SOC is a framework created by the American Institute of Certified Public Accountants (AICPA) as a way to attest that an organization is following business management best practices, such as making good information security and financial decisions. There are currently three types of SOC reports that offer different views into the way your business operates: SOC 1, SOC 2, and SOC 3.
These reports provide a way for prospects to assess the potential risk of working with you and can influence their decision to bring you on as a vendor. Specifically for a SOC 1 report, it can verify the controls you have in place to reduce inaccurate financial reporting that could impact your customers’ financials. It covers practices like personnel policies, security practices to avoid data manipulation, and more.
This article will cover what a SOC 1 is, how it’s different from SOC 2, and answer some of the most common questions related to attaining a SOC 1 report.
What is a SOC 1 report?
SOC stands for System and Organization Controls. The SOC 1 report focuses on controls at a service organization that could affect the financial statements of the organizations it serves. The American Institute of Certified Public Accountants (AICPA) created the SOC framework, and SOC 1 falls under the SSAE 18 attestation standard (AT-C Section 320). If you've heard the terms SAS 70 or SSAE 16, those were earlier versions of the same standard. SOC 1 is the current iteration.
Here's what makes SOC 1 distinct from its sibling, SOC 2. In a SOC 2 audit, the AICPA prescribes a fixed set of Trust Services Criteria that every organization is measured against. SOC 1 works differently. Your organization, with guidance from your auditor, defines custom control objectives tailored to the specific services you provide. A payroll processor's control objectives will look nothing like those of a fund administrator, even though both undergo SOC 1 audits.
The report itself is an attestation report, meaning your management asserts that certain controls are in place, and the CPA firm tests those controls and issues an opinion on whether it agrees with that assertion. The auditor's opinion will be either unqualified (sometimes called a "clean" opinion) or qualified. A qualified opinion means one or more control objectives weren't met, which is a red flag for anyone reading the report.
One more detail that often catches people off guard. SOC 1 reports are restricted-use documents. You can share them with your management team, your clients, and your clients' auditors, but you can't publish them publicly. If you need something for broader distribution, that's where SOC 3 comes in.
Who needs a SOC 1 report
The simplest way to figure out whether you need a SOC 1 is to ask one question. Can your service impact the financial statements of your clients? If the answer is yes, you're a strong candidate.
Some industries make this obvious. Payroll processors directly handle compensation data that shows up on their clients' income statements and balance sheets. Benefits administrators manage retirement plan contributions and health insurance deductions. Fund administrators calculate net asset values that investors and auditors rely on. Loan servicers process payments and interest calculations that affect their clients' receivables. In all of these cases, an error or security gap on your end could lead to a material misstatement in a client's financials.
But it's not limited to traditional financial services. SaaS companies that handle billing, invoicing, or revenue recognition for their clients also fall into SOC 1 territory. If your platform processes transactions, manages subscription billing, or generates financial data that your clients import into their accounting systems, their auditors will want to see how you're controlling that process.
On the other hand, if your service only provides read access to client data, you probably don't need a SOC 1. Business intelligence tools, analytics dashboards, and reporting platforms that display data without modifying it typically fall outside the scope. For those organizations, a SOC 2 report focused on security and data protection is usually the better fit.
How SOC 1 supports SOX compliance
If you sell to publicly traded companies, SOC 1 isn't optional in practice, even though no law technically requires you to have one.
Section 404 of the Sarbanes-Oxley Act requires public companies to assess and report on the strength of their internal controls over financial reporting each year. Their external auditors, operating under PCAOB standards, must independently evaluate those same controls. When a public company outsources a process to you, whether that's payroll, claims processing, or transaction settlement, your controls become part of their control environment. The auditor needs assurance that your piece of the puzzle is working.
That's where your SOC 1 report comes in. It gives the user auditor a ready-made, independently verified assessment of your controls. Without it, the auditor has two options. They can perform direct testing at your organization, which is time-consuming, expensive, and disruptive for both sides. Or they can note a scope limitation in their audit, which is something no public company wants in their filings.
Having a current SOC 1 report, particularly a Type 2, eliminates that friction entirely. Your clients' auditors can review your report, assess the results, and place reliance on your controls without ever setting foot in your office. For service organizations selling into the enterprise market, this dynamic turns SOC 1 into a genuine sales enabler. Prospects at public companies will ask for your SOC 1 during vendor evaluation. Having one ready shortens the security review cycle and removes a common objection from the deal process.
SOC 1 Type 1 vs. Type 2
Every SOC 1 report comes in one of two flavors, and picking the right one depends on where you are in your compliance journey and how quickly you need the report.
A Type 1 report is a snapshot. It evaluates whether your controls are suitably designed as of a specific date. It's essentially the auditor saying, "On this particular day, the controls looked like they should work." It doesn't test whether those controls actually performed well over time. Type 1 reports are faster to complete and less expensive, making them a good option when you've never been audited before or when a client needs something quickly to move a deal forward.
A Type 2 report goes further. It evaluates both the design and the operating performance of your controls over a period of time, typically six to twelve months. The auditor doesn't just confirm your controls exist. They test whether those controls actually worked as intended throughout the observation window. Type 2 reports include a detailed section describing every test the auditor performed and the results, including any exceptions. This is what most clients' auditors want to see, because it provides assurance that your controls are consistently functioning, not just well designed on paper.
Most organizations start with a Type 1 to get their first report in hand quickly, then transition to a Type 2 for subsequent years. Once you have a Type 2, your clients and their auditors rarely go back to accepting a Type 1.
How SOC 1 and SOC 2 differ
The numbers don't indicate a sequence or a hierarchy. You don't need a SOC 1 before you can get a SOC 2, and one isn't "better" than the other. They examine completely different things, though both ultimately attest to your organization's ability to protect your clients' resources and needs. Both require an independent audit that assesses and documents your internal controls and practices.
The core distinction is what those controls protect. SOC 1 focuses on controls that protect the integrity of your clients' financial reports. The controls and control objectives are custom, defined by your organization based on the specific financial risks your service introduces. The report is typically requested by prospective clients and business partners whose own financial reporting could be affected by how you process their data.
SOC 2 focuses on information security controls that protect your customers' data. It's built around the AICPA's Trust Services Criteria, which cover five categories, security, availability, processing integrity, confidentiality, and privacy. Security is required in every SOC 2 report, and you add the other categories based on what's relevant to your business. The report is requested by customers, prospects, and partners whose data you handle, which is why SOC 2 is the standard most SaaS companies, cloud providers, and data processors pursue.
For many organizations, the answer is both. A payroll SaaS company, for example, processes financial data that affects client financial statements (SOC 1 territory) while also storing sensitive employee information like Social Security numbers and bank account details (SOC 2 territory). In that case, you'd pursue both reports. Many controls overlap between the two frameworks. Access management, change management, system monitoring, and backup procedures often satisfy requirements for both. Running parallel audits with the same CPA firm reduces disruption and can lower your total audit costs compared to scheduling them separately.
What's inside a SOC 1 report?
If you're going to invest in a SOC 1, you should know exactly what your clients and their auditors will see when they open the document. A SOC 1 report follows a standard structure, and knowing each section helps you prepare better evidence and avoid surprises during the audit.
Section I - The independent service auditor's report
This is the opinion letter where the CPA firm states whether your controls are suitably designed (Type 1) or suitably designed and operating as intended (Type 2). It's the first thing readers turn to. An unqualified opinion means the auditor found no material issues. A qualified opinion means at least one control objective wasn't met, and the letter will describe exactly what fell short.
Section II - Management's assertion
This is your organization's formal statement that the description of your system is accurate and that your controls are designed (and, for Type 2, operating) to meet the stated control objectives. You're putting your name on it, so accuracy matters.
Section III - The description of your system
This section covers the services you provide, the infrastructure and software involved, the people and processes that support those services, and the control environment surrounding them. It also identifies any subservice organizations you rely on and describes complementary user entity controls, often called CUECs. CUECs are the controls your clients are responsible for implementing on their end. For example, you might require clients to restrict who can approve payroll runs in your system. If a client ignores that responsibility, gaps aren't your fault, but only if you've clearly documented the expectation in this section.
Section IV - Tests of controls and results
This section appears only in Type 2 reports. It contains the auditor's description of every test performed, the control tested, and the results. This is where auditors spend most of their time. They're looking for exceptions, which are instances where a control didn't operate as described. A few exceptions don't necessarily mean a qualified opinion, as long as enough other controls in that area are working to provide reasonable assurance. But patterns of exceptions will raise concerns.
Section V - Other information
This section is optional and contains any additional information the service organization wants to provide. Some organizations use this section to include context that doesn't fit neatly into the system description but helps readers grasp the full control environment.
The biggest takeaway here is that Section IV drives the conversation. If your controls test cleanly, the report becomes a trust accelerator. If exceptions pile up, you'll spend the next audit cycle explaining what went wrong and what you've fixed.
Six steps to follow when preparing for a SOC 1 audit
Now that you know what the report looks like, you can work backward to build the preparation plan. The audit itself is relatively straightforward if you've done the groundwork. Here are the six steps that separate a smooth SOC 1 engagement from a painful one.
1. Define your scope
Your scope should include only the systems, processes, and people that impact your clients' financial reporting. Nothing more. Over-scoping is one of the most common and expensive mistakes organizations make. If a system doesn't touch data that feeds into a client's financial statements, it doesn't belong in your SOC 1. Work with your finance and operations teams to map exactly which services, applications, and infrastructure components are financially relevant.
2. Document your control objectives and controls
Control objectives are the overarching goals your controls are designed to achieve. For example, a control objective might state that your organization provides reasonable assurance that payroll transactions are processed accurately and completely. Underneath that objective, you'd document the specific controls that support it, such as automated validation checks, supervisory review processes, and access restrictions on payroll data. Each control objective should map directly to a risk your service introduces.
3. Assign control ownership
Every control needs a named owner who is responsible for executing it and producing evidence during the audit. Without clear ownership, evidence collection becomes a scramble. Control owners should know what the auditor will ask for, whether that's system access logs, approval records, change management tickets, or configuration screenshots. Assign owners early and make sure they're comfortable with their responsibilities before the audit begins.
4. Run a readiness assessment
A readiness assessment is essentially a practice audit. An external consultant or your auditor reviews your controls, tests a sample of evidence, and identifies gaps before the formal engagement starts. Readiness assessments typically cost between $10,000 and $17,000, and they consistently save organizations far more than that by catching issues early. Remediating a gap before the audit is routine. Discovering it during the audit can delay your report, increase costs, or result in a qualified opinion.
5. Remediate gaps
This is often the largest variable cost in your SOC 1 program. Remediation might involve writing or updating policies, implementing new access controls, configuring system monitoring, or redesigning a business process. The scope depends entirely on what the readiness assessment uncovers. For organizations with mature controls, remediation might take a few weeks. For those starting from scratch, it could take several months and require meaningful engineering time. Compliance automation platforms like Vanta can reduce this burden by connecting directly to your infrastructure through 400+ integrations, continuously monitoring your controls, and flagging gaps before your auditor arrives.
6. Engage a CPA firm
Your SOC 1 report must be issued by a licensed CPA firm. Not all firms are created equal. Some specialize in SOC engagements and bring deep experience with organizations in your industry. Others treat SOC audits as a side offering. Specialist firms tend to produce better outcomes because they know what user auditors look for and can help you define control objectives that are appropriately scoped. Big Four firms charge significantly more than boutique specialists, so match your firm selection to both your budget and your clients' expectations.
How much does a SOC 1 audit cost?
SOC 1 pricing depends on your size, your complexity, and whether you're pursuing a Type 1 or Type 2 report. The audit fee is the part you can pin down. A SOC 1 audit typically runs $10,000 to $50,000 or higher, and where you land inside that range tracks with how large and complex your organization is. Everything around the fee, from the readiness assessment to the remediation work to your team's time, pushes the total higher.
For startups and small companies with 20 to 50 employees on a single cloud environment, the audit fee sits at the low end of that range. A Type 1 report, which checks the design of your controls at a single point in time, costs less than a Type 2, which tests how those controls operate across a period of months. The bigger costs at this size are usually the prep work and closing whatever gaps a readiness assessment turns up, since a smaller team and simpler infrastructure mean fewer control objectives for the auditor to test.
Midmarket organizations, think a third-party administrator with around 300 employees handling billing and reconciliation across multiple locations, sit higher up the fee range and carry heavier prep costs. SOC 1 scope is built around control objectives tied to your clients' financial reporting, so the more objectives you bring into scope, the more testing the auditor performs and the higher the fee climbs. At this size, remediation and internal staff hours often outweigh the audit fee itself.
Enterprise organizations with over 1,000 employees, multiple subsidiaries, and complex infrastructure land at the top of the fee range, and a Big Four firm will push the number higher still. Program coordination and remediation add the most at this scale, because more people, products, and locations mean more control objectives to document and monitor.
Year two costs less than year one. Your controls are already in place, your team knows the process, and evidence collection becomes routine rather than a scramble. A compliance automation platform is another line item worth weighing, since it can cut the manual hours your team spends gathering evidence between audits.
How long is a SOC 1 report valid?
Once your auditor issues your SOC 1, the report covers a specific period and is generally accepted by clients for one year. After that, it starts to feel stale. User auditors want testing that's relevant to their own audit periods, and most won't accept a report issued more than twelve months ago. That means SOC 1 isn't a one-and-done exercise. It's an annual commitment, and you'll need to go through another audit to maintain coverage.
A best practice is to start the process for your next report before your current one expires. Clients and their auditors expect uninterrupted coverage, and a gap between reports will raise questions you don't want to answer, particularly if your clients operate in regulated industries. Plan your audit cadence so each new report picks up where the last one ended, keeping your coverage continuous.
The good news is that subsequent audits tend to be less painful than the first. Your controls are already in place, your team knows what the auditor will ask for, and evidence collection becomes a routine process rather than a scramble. Organizations that build continuous monitoring into their operations, rather than treating compliance as an annual project, find that year two and each year afterward take a fraction of the time the initial audit required.
Are SOC 1 reports public?
SOC 1 reports aren't public documents, and you shouldn't treat them like marketing collateral. The information inside is sensitive. Your report describes your systems, your controls, and the results of the auditor's testing, all of which give readers a detailed view into how your organization operates. That level of detail is useful for clients evaluating you, but it's not something you want competitors, attackers, or the general public browsing at will.
In practice, SOC 1 reports are shared privately with prospects, customers, business partners, and other stakeholders who have a legitimate reason to review them. Most organizations require recipients to sign an NDA before sharing the report, which keeps the information protected while still giving clients the assurance they need. This NDA-gated sharing is standard practice across the industry, and prospects who are serious about working with you won't push back on it.
If you want something you can share more freely, SOC 3 is the option to consider. SOC 3 reports cover similar ground but are designed for public distribution and contain far less detail. Most organizations keep their SOC 1 for private use and rely on a trust center or a SOC 3 summary when they need to signal compliance more broadly.
Are SOC 1 reports mandatory?
No law requires service organizations to obtain a SOC 1. There's no regulatory body that fines you for operating without one, and you won't face penalties for skipping the audit entirely. In that sense, SOC 1 is voluntary.
In practice, though, the market often decides for you. Large enterprises, publicly traded companies, and organizations in regulated industries frequently require a SOC 1 from any vendor whose services touch their financial reporting. Procurement teams ask for it during vendor evaluation. Client auditors request it during financial statement audits. If you can't produce one, you're either delaying the deal or losing it to a competitor who can.
The question isn't whether SOC 1 is legally mandatory. It's whether your target customers will do business with you without one. If your services impact client financial reporting and you're selling into the enterprise or public company market, operating without a SOC 1 is a growth constraint, not a cost-saving measure. Getting the report in hand removes a common objection from your sales process and signals that you take your responsibilities as a vendor seriously.
Move from audit prep to audit-ready every day
Most service organizations encounter SOC 1 the same way. A prospect asks for it during vendor due diligence, a deal stalls, and suddenly compliance becomes a fire drill. The organizations that get the most out of SOC 1 avoid that dynamic entirely. They treat the report as a trust instrument they bring to the conversation, not a document they scramble to produce after the conversation has already stalled.
The difference usually comes down to how compliance gets done day to day. Organizations that invest in continuous monitoring and automated evidence collection spend less time preparing for each annual audit and more time using the report as a sales asset. The audit stops being a once-a-year project and becomes a background process that runs on its own. That shift is where SOC 1 starts paying back the investment, not just in closed deals, but in shorter security reviews, fewer vendor questionnaires, and faster procurement cycles.
Your next move is straightforward. Map which of your services impact client financial reporting, then start scoping your control objectives and lining up a CPA firm to run your audit. While the audit itself has to come from a licensed CPA, the preparation doesn't have to be manual. Vanta's compliance automation platform handles the heavy lifting on your side, from evidence collection to continuous control monitoring, and streamlines collaboration with your external auditor across SOC 1 and 35+ other frameworks. Request a demo to see how Vanta can shorten your path to a SOC 1 report and turn compliance into a growth lever for your business.
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SOC differences and similarities
What is a SOC 1 report and who needs one?
SOC differences and similarities
What is a SOC 1 report and who needs one?
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SOC is a framework created by the American Institute of Certified Public Accountants (AICPA) as a way to attest that an organization is following business management best practices, such as making good information security and financial decisions. There are currently three types of SOC reports that offer different views into the way your business operates: SOC 1, SOC 2, and SOC 3.
These reports provide a way for prospects to assess the potential risk of working with you and can influence their decision to bring you on as a vendor. Specifically for a SOC 1 report, it can verify the controls you have in place to reduce inaccurate financial reporting that could impact your customers’ financials. It covers practices like personnel policies, security practices to avoid data manipulation, and more.
This article will cover what a SOC 1 is, how it’s different from SOC 2, and answer some of the most common questions related to attaining a SOC 1 report.
What is a SOC 1 report?
SOC stands for System and Organization Controls. The SOC 1 report focuses on controls at a service organization that could affect the financial statements of the organizations it serves. The American Institute of Certified Public Accountants (AICPA) created the SOC framework, and SOC 1 falls under the SSAE 18 attestation standard (AT-C Section 320). If you've heard the terms SAS 70 or SSAE 16, those were earlier versions of the same standard. SOC 1 is the current iteration.
Here's what makes SOC 1 distinct from its sibling, SOC 2. In a SOC 2 audit, the AICPA prescribes a fixed set of Trust Services Criteria that every organization is measured against. SOC 1 works differently. Your organization, with guidance from your auditor, defines custom control objectives tailored to the specific services you provide. A payroll processor's control objectives will look nothing like those of a fund administrator, even though both undergo SOC 1 audits.
The report itself is an attestation report, meaning your management asserts that certain controls are in place, and the CPA firm tests those controls and issues an opinion on whether it agrees with that assertion. The auditor's opinion will be either unqualified (sometimes called a "clean" opinion) or qualified. A qualified opinion means one or more control objectives weren't met, which is a red flag for anyone reading the report.
One more detail that often catches people off guard. SOC 1 reports are restricted-use documents. You can share them with your management team, your clients, and your clients' auditors, but you can't publish them publicly. If you need something for broader distribution, that's where SOC 3 comes in.
Who needs a SOC 1 report
The simplest way to figure out whether you need a SOC 1 is to ask one question. Can your service impact the financial statements of your clients? If the answer is yes, you're a strong candidate.
Some industries make this obvious. Payroll processors directly handle compensation data that shows up on their clients' income statements and balance sheets. Benefits administrators manage retirement plan contributions and health insurance deductions. Fund administrators calculate net asset values that investors and auditors rely on. Loan servicers process payments and interest calculations that affect their clients' receivables. In all of these cases, an error or security gap on your end could lead to a material misstatement in a client's financials.
But it's not limited to traditional financial services. SaaS companies that handle billing, invoicing, or revenue recognition for their clients also fall into SOC 1 territory. If your platform processes transactions, manages subscription billing, or generates financial data that your clients import into their accounting systems, their auditors will want to see how you're controlling that process.
On the other hand, if your service only provides read access to client data, you probably don't need a SOC 1. Business intelligence tools, analytics dashboards, and reporting platforms that display data without modifying it typically fall outside the scope. For those organizations, a SOC 2 report focused on security and data protection is usually the better fit.
How SOC 1 supports SOX compliance
If you sell to publicly traded companies, SOC 1 isn't optional in practice, even though no law technically requires you to have one.
Section 404 of the Sarbanes-Oxley Act requires public companies to assess and report on the strength of their internal controls over financial reporting each year. Their external auditors, operating under PCAOB standards, must independently evaluate those same controls. When a public company outsources a process to you, whether that's payroll, claims processing, or transaction settlement, your controls become part of their control environment. The auditor needs assurance that your piece of the puzzle is working.
That's where your SOC 1 report comes in. It gives the user auditor a ready-made, independently verified assessment of your controls. Without it, the auditor has two options. They can perform direct testing at your organization, which is time-consuming, expensive, and disruptive for both sides. Or they can note a scope limitation in their audit, which is something no public company wants in their filings.
Having a current SOC 1 report, particularly a Type 2, eliminates that friction entirely. Your clients' auditors can review your report, assess the results, and place reliance on your controls without ever setting foot in your office. For service organizations selling into the enterprise market, this dynamic turns SOC 1 into a genuine sales enabler. Prospects at public companies will ask for your SOC 1 during vendor evaluation. Having one ready shortens the security review cycle and removes a common objection from the deal process.
SOC 1 Type 1 vs. Type 2
Every SOC 1 report comes in one of two flavors, and picking the right one depends on where you are in your compliance journey and how quickly you need the report.
A Type 1 report is a snapshot. It evaluates whether your controls are suitably designed as of a specific date. It's essentially the auditor saying, "On this particular day, the controls looked like they should work." It doesn't test whether those controls actually performed well over time. Type 1 reports are faster to complete and less expensive, making them a good option when you've never been audited before or when a client needs something quickly to move a deal forward.
A Type 2 report goes further. It evaluates both the design and the operating performance of your controls over a period of time, typically six to twelve months. The auditor doesn't just confirm your controls exist. They test whether those controls actually worked as intended throughout the observation window. Type 2 reports include a detailed section describing every test the auditor performed and the results, including any exceptions. This is what most clients' auditors want to see, because it provides assurance that your controls are consistently functioning, not just well designed on paper.
Most organizations start with a Type 1 to get their first report in hand quickly, then transition to a Type 2 for subsequent years. Once you have a Type 2, your clients and their auditors rarely go back to accepting a Type 1.
How SOC 1 and SOC 2 differ
The numbers don't indicate a sequence or a hierarchy. You don't need a SOC 1 before you can get a SOC 2, and one isn't "better" than the other. They examine completely different things, though both ultimately attest to your organization's ability to protect your clients' resources and needs. Both require an independent audit that assesses and documents your internal controls and practices.
The core distinction is what those controls protect. SOC 1 focuses on controls that protect the integrity of your clients' financial reports. The controls and control objectives are custom, defined by your organization based on the specific financial risks your service introduces. The report is typically requested by prospective clients and business partners whose own financial reporting could be affected by how you process their data.
SOC 2 focuses on information security controls that protect your customers' data. It's built around the AICPA's Trust Services Criteria, which cover five categories, security, availability, processing integrity, confidentiality, and privacy. Security is required in every SOC 2 report, and you add the other categories based on what's relevant to your business. The report is requested by customers, prospects, and partners whose data you handle, which is why SOC 2 is the standard most SaaS companies, cloud providers, and data processors pursue.
For many organizations, the answer is both. A payroll SaaS company, for example, processes financial data that affects client financial statements (SOC 1 territory) while also storing sensitive employee information like Social Security numbers and bank account details (SOC 2 territory). In that case, you'd pursue both reports. Many controls overlap between the two frameworks. Access management, change management, system monitoring, and backup procedures often satisfy requirements for both. Running parallel audits with the same CPA firm reduces disruption and can lower your total audit costs compared to scheduling them separately.
What's inside a SOC 1 report?
If you're going to invest in a SOC 1, you should know exactly what your clients and their auditors will see when they open the document. A SOC 1 report follows a standard structure, and knowing each section helps you prepare better evidence and avoid surprises during the audit.
Section I - The independent service auditor's report
This is the opinion letter where the CPA firm states whether your controls are suitably designed (Type 1) or suitably designed and operating as intended (Type 2). It's the first thing readers turn to. An unqualified opinion means the auditor found no material issues. A qualified opinion means at least one control objective wasn't met, and the letter will describe exactly what fell short.
Section II - Management's assertion
This is your organization's formal statement that the description of your system is accurate and that your controls are designed (and, for Type 2, operating) to meet the stated control objectives. You're putting your name on it, so accuracy matters.
Section III - The description of your system
This section covers the services you provide, the infrastructure and software involved, the people and processes that support those services, and the control environment surrounding them. It also identifies any subservice organizations you rely on and describes complementary user entity controls, often called CUECs. CUECs are the controls your clients are responsible for implementing on their end. For example, you might require clients to restrict who can approve payroll runs in your system. If a client ignores that responsibility, gaps aren't your fault, but only if you've clearly documented the expectation in this section.
Section IV - Tests of controls and results
This section appears only in Type 2 reports. It contains the auditor's description of every test performed, the control tested, and the results. This is where auditors spend most of their time. They're looking for exceptions, which are instances where a control didn't operate as described. A few exceptions don't necessarily mean a qualified opinion, as long as enough other controls in that area are working to provide reasonable assurance. But patterns of exceptions will raise concerns.
Section V - Other information
This section is optional and contains any additional information the service organization wants to provide. Some organizations use this section to include context that doesn't fit neatly into the system description but helps readers grasp the full control environment.
The biggest takeaway here is that Section IV drives the conversation. If your controls test cleanly, the report becomes a trust accelerator. If exceptions pile up, you'll spend the next audit cycle explaining what went wrong and what you've fixed.
Six steps to follow when preparing for a SOC 1 audit
Now that you know what the report looks like, you can work backward to build the preparation plan. The audit itself is relatively straightforward if you've done the groundwork. Here are the six steps that separate a smooth SOC 1 engagement from a painful one.
1. Define your scope
Your scope should include only the systems, processes, and people that impact your clients' financial reporting. Nothing more. Over-scoping is one of the most common and expensive mistakes organizations make. If a system doesn't touch data that feeds into a client's financial statements, it doesn't belong in your SOC 1. Work with your finance and operations teams to map exactly which services, applications, and infrastructure components are financially relevant.
2. Document your control objectives and controls
Control objectives are the overarching goals your controls are designed to achieve. For example, a control objective might state that your organization provides reasonable assurance that payroll transactions are processed accurately and completely. Underneath that objective, you'd document the specific controls that support it, such as automated validation checks, supervisory review processes, and access restrictions on payroll data. Each control objective should map directly to a risk your service introduces.
3. Assign control ownership
Every control needs a named owner who is responsible for executing it and producing evidence during the audit. Without clear ownership, evidence collection becomes a scramble. Control owners should know what the auditor will ask for, whether that's system access logs, approval records, change management tickets, or configuration screenshots. Assign owners early and make sure they're comfortable with their responsibilities before the audit begins.
4. Run a readiness assessment
A readiness assessment is essentially a practice audit. An external consultant or your auditor reviews your controls, tests a sample of evidence, and identifies gaps before the formal engagement starts. Readiness assessments typically cost between $10,000 and $17,000, and they consistently save organizations far more than that by catching issues early. Remediating a gap before the audit is routine. Discovering it during the audit can delay your report, increase costs, or result in a qualified opinion.
5. Remediate gaps
This is often the largest variable cost in your SOC 1 program. Remediation might involve writing or updating policies, implementing new access controls, configuring system monitoring, or redesigning a business process. The scope depends entirely on what the readiness assessment uncovers. For organizations with mature controls, remediation might take a few weeks. For those starting from scratch, it could take several months and require meaningful engineering time. Compliance automation platforms like Vanta can reduce this burden by connecting directly to your infrastructure through 400+ integrations, continuously monitoring your controls, and flagging gaps before your auditor arrives.
6. Engage a CPA firm
Your SOC 1 report must be issued by a licensed CPA firm. Not all firms are created equal. Some specialize in SOC engagements and bring deep experience with organizations in your industry. Others treat SOC audits as a side offering. Specialist firms tend to produce better outcomes because they know what user auditors look for and can help you define control objectives that are appropriately scoped. Big Four firms charge significantly more than boutique specialists, so match your firm selection to both your budget and your clients' expectations.
How much does a SOC 1 audit cost?
SOC 1 pricing depends on your size, your complexity, and whether you're pursuing a Type 1 or Type 2 report. The audit fee is the part you can pin down. A SOC 1 audit typically runs $10,000 to $50,000 or higher, and where you land inside that range tracks with how large and complex your organization is. Everything around the fee, from the readiness assessment to the remediation work to your team's time, pushes the total higher.
For startups and small companies with 20 to 50 employees on a single cloud environment, the audit fee sits at the low end of that range. A Type 1 report, which checks the design of your controls at a single point in time, costs less than a Type 2, which tests how those controls operate across a period of months. The bigger costs at this size are usually the prep work and closing whatever gaps a readiness assessment turns up, since a smaller team and simpler infrastructure mean fewer control objectives for the auditor to test.
Midmarket organizations, think a third-party administrator with around 300 employees handling billing and reconciliation across multiple locations, sit higher up the fee range and carry heavier prep costs. SOC 1 scope is built around control objectives tied to your clients' financial reporting, so the more objectives you bring into scope, the more testing the auditor performs and the higher the fee climbs. At this size, remediation and internal staff hours often outweigh the audit fee itself.
Enterprise organizations with over 1,000 employees, multiple subsidiaries, and complex infrastructure land at the top of the fee range, and a Big Four firm will push the number higher still. Program coordination and remediation add the most at this scale, because more people, products, and locations mean more control objectives to document and monitor.
Year two costs less than year one. Your controls are already in place, your team knows the process, and evidence collection becomes routine rather than a scramble. A compliance automation platform is another line item worth weighing, since it can cut the manual hours your team spends gathering evidence between audits.
How long is a SOC 1 report valid?
Once your auditor issues your SOC 1, the report covers a specific period and is generally accepted by clients for one year. After that, it starts to feel stale. User auditors want testing that's relevant to their own audit periods, and most won't accept a report issued more than twelve months ago. That means SOC 1 isn't a one-and-done exercise. It's an annual commitment, and you'll need to go through another audit to maintain coverage.
A best practice is to start the process for your next report before your current one expires. Clients and their auditors expect uninterrupted coverage, and a gap between reports will raise questions you don't want to answer, particularly if your clients operate in regulated industries. Plan your audit cadence so each new report picks up where the last one ended, keeping your coverage continuous.
The good news is that subsequent audits tend to be less painful than the first. Your controls are already in place, your team knows what the auditor will ask for, and evidence collection becomes a routine process rather than a scramble. Organizations that build continuous monitoring into their operations, rather than treating compliance as an annual project, find that year two and each year afterward take a fraction of the time the initial audit required.
Are SOC 1 reports public?
SOC 1 reports aren't public documents, and you shouldn't treat them like marketing collateral. The information inside is sensitive. Your report describes your systems, your controls, and the results of the auditor's testing, all of which give readers a detailed view into how your organization operates. That level of detail is useful for clients evaluating you, but it's not something you want competitors, attackers, or the general public browsing at will.
In practice, SOC 1 reports are shared privately with prospects, customers, business partners, and other stakeholders who have a legitimate reason to review them. Most organizations require recipients to sign an NDA before sharing the report, which keeps the information protected while still giving clients the assurance they need. This NDA-gated sharing is standard practice across the industry, and prospects who are serious about working with you won't push back on it.
If you want something you can share more freely, SOC 3 is the option to consider. SOC 3 reports cover similar ground but are designed for public distribution and contain far less detail. Most organizations keep their SOC 1 for private use and rely on a trust center or a SOC 3 summary when they need to signal compliance more broadly.
Are SOC 1 reports mandatory?
No law requires service organizations to obtain a SOC 1. There's no regulatory body that fines you for operating without one, and you won't face penalties for skipping the audit entirely. In that sense, SOC 1 is voluntary.
In practice, though, the market often decides for you. Large enterprises, publicly traded companies, and organizations in regulated industries frequently require a SOC 1 from any vendor whose services touch their financial reporting. Procurement teams ask for it during vendor evaluation. Client auditors request it during financial statement audits. If you can't produce one, you're either delaying the deal or losing it to a competitor who can.
The question isn't whether SOC 1 is legally mandatory. It's whether your target customers will do business with you without one. If your services impact client financial reporting and you're selling into the enterprise or public company market, operating without a SOC 1 is a growth constraint, not a cost-saving measure. Getting the report in hand removes a common objection from your sales process and signals that you take your responsibilities as a vendor seriously.
Move from audit prep to audit-ready every day
Most service organizations encounter SOC 1 the same way. A prospect asks for it during vendor due diligence, a deal stalls, and suddenly compliance becomes a fire drill. The organizations that get the most out of SOC 1 avoid that dynamic entirely. They treat the report as a trust instrument they bring to the conversation, not a document they scramble to produce after the conversation has already stalled.
The difference usually comes down to how compliance gets done day to day. Organizations that invest in continuous monitoring and automated evidence collection spend less time preparing for each annual audit and more time using the report as a sales asset. The audit stops being a once-a-year project and becomes a background process that runs on its own. That shift is where SOC 1 starts paying back the investment, not just in closed deals, but in shorter security reviews, fewer vendor questionnaires, and faster procurement cycles.
Your next move is straightforward. Map which of your services impact client financial reporting, then start scoping your control objectives and lining up a CPA firm to run your audit. While the audit itself has to come from a licensed CPA, the preparation doesn't have to be manual. Vanta's compliance automation platform handles the heavy lifting on your side, from evidence collection to continuous control monitoring, and streamlines collaboration with your external auditor across SOC 1 and 35+ other frameworks. Request a demo to see how Vanta can shorten your path to a SOC 1 report and turn compliance into a growth lever for your business.
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