SOC 1 vs SOC 2: What’s the Difference?

April 20, 2023

Have you ever heard of “SOC 1” and “SOC 2”? No, they are not up-and-coming rap groups – SOC stands for System and Organization Controls. They’re two security standards used by companies to ensure that their data is protected.

It can be pretty confusing trying to figure out what the difference between the two is, especially when there are so many SOC-related terms thrown around. But don’t worry – we’re here to help! 

If your business deals with sensitive data, it’s important to understand the key differences between SOC 1 and SOC 2 compliance. Knowing these differences and how they relate to your organization can be the difference between meeting information security best practices and suffering a costly breach.

Overview of SOC 1 and SOC 2

Trying to see whether SOC 1 or SOC 2 is right for you? 

Let’s start with SOC 1 – this audit report focuses on internal controls related to financial reporting, and it aligns with the SSAE 18 standard, so think of it as your financial information bodyguard. SOC 1 tests if your internal controls meet the identified control objectives.

On the other hand, we have SOC 2 – this audit report focuses more broadly on security, availability, confidentiality, processing integrity, and privacy. SOC 2 identifies and tests controls that meet these criteria. In simpler terms, think of it as your trusted data knight in shining armor – ready to fight off any digital dragons that come its way. 

SOC 1 and SOC 2 may sound similar at first glance, but there are key differences between them that you should consider when deciding which standard best fits your needs. Let’s dig a little deeper.


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SOC 1: Focusing on financial reporting

The primary purpose of a SOC 1 audit is to provide assurance to stakeholders that a company’s internal controls and processes are in line with the SOC 1 standards. 

SOC 1 is the audit of the financial controls which an organization has implemented to protect the data it processes, stores and transmits.  Specifically, SOC 1 audits are conducted by independent auditors in order to evaluate the design and effectiveness of the internal controls at an organization that directly impact their user entities’ financial statements.

SOC 2: Ensuring data security

A SOC 2 audit helps organizations create and maintain trust with their customers, as well as demonstrate their commitment to data security. 

SOC 2 is a voluntary compliance standard for organizations, developed by the American Institute of CPAs (AICPA), specifying how organizations should manage customer data. The standard is based on the following Trust Services Criteria: Security, Availability, Processing Integrity, Confidentiality, and Privacy. 

The goal of a SOC 2 audit is not just to check compliance, but also ensure that all requirements necessary for running robust IT operations are fulfilled. 

Both audits culminate in the production of a report relating to the respective standards.

How to choose the right standard?

So now comes the important question: which one should you choose? That completely depends on your specific needs – make sure you evaluate carefully what kind of audit will best meet your data security objectives. Once you know that, you can make an informed decision about which standard best suits your company’s needs.

When deciding between SOC 1 vs SOC 2, consider what type of customer information you are managing and aim to protect, the industry you are operating in, as well as the requests you’re receiving from your prospects. Mainly, your industry and business operations will determine whether SOC 1 and/or SOC 2 is relevant to your organizational needs. 

With careful consideration of your organization’s needs and objectives, you’re sure to make the best decision for your business!

SOC 1 vs SOC 2: Benefits and challenges

Organizations have to be sure that their systems are in compliance with industry regulations and standards, and that they can protect the security and privacy of customers’ data. To help ensure this, there are two distinct sets of standards: SOC 1 and SOC 2.

Both offer an impressive set of benefits, as well as challenges, such as the fact that they are very complex security compliance standards and do require extensive and continuous monitoring, which can become an expensive and time-consuming endeavor.

On the plus side, SOC 1 and SOC 2 makes it easier for organizations to spot weak or missing security spots that could create unnecessary exposure and data breaches. Both standards provide assurance to fully protect customer data from misuse or theft, by demonstrating adherence with applicable security standards. This is especially helpful for organizations whose products or services involve large amounts of sensitive customer information. In addition to identifying security gaps, SOC compliance can provide strategic benefits, such as enhanced market credibility and a competitive advantage.

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What’s the difference between Type I and Type II SOC 1 or SOC 2 audits?

Type I audits are all about testing the implementation of controls at a single point in time – a “snapshot” of sorts. A Type 1 report looks at the ‘design’ side of things, that is, how your data security measures are set up and why they make sense for your organization. 

On the other hand, a Type II report is a review of how well those measures actually work in practice. Type II audits evaluate the design and operating effectiveness of those same controls over a period of time – usually 6 months or more.

Areas that affect which report you decide to undergo are mainly time and costs. However, it is important to note that it is always highly recommended to undergo a Type II report, due to its thorough analysis, as well as the fact that some customers will specifically request this report. Also remember, you can only undergo a Type I report once.

Leverage the SOC 1 and SOC 2 automation experts

SOC 1 and SOC 2 serve two distinct yet related security standards. Each standard has unique requirements, and both must be tailored to meet the specific needs of the organization while demonstrating its compliance. 

Knowing which standard to choose can be tricky, but understanding the differences and seeking the advice of experts can help make the decision process easier. With prudent choices in selecting the appropriate security standard, organizations can gain the trust and confidence of customers and stakeholders.

Streamline both SOC 1 and SOC 2 compliance with Scytale, automating the once time-heavy and manual processes and getting audit-ready 90% faster. Just check what our customers are saying!