SOC differences and similarities
SOC 1 vs. SOC 2: Which one do you need?
Trust is a crucial aspect of business success. Even with high quality products and services and a stellar sales pitch, your prospects still need to trust that you’ll protect their data and provide them with accurate financial information. Getting a SOC 1 or a SOC 2 report shows your potential customers that you’re trustworthy and reduces their risk of working with you.
But which SOC report do you need? In this article, we’ll cover the differences between SOC 1 and SOC 2 reports to help you determine which one is right for you.
Overview of SOC reports
SOC reports were developed by the American Institute of Certified Public Accountants (AICPA) as a way to verify data security or financial reporting practices to ensure that businesses are well-protected as they bring on new vendors. SOC stands for Service Organization Controls — these reports were designed for organizations that provide services to demonstrate their trustworthiness to clients.
A SOC 1 report details the controls your organization has in place for financial reporting. A SOC 2 report details your information security practices to ensure that your customer’s data will be safe under your care. SOC 1 and SOC 2 reports are most often requested from buyers in North America.
What are the different types of SOC reports?
There are three types of SOC reports: SOC 1, SOC 2, and SOC 3. Each one has its own purpose and requirements that must be met to.
A SOC 1 report is an audit of your financial reporting practices and details your controls for keeping accurate financial records. A SOC 2 report is an audit of your information security that details the controls you have in place to protect your user and customer data. A SOC 3 report also covers information security, however a SOC 3 report is designed for public viewing and is less detailed than a SOC 2 report as a result.
What is SOC 1?
SOC 1 is an audit intended to help you implement financial reporting practices to ensure your reports are accurate and reliable. SOC 1 outlines best practices and policies on financial reporting and your SOC 1 report will document how well you adhere to those guidelines. A SOC 1 helps customers and prospects trust the accuracy of your financial reports.
What is SOC 2?
A SOC 2 audit will cover your information security practices. A SOC 2 report details how well you adhere to the SOC 2 controls and protocols for protecting your organizational and customer data. This report allows customers, partners, and other stakeholders to see what measures you have in place to reduce the risk of a data breach.
What’s the difference between a SOC 1 and a SOC 2?
The difference between a SOC 1 and a SOC 2 report is that a SOC 1 report focuses on financial operations while SOC 2 reports focus on information security.
A SOC 1 report will detail what controls you have in place to ensure accurate financial reporting and financial operations. A SOC 1 is most common for organizations that provide services that affect their clients’ financial reports.
SOC 2 covers data security. The requirements for SOC 2 are five categories called the Trust Service Criteria: security, availability, processing integrity, availability, and privacy. Every SOC 2 report will evaluate your security, but your report only needs to include controls for the other four criteria if they apply to your business.
SOC Type 1 vs. SOC Type 2 report
A SOC Type 1 report details your controls at a single point in time. It shows how your controls were implemented but doesn’t include information on how effective they are.
During a SOC Type 2 audit, your controls will be monitored over a period of time to test how effective they are. The results of these tests will be included in your SOC Type 2 report.
Who gets a SOC report?
What types of organizations get a SOC report? It largely depends on the products and services your organization provides and the type of customers you serve.
A SOC 1 is for organizations that may impact their customers’ financial reporting. This is important for your customers because if they report inaccurate numbers due to your miscalculations, they could face charges of fraud and lawsuits. A SOC 2 audit is intended for organizations that handle user or client data, as the audit ensures that you have the practices in place to keep that data secure.
How to determine if you need a SOC 1 or SOC 2 report
How can you decide which type of SOC report you’ll need? This decision comes down to the impact your organization will have on your customers or users.
If you affect your clients’ financial operations in any way, they will likely ask for a SOC 1 report. For example, if you process payments on their behalf, you’ll likely need a SOC 1 report. If you work with any of your customers’ sensitive data, they will likely need to see your SOC 2 report. This is a common request for cloud service providers and cybersecurity providers.
Ultimately, your client will tell you what they need from you. Though it’s not advisable to wait for your prospects to ask for your SOC report given the amount of time it takes to get ready for and undergo a SOC audit. Plan ahead and consider the products and services you provide to anticipate the type of SOC report your customers may need from you.
How to get a SOC 1 or SOC 2 report
To get a SOC 1 or a SOC 2 report, you’ll need to look into your existing systems and practices, implement controls to address areas of non-compliance, and hire an auditor to investigate them. The entire process can take months or even a year to complete, especially when done manually.
If you need to get a SOC 2 report, Vanta’s trust management platform can cut that time in half. Our platform has compliance automation capabilities that will guide you through scoping your SOC 2, conducting a readiness assessment, and providing you with helpful guidance so you can prepare more efficiently. We can even help you find an auditor and speed up your SOC 2 timeline.
Request a demo to learn more.