With technology advancing at the speed of light, a lot of businesses have turned to outsourced technology services, leading to the exponential growth of SaaS offerings. Outsourcing definitely has compelling advantages, but it also increases the attack surface through which hackers can gain access to confidential information.
With the growth of SaaS services, especially of the B2B variety, the demand for compliance certifications has exploded. Proof of security and operational compliance is a basic prerequisite of customer trust.
The most popular framework is SOC 2 Compliance, but it also has a counterpart on the financial reporting side of the house: SOC 1. Both of these frameworks were created by the American Institute of Certified Public Accountants (AICPA). Understanding the differences between SOC 1 vs. SOC 2 reports can help you determine which framework you need and assist you in designing a comprehensive security program that provides customers with the reassurance they want.
SOC 1: An Overview
A SOC 1 audit allows a service organization to evaluate its internal controls to assure its customers that their financial information is being handled safely and securely.
A service organization is responsible for identifying key control objectives for the services it provides to its clients when preparing for a SOC 1 audit. Control objectives apply to both business and information technology activities (for example, controls around processing customers’ information for accounts receivable).
A company that provides outsourced accounting services is an example of a service organization that requires a SOC 1 report. When customers ask for permission to perform an audit of their payroll processing and data security procedures, the outsourced provider may instead supply them with a completed SOC 1 audit report as proof of having effective internal controls that have been reviewed by an independent CPA firm. Financial executives, compliance officers, and auditors are frequently viewers and users of SOC 1 reports.
SOC 2: An Overview
Unlike SOC 1’s financial focus, a SOC 2 report focuses on the controls that are important to a service organization’s operations and security. A SOC 2 audit aids a service company in examining and reporting on internal controls related to client data security, availability, processing integrity, confidentiality, and privacy.
A service organization’s responsibility while preparing for a SOC 2 audit is to determine which Trust Services Criteria are applicable to the services it provides to its clients. Only the security category of criteria is required; the rest of the scope of compliance is up to the service organization. Because of the nature of their services and because of client requirements, some service businesses may have their SOC 2 audit cover only security and availability, for example. Others may elect to comply with all five Trust Services Criteria.
A SaaS firm offering secure storage may need a SOC 2 report. Instead of on-site checks, customers can review the report to verify safeguards. SOC 1 vs. SOC 2 comparisons help clarify the scope. Customer executives, prospects, compliance officers, and auditors often review SOC 2 reports.
SOC 1 vs. SOC 2 Reports
The most notable differences between SOC 1 vs. SOC 2 Compliance are the following:
SOC 1 is focused on financial reporting; SOC 2 is about security and operations. SOC 1 is extremely flexible in allowing an organization to define its own control objectives and its own controls to achieve those objectives; SOC 2 comes with a predefined set of control objectives (known as criteria) but is similarly flexible in choosing appropriate controls to meet the goals. Also, SOC 2 allows the organization to define the scope of the audit criteria, with only the security criteria being mandatory.
The audience for SOC 1 reports is primarily a financial one (CFOs, auditors …); the audience for SOC 2 reports is mainly compliance officers, CISOs, CTOs, and other executives focused on security.
Difference Between Type I and Type II SOC Reports
After determining whether a SOC 1 vs. SOC 2 report best suits its reporting requirements, a service organization has an additional choice to make: type 1 or type 2. These alternatives are contingent on how well-prepared the service organization is for the SOC audit and how quickly the SOC audit must be completed. A type 1 SOC audit assesses and reports on the design of controls and procedures as of a specific date.
A type 2 SOC audit goes a step further by also covering the operational effectiveness of the controls over a period of time, typically 3-6 months for the first audit, and annually thereafter.
When a service organization 1) has never been audited and is facing customer demands for a completed SOC report, or 2) has recently carried out a major revamp of its internal controls, then a type 1 SOC audit may be a good option to prove compliance as quickly as possible. A SOC 2 report can be completed some months later.
SOC 1 vs SOC 2 – Which One Should You Choose For Your Business
Are You Set to Begin? Service organizations benefit from being able to assure current and potential customers that their data is being appropriately processed and safeguarded. Understanding SOC 1 vs. SOC 2 is essential in deciding which report aligns with your business goals. SOC 1 is designed for businesses that impact their customers’ financial reporting, focusing on internal controls.
SOC 2, on the other hand, evaluates how a service provider manages data security, availability, processing integrity, confidentiality, and privacy. Choose SOC 1 for financial relevance and SOC 2 for data protection and trust assurance. So if you haven’t had a SOC audit before, you should definitely get on the bandwagon now.
Conclusion
Choosing between SOC 1 vs. SOC 2 depends on your business needs, financial reporting, and data security. With the right guidance and tools like Akitra, achieving and maintaining compliance becomes faster, easier, and more efficient.
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In the competitive landscape of SaaS businesses, trust is paramount amidst data breaches and privacy concerns. Akitra addresses this need with its leading AI-powered Compliance Automation platform. Our platform empowers customers to prevent sensitive data disclosure and mitigate risks, meeting the expectations of customers and partners in the rapidly evolving landscape of data security and compliance. Through automated evidence collection and continuous monitoring, paired with customizable policies, Akitra ensures organizations are compliance-ready for various frameworks such as SOC 1, SOC 2, HIPAA, GDPR, PCI DSS, ISO 27001, ISO 27701, ISO 27017, ISO 27018, ISO 9001, ISO 13485, ISO 42001, NIST 800-53, NIST 800-171, NIST AI RMF, FedRAMP, CCPA, CMMC, SOX ITGC, and more such as CIS AWS Foundations Benchmark, Australian ISM and Essential Eight etc. In addition, companies can use Akitra’s Risk Management product for overall risk management using quantitative methodologies such as Factorial Analysis of Information Risks (FAIR) and qualitative methods, including NIST-based for your company, Vulnerability Assessment and Pen Testing services, Third Party Vendor Risk Management, Trust Center, and AI-based Automated Questionnaire Response product to streamline and expedite security questionnaire response processes, delivering huge cost savings. Our compliance and security experts provide customized guidance to navigate the end-to-end compliance process confidently. Last but not least, we have also developed a resource hub called Akitra Academy, which offers easy-to-learn short video courses on security, compliance, and related topics of immense significance for today’s fast-growing companies.
Our solution offers substantial time and cost savings, including discounted audit fees, enabling fast and cost-effective compliance certification. Customers achieve continuous compliance as they grow, becoming certified under multiple frameworks through a single automation platform.
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FAQs
Which industries typically need SOC 1 and SOC 2 reports?
SOC 1 suits finance-related services; SOC 2 is ideal for SaaS, cloud providers, and companies handling sensitive customer data securely.
Does a company need both SOC 1 and SOC 2 compliance?
Yes, companies handling financial reporting and sensitive data, like fintech or accounting SaaS, often need both SOC 1 and SOC 2 compliance.
How long does it take to achieve SOC 1 vs. SOC 2 certification?
Type 1 takes weeks; Type 2 needs 3–12 months. Automation platforms like Akitra help complete audits faster and more efficiently.
