Resources SOC 1 vs. SOC 2 Reports: What is the Difference?

There are many ways to impress your customers, and we believe that putting their security at the top of your list is a way you can really stand out. If your business wants to improve its cybersecurity protocol, you first have to understand the standardized evaluations created by the AICPA. Though there are various types of cybersecurity evaluation reports, the two most common are SOC 1 and SOC 2 reports. These audit reports give business owners unparalleled insight into the security of their daily operations, as well as their long-term cybersecurity strategies.

However, just knowing about the existence of SOC 1 and SOC 2 reports is not enough. You need to understand how and when they are conducted, as well as what you can do with the reports to make enhancements going forward. So, SOC 1 vs. SOC 2 reports — what are the most important differences? Read on to find out!

Everything You Need to Know About SOC 1 Reports

Service Organization Control (SOC) 1 is a kind of audit report designed for service companies. The SOC 1, or Statement on Standards for Attestation Engagements (SSAE) 18, focuses on the controls that are (or could be) relevant to the audit of a consumer’s financial statements. In most cases, these controls involve general business practices and information technology related to consumer data.

Thus, SOC 1 is not a comprehensive evaluation of your entire cybersecurity system. Instead, it is a targeted audit of your processes for obtaining, storing, and safely managing consumer data. While getting SOC 1 reports is not required by law, many clients or even investors may ask that you achieve SOC 1 compliance. However, before we look at exactly how to achieve SOC 1 compliance, it’s important to remember that there are two distinct types of SOC reports:

SOC 1 Type 1

The SOC 1 Type 1 audit report evaluates the fairness of a service organization’s system and a description of the system’s ability to achieve the control objectives by the specified date. For example, if your business intends to take on a new client on January 31st, and the new client requires SOC 1 compliance, you can get the SOC 1 Type 1 report to determine where your business currently stands. If the auditors determine that your business is not yet in compliance with SOC 1 standards, they will describe your business’s ability to make the necessary changes by the specified date. In this case, the date would be January 31st. It’s important to note that SOC 1 Type 1 reports can only be handled by your business, your users, and the auditors. However, you can still share the results of SOC 1 Type 1 reports with stakeholders as needed.

It’s important to note that SOC 1 Type 1 reports can only be handled by your business, your users, and the auditors. However, you can still share the results of SOC 1 Type 1 reports with stakeholders as needed.

SOC 1 Type 2

On the surface, the difference between SOC 1 Type 1 and Type 2 is pretty small. SOC 1 Type 2 reports cover all of the same controls as Type 1 reports. However, Type 1 reports are unique insofar as they audit a business’ control capabilities in relation to a specific date. Alternatively, SOC 1 Type 2 audits the controls over a set period of time (at least six months). In this way, Type 2 reports provide a more detailed audit of your organization’s actual cybersecurity activities, rather than a general evaluation of your organization’s capabilities.

Just like SOC 1 Type 1 reports, SOC 1 Type 2 reports can only be handled by your business, your users, and the auditors conducting your security audit. If you’d like to learn more about SOC 1 Type 1 and Type 2 reports, SOC certification, or SOC compliance in general, be sure to consult the AICPA.

Everything You Need to Know About SOC 2 Reports

While it is also designed by the AICPA, the SOC 2 report varies from SOC 1 in its scope and implementation. SOC 2 compliance hinges on five basic principles related to the secure management of sensitive data: security, availability, processing integrity, confidentiality, and privacy. Naturally, these are general categories, which gives auditors room to evaluate each service organization based on its particular processes and circumstances.

That said, there are some standard practices that most service organizations can implement to achieve SOC 2 compliance:

Network firewalls
Two-factor authentication
Intrusion detection

Performance monitoring
Disaster recovery
Security breach management

Quality assurance
Process monitoring

Data encryption
Access controls

Though SOC 2 reports differ from SOC 1, they also have two distinct types of audits:

SOC 2 Type 1

SOC 2 Type 1 reports outline the suitability of design controls to the service organization’s system at a specific point in time. Like SOC 1 Type 1, SOC 2 Type 1 focuses on the relevant parameters in relation to a designated date. Thus, an SOC 2 Type 1 report shows whether or not your organization has the best practices in place — or could have the best practices in place — by a date that is agreed upon by the organization and the auditors. Again, what qualifies as “best practices” will vary somewhat for every business, though you can get a general idea of how to ensure compliance with the list of activities and implementations above.

SOC 2 Type 2

SOC 2 Type 2 encompasses the same basic principles (security, availability, processing integrity, confidentiality, and privacy) as Type 1, but provides a much more complete and thorough evaluation of your organization’s design controls. With Type 1 reports, your protocols and procedures are evaluated at a specific point in time, for a specific point in time. Alternatively, SOC 2 Type 2 reports require a rigorous and in-depth analysis over a designated period of time. In short, SOC 2 Type 2 audits provide the most comprehensive report on cybersecurity compliance in accordance with the standards set out by the AICPA.

Additionally, both SOC 2 Type 1 and Type 2 reports are confidential and only reserved for service organizations, their users, and their auditors.