These days, it seems like prospects and vendors are all about acronyms when it comes to security requests: SOC, ISO, or PCI DSS. In reality, these reports are fairly straightforward, and when properly understood, they can open lucrative doors for your organization. 

But how do you know which reports you need? Let’s start by breaking down the difference between SOC 1 vs. SOC 2 vs. SOC 3.

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What is SOC compliance?

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SOC compliance documents whether your organization has certain security controls and best practices in place. To be SOC compliant, you need to use the practices and protocols outlined in the SOC framework and undergo a third-party audit to verify that your company meets those requirements. This is usually done as a way to assure clients that when they do business with your organization, their investment, and information will be safe.

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The purpose of SOC reports

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SOC 1, SOC 2, and SOC 3 reports have distinctive differences, but at their core, they have a common purpose: to attest to your organization’s ability to protect your clients’ needs. 

When your client requests a SOC report, it’s a way for them to assess and mitigate the risks of doing business with you. In many cases, a client or business partner might walk away from the deal if you can’t provide a satisfactory report.

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SOC 1 vs. SOC 2 vs. SOC 3: What’s the difference?

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SOC reports serve as documented reassurance. They show your company’s ability to protect clients’ needs, and those “needs” are not always the same. 

A SOC 1 report is all about finances. It examines and details the controls you have in place over your financial reporting and operations. This can be critical for your clients because, depending on the services you provide, a failure to conduct financial operations responsibly could put their financial statements, reporting, and integrity at risk.

A SOC 2 report is concerned with the way you handle customer data. That includes the security, confidentiality, processing integrity, privacy, and availability of customer data. Think of your SOC 2 report as an in-depth demonstration of how you protect customer data that comes through your system. Keep in mind this may include your customer’s customer data.

A SOC 3 report covers the same information as a SOC 2 report, but is less complex. It’s usually designed for the general public. You might want to produce a SOC 3 report for internal purposes, such as marketing your data security or reassuring your shareholders.

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Benefits of different SOC audits

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Each type of SOC audit brings its own distinct advantages for your organization. The audits you choose to undergo will depend on which of these advantages will benefit you most, especially based on the type of services or products you offer.

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Benefits of SOC 1 audits

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A SOC 1 audit takes a close look at your financial reporting practices to ensure that you’re following protocols that keep your reports consistent and reliable. If your organization is in a position where your financial reporting and record-keeping will affect your clients, as in the case of financial institutions, a SOC 1 report can open the door for new clients. 

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Benefits of SOC 2 audits

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The benefits of a SOC 2 audit are geared more toward data security instead of finances. Organizations in all industries are under a watchful eye from consumers who want to know if they can trust them with their private data. Now more than ever before, you’ll see prospective clients who will only do business with organizations that are SOC 2 compliant, so this audit is likely to pay for itself by allowing you to bring in lucrative clients.

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Benefits of SOC 3 audits

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SOC 3 audits are beneficial when you want to assure someone other than a prospective client that you have adequate security practices. A SOC 3 audit can improve the confidence of your shareholders so your financial support remains stable. It can assure the general public that you follow adequate security protocols so more customers feel safe engaging with your business.

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SOC audit challenges

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The benefits of SOC audits are abundant, so why doesn’t every organization have these reports? Along with requiring a financial investment and considerable time, there are challenges for each type of SOC report.

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SOC 1 challenges

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The first step of SOC 1 compliance is to determine the scope that is relevant to your specific organization, as this varies from one organization to the next. Adequate scoping from the start requires in-depth knowledge of both SOC 1 and the organization, and this sets the stage for the rest of the project.

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SOC 2 challenges

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A key challenge in a SOC 2 audit is the fact that this audit involves numerous departments and teams across the organization. SOC 2 compliance involves technical security practices carried out by your IT or information security team; physical security practices maintained by your facilities management team; onboarding practices and staff policies that involve your HR department; and more. Collaboration and buy-in among all these teams can be difficult to manage.

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SOC 3 challenges

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In a SOC 3 audit, the chief challenge is striking a balance between giving too much information or too little information. You want to provide enough detail to achieve the goal of showing shareholders or others that you have strong security practices, but you don’t want to provide so much insight into your security framework that it could make it easier for unauthorized people to get access.

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Which SOC report do you need?

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Between SOC 1 and SOC 2, it’s a matter of the service your business provides. If your service could affect your clients’ financial statements in any way—such as processing their payroll—SOC 1 will be critical. If you’re handling other types of sensitive information, like user actions or proprietary data, you’ll likely need a SOC 2 as your company grows.

A SOC 3 report is more situational and isn’t often requested by a potential customer. It’s meant for an organization that handles customer data and wants to increase public awareness of how you handle that data.

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Is one SOC report better than the others?

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There’s a common misconception that the numerical value of each SOC report signifies the amount of detail found within. Each type of report merely has its own purposes without one being better than the others.

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When do I need a SOC report?

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You’ll eventually need some type of SOC report to prove your security posture to investors and potential customers. How do you know when you need a certain type of SOC report? For SOC 1 and SOC 2, a client or partner will specifically ask for the type of report they want as they consider doing business with you. Because SOC 3 is used for general purposes, you’ll likely find a need for SOC 1 and SOC 2 first.

So, should you just ignore the idea of a SOC report until someone asks for one? That isn’t advisable. Any type of SOC report will require an external auditor to come in and do a comprehensive audit. It can take weeks or months to upgrade and prepare your controls before you’re even ready for the audit to begin. 

If you have a potential deal in the works with a new client, you’ll probably need to put it on hold until you receive your SOC report. This can derail a business deal and slow further sales opportunities.

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Preparing for your SOC 1, 2, or 3 report 

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The first step for any SOC report is to take an in-depth look at your controls and see where you’re using up-to-date best practices and where you could be putting efforts more efficiently.

In the case of a SOC 2 report, Vanta’s SOC 2 automated compliance software is great place to start. This tool guides you through defining the scope of your SOC 2 report, conducting a readiness assessment, and providing you with helpful guides and templates so you can prepare more efficiently.