A simple breakdown: SOC 1 vs. SOC 2 vs. SOC 3

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.

What is SOC compliance?

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.

The purpose of SOC reports

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.

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

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.

Benefits of different SOC audits

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.

Benefits of SOC 1 audits

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. 

Benefits of SOC 2 audits

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.

Benefits of SOC 3 audits

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.

SOC audit challenges

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.

SOC 1 challenges

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.

SOC 2 challenges

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.

SOC 3 challenges

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.

Which SOC report do you need?

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.

Is one SOC report better than the others?

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.

When do I need a SOC report?

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.

Preparing for your SOC 1, 2, or 3 report 

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.


Determine whether the GDPR applies to you and if so, if you are a processor or controller (or both)

Do you sell goods or service in the EU or UK?

Do you sell goods or services to EU businesses, consumers, or both?

Do you have employees in the EU or UK?

Do persons from the EU or UK visit your website?

Do you monitor the behavior of persons within the EU?

If any of the above apply to your business, you’ll need to get GDPR compliant.

Create a Data Map by taking the following actions

Identify and document every system (i.e. database, application, or vendor) which stores or processes EU or UK based personally identifiable information (PII)

Document the retention periods for PII in each system

Determine whether you collect, store, or process “special categories” of data

racial or ethnic origins
genetic data
political opinions
biometric data that can uniquely identifying someone
religious or philosophical beliefs
health, sex life or sexual orientation data
trade union membership

Determine whether your Data Map meets the requirements for Records of Processing Activities (Art. 30)

the name and contact details of the controller
the purpose behind the processing of data
a description of the categories of data that will be processed
who will receive the data including data
documentation of suitable safeguards for data transfers to a third country or an international organization
the retention period of the different categories of data
a general description of the technical and organizational security measures

Determine whether your Data Map includes the following information about processing activities carried out by vendors on your behalf

the name and contact details of the processor or processors and of each controller on behalf of which the processor is acting, and, where applicable, of the controller’s or the processor’s representative, and the data protection officer
the categories of processing carried out on behalf of each controller
documentation of suitable safeguards for data transfers to a third country or an international organization
a general description of the technical and organizational security measures

Determine your grounds for processing data

For each category of data and system/application have you determined the lawful basis for processing based on one of the following conditions?

consent of the data subject
contract with the data subject
necessary for compliance with a legal obligation
necessary in order to protect the vital interests of the data subject or a third party
necessary for the performance of a task in the public interest or in the exercise of official authority vested in the controller
necessary for the purposes of the legitimate interests pursued by the controller or by a third party, except where such interests are overridden by the rights of data subject

Take inventory of current customer and vendor contracts to confirm new GDPR-required flow-down provisions are included

Review all customer contracts to determine that they have appropriate contract language (i.e. Data Protection Addendums with Standard Contractual Clauses)

Review all in-scope vendor contracts to determine that they have appropriate contract language (i.e. Data Protection Addendums with Standard Contractual Clauses)

Do your agreements cover the following items?
vendor shall process the personal data only on documented instructions (including when making an international transfer of personal data) unless it is required to do otherwise by EU or member state law
vendor ensures that persons authorized to process the personal data are subject to confidentiality undertakings or professional or statutory obligations of confidentiality.
vendor have adequate information security in place, technical and organizational measures to be met to support data subject requests or breaches
vendor shall not appoint or disclose any personal data to any sub-processor unless required or authorized
vendor shall delete or return all the personal data after the end of the provision of services relating to processing, and deletes existing copies unless Union or Member State law requires storage of the personal data;
vendor makes available all information necessary to demonstrate compliance and allow for and contribute to audits, including inspections

Have you performed a risk assessment on vendors who are processing your PII?


Determine if you need to do a Data Protection Impact Assessment

Is your data processing taking into account the nature, scope, context, and purposes of the processing, likely to result in a high risk to the rights and freedoms of natural persons?

Does your processing involve any of the following?
automated processing, including profiling, and on which decisions are based that produce legal effects
special categories of data or data related to criminal convictions and offenses
monitor publicly accessible area on a large scale.
If any of the above are true, you may need to conduct a Data Protection Impact Assessment for existing and new data projects.

Review product and service design (including your website or app) to ensure privacy notice links, marketing consents, and other requirements are integrated

Do you have a public-facing Privacy Policy which covers the use of all your products,  services and websites?

Does the notice to the data subject include the following items?

the identity and the contact details of the organization and its representative
the contact details of the data protection officer, if applicable
the purposes to process personal data and its legal basis for the processing
the recipients or categories of recipients of the personal data, if any
the details regarding any transfer of personal data to a third country and the safeguards taken applicable

Does the notice also include the following items?

the retention period, or if that is not possible, the criteria used to determine that period
the existence of the data subject rights (i.e. requests for information, modification or deletion of PII)
the right to withdraw consent at any time
the right to lodge a complaint with a supervisory authority
whether the provision of personal data is a statutory or contractual requirement, or a requirement necessary to enter into a contract, as well as whether the data subject is obliged to provide the personal data and of the possible consequences of failure to provide such data
the existence of automated decision-making, including profiling, and meaningful information about the logic involved, as well as the significance and the consequences

Do you have a mechanism for persons to change or withdraw consent?


Update internal privacy policies to comply with notification obligations

Update internal privacy notices for EU employees

Do you have an Employee Privacy Policy governing the collection and use of EU and UK employee data?

Determine if you need to appoint a Data Protection Officer, and appoint one if needed

Have you determined whether or not you must designate a Data Protection Officer (DPO) based on one of the following conditions (Art. 37)?

the data processing is carried out by a public authority
the core activities of the controller or processor require regular and systematic monitoring of data subjects on a large scale

If you export data from the EU, consider if you need a compliance mechanism to cover the data transfer, such as model clauses

If you transfer, store, or process data outside the EU or UK, have you identified your legal basis for the data transfer (note: most likely covered by the Standard Contractual Clauses)

Have you performed and documented a Transfer Impact Assessment (TIA)?


Confirm you are complying with other data subject rights (i.e. aside from notification)

Do you have a defined process for timely response to Data Subject Access Requests (DSAR) (i.e. requests for information, modification or deletion of PII)?

Are you able to provide the subject information in a concise, transparent, intelligible and easily accessible form, using clear and plain language?

Do you have a process for correcting or deleting data when requested?

Do you have an internal policy regarding a Compelled Disclosure from Law Enforcement?


Determine if you need to appoint an EU-based representative, and appoint one if needed

Have you appointed an EU Representative or determined that an EU Representative is not needed based on one of the following conditions?

data processing is occasional
data processing is not on a large scale
data processing doesn’t include special categories or data related to criminal convictions and offenses
doesn’t risk to the rights and freedoms of data subjects
a public authority or body

If operating in more than one EU state, identify a lead Data Protection Authority (DPA)

Do you operate in more than one EU state?

If so, have you designated the Supervisory Authority of the main establishment to act as your Lead Supervisory Authority?


Implement Employee Trainings to Demonstrate Compliance with GDPR Principles and Data Subject Rights

Have you provided appropriate Security Awareness and Privacy training to your staff?


Update internal procedures and policies to ensure you can comply with data breach response requirements

Have you created and implemented an Incident Response Plan which included procedures for reporting a breach to EU and UK Data Subjects as well as appropriate Data Authorities?

Do breach reporting policies comply with all prescribed timelines and include all recipients i.e. authorities, controllers, and data subjects?


Implement appropriate technical and organizational measures to ensure a level of security appropriate to the risk

This includes pseudonymization/ encryption, maintaining confidentiality, restoration of access following physical/technical incidents and regular testing of measures

Have you implemented encryption of PII at rest and in transit?

Have you implemented pseudonymization?

Have you implemented appropriate physical security controls?

Have you implemented information security policies and procedures?

Can you access EU or UK PII data in the clear?

Do your technical and organizational measure ensure that, by default, only personal data which are necessary for each specific purpose of the processing are processed?


Consider streamlining GDPR compliance with automation

Transform manual data collection and observation processes into continuous monitoring

Download this checklist for easy reference

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Develop a roadmap for successful implementation of an ISMS and ISO 27001 certification

Implement Plan, Do, Check, Act (PDCA) process to recognize challenges and identify gaps for remediation

Consider ISO 27001 certification costs relative to org size and number of employees

Clearly define scope of work to plan certification time to completion

Select an ISO 27001 auditor


Set the scope of your organization’s ISMS

Decide which business areas are covered by the ISMS and which are out of scope

Consider additional security controls for business processes that are required to pass ISMS-protected information across the trust boundary

Inform stakeholders regarding scope of the ISMS


Establish an ISMS governing body

Build a governance team with management oversight

Incorporate key members of top management, e.g. senior leadership and executive management with responsibility for strategy and resource allocation


Conduct an inventory of information assets

Consider all assets where information is stored, processed, and accessible

  • Record information assets: data and people
  • Record physical assets: laptops, servers, and physical building locations
  • Record intangible assets: intellectual property, brand, and reputation

Assign to each asset a classification and owner responsible for ensuring the asset is appropriately inventoried, classified, protected, and handled


Execute a risk assessment

Establish and document a risk-management framework to ensure consistency

Identify scenarios in which information, systems, or services could be compromised

Determine likelihood or frequency with which these scenarios could occur

Evaluate potential impact of each scenario on confidentiality, integrity, or availability of information, systems, and services

Rank risk scenarios based on overall risk to the organization’s objectives


Develop a risk register

Record and manage your organization’s risks

Summarize each identified risk

Indicate the impact and likelihood of each risk


Document a risk treatment plan

Design a response for each risk (Risk Treatment)

Assign an accountable owner to each identified risk

Assign risk mitigation activity owners

Establish target dates for completion of risk treatment activities


Complete the Statement of Applicability worksheet

Review 114 controls of Annex A of ISO 27001 standard

Select controls to address identified risks

Complete the Statement of Applicability listing all Annex A controls, justifying inclusion or exclusion of each control in the ISMS implementation


Continuously assess and manage risk

Build a framework for establishing, implementing, maintaining, and continually improving the ISMS

Include information or references to supporting documentation regarding:

  • Information Security Objectives
  • Leadership and Commitment
  • Roles, Responsibilities, and Authorities
  • Approach to Assessing and Treating Risk
  • Control of Documented Information
  • Communication
  • Internal Audit
  • Management Review
  • Corrective Action and Continual Improvement
  • Policy Violations

Assemble required documents and records

Review ISO 27001 Required Documents and Records list

Customize policy templates with organization-specific policies, process, and language


Establish employee training and awareness programs

Conduct regular trainings to ensure awareness of new policies and procedures

Define expectations for personnel regarding their role in ISMS maintenance

Train personnel on common threats facing your organization and how to respond

Establish disciplinary or sanctions policies or processes for personnel found out of compliance with information security requirements


Perform an internal audit

Allocate internal resources with necessary competencies who are independent of ISMS development and maintenance, or engage an independent third party 

Verify conformance with requirements from Annex A deemed applicable in your ISMS's Statement of Applicability

Share internal audit results, including nonconformities, with the ISMS governing body and senior management

Address identified issues before proceeding with the external audit


Undergo external audit of ISMS to obtain ISO 27001 certification

Engage an independent ISO 27001 auditor

Conduct Stage 1 Audit consisting of an extensive documentation review; obtain feedback regarding readiness to move to Stage 2 Audit

Conduct Stage 2 Audit consisting of tests performed on the ISMS to ensure proper design, implementation, and ongoing functionality; evaluate fairness, suitability, and effective implementation and operation of controls


Address any nonconformities

Ensure that all requirements of the ISO 27001 standard are being addressed

Ensure org is following processes that it has specified and documented

Ensure org is upholding contractual requirements with third parties

Address specific nonconformities identified by the ISO 27001 auditor

Receive auditor’s formal validation following resolution of nonconformities


Conduct regular management reviews

Plan reviews at least once per year; consider a quarterly review cycle 

Ensure the ISMS and its objectives continue to remain appropriate and effective

Ensure that senior management remains informed

Ensure adjustments to address risks or deficiencies can be promptly implemented


Calendar ISO 27001 audit schedule and surveillance audit schedules

Perform a full ISO 27001 audit once every three years

Prepare to perform surveillance audits in the second and third years of the Certification Cycle


Consider streamlining ISO 27001 certification with automation

Transform manual data collection and observation processes into automated and continuous system monitoring

Identify and close any gaps in ISMS implementation in a timely manner


Learn more about achieving ISO 27001 certification with Vanta

Book an ISO 27001 demo with Vanta

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Determine which annual audits and assessments are required for your company

Perform a readiness assessment and evaluate your security against HIPAA requirements

Review the U.S. Dept of Health and Human Services Office for Civil Rights Audit Protocol


Conduct required HIPAA compliance audits and assessments

Perform and document ongoing technical and non-technical evaluations, internally or in partnership with a third-party security and compliance team like Vanta


Document your plans and put them into action

Document every step of building, implementing, and assessing your compliance program

Vanta’s automated compliance reporting can streamline planning and documentation


Appoint a security and compliance point person in your company

Designate an employee as your HIPAA Compliance Officer


Schedule annual HIPAA training for all employees

Distribute HIPAA policies and procedures and ensure staff read and attest to their review


Document employee trainings and other compliance activities

Thoroughly document employee training processes, activities, and attestations


Establish and communicate clear breach report processes
to all employees

Ensure that staff understand what constitutes a HIPAA breach, and how to report a breach

Implement systems to track security incidents, and to document and report all breaches


Institute an annual review process

Annually assess compliance activities against theHIPAA Rules and updates to HIPAA


Continuously assess and manage risk

Build a year-round risk management program and integrate continuous monitoring

Understand the ins and outs of HIPAA compliance— and the costs of noncompliance

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