cover HIPAA?

SOC 2 and HIPAA are different frameworks. A SOC 2 examination evaluates controls against the Trust Services Criteria, while HIPAA establishes requirements for protecting certain health information. Organizations may pursue both depending on their regulatory and customer requirements.

7. Does SOC 2 cover ISO 27001?

SOC 2 and ISO 27001 are separate assurance frameworks. They have overlapping areas, particularly around information security, but they use different criteria and produce different forms of assurance.

8. How often does a company need a SOC 2 audit?

SOC 2 reports are typically part of an ongoing assurance program rather than a one-time compliance exercise. Organizations commonly undergo recurring examinations so customers can receive current assurance over their control environment.

9. How do I know whether my company needs SOC 1 or SOC 2?

Start with your customer contracts, services, systems, financial reporting dependencies, data-handling responsibilities, and security requirements. If your services affect customer financial reporting, SOC 1 may be relevant. If customers require assurance over security and related controls, SOC 2 may be relevant. Some organizations require both.

SOC 1 vs SOC 2: The Bottom Line

SOC 1 and SOC 2 solve different assurance problems.

SOC 1 is centered on controls relevant to customers’ internal control over financial reporting. SOC 2 focuses on controls related to security and the applicable Trust Services Criteria.

The right choice should not be based on which report is more popular. It should be based on what your organization provides, what risks your customers care about, and what assurance they require.

For organizations that need to meet growing customer assurance demands while managing multiple compliance frameworks, combining expert-led compliance services with continuous compliance technology can make the process more efficient and sustainable.

Ready to assess your SOC 1 or SOC 2 readiness?