Complete comparison guide to help you understand the key differences between SOC 1 and SOC 2 audits and choose the right compliance framework for your organization.
Both SOC 1 and SOC 2 are audit frameworks developed by the American Institute of Certified Public Accountants (AICPA), but they serve different purposes and address different aspects of service organization controls.
Primary Focus: Financial reporting controls
Target Audience: User entities' financial auditors
Main Purpose: Evaluate controls that could impact client financial statements
Primary Focus: Security, availability, and privacy controls
Target Audience: Management, customers, and stakeholders
Main Purpose: Evaluate controls related to Trust Service Criteria
Choose SOC 1 if your services could impact client financial reporting. Choose SOC 2 if you handle customer data and need to demonstrate security and operational controls.
Financial reporting controls that could impact user entities' financial statements
Security, availability, processing integrity, confidentiality, and privacy controls
External auditors of user entities and their management
Management, customers, regulators, and other stakeholders
Restricted use - only for user entities and their auditors
Restricted or general use depending on report type
SSAE 18 (Statement on Standards for Attestation Engagements)
AT-C 105 and TSC (Trust Service Criteria)
Type I: Point in time
Type II: 6-12 months
Type I: Point in time
Type II: 3-12 months
$15,000 - $50,000
Medium Cost
$20,000 - $100,000+
Higher Cost
SOC 1 reports focus on controls at a service organization that are relevant to user entities' internal control over financial reporting (ICFR). These reports are essential when service organizations perform functions that could materially impact their clients' financial statements.
SOC 2 reports focus on controls relevant to security, availability, processing integrity, confidentiality, and privacy. These reports are designed for a broad range of stakeholders who need assurance about the service organization's systems and controls.
The system is protected against unauthorized access (both physical and logical).
The system is available for operation and use as committed or agreed.
System processing is complete, valid, accurate, timely, and authorized.
Information designated as confidential is protected as committed or agreed.
Personal information is collected, used, retained, disclosed, and disposed of in accordance with the entity's privacy notice.
| Aspect | SOC 1 | SOC 2 |
|---|---|---|
| Primary Purpose | Financial reporting controls | Operational and security controls |
| Applicable Standard | SSAE 18 | AT-C 105 and TSC |
| Control Framework | User entity's financial reporting needs | Trust Service Criteria (5 categories) |
| Mandatory Criteria | Financial reporting controls (varies by service) | Security (other 4 criteria optional) |
| Target Audience | User entity auditors and management | Customers, prospects, regulators, partners |
| Report Distribution | Restricted use only | Restricted or general use |
| Marketing Value | Limited | High |
| Competitive Advantage | Minimal | Significant |
| Customer Demand | Required by specific clients | Increasingly expected across industries |
| Implementation Timeline | 4-8 months | 6-12 months |
| Annual Cost Range | $15K - $50K | $20K - $100K+ |
| Regulatory Compliance | Supports SOX compliance | Supports various data protection regulations |
Examples: Payroll processing, investment management, loan servicing, benefits administration, transaction processing
You likely need SOC 1 if:
You likely need SOC 2 if:
Yes! Some organizations maintain both SOC 1 and SOC 2 reports. SOC 1 for clients who need financial reporting assurance, and SOC 2 for broader stakeholder confidence in security and operational controls.
| Cost Component | Range |
|---|---|
| Initial Assessment | $3,000 - $8,000 |
| Gap Remediation | $5,000 - $15,000 |
| Annual Audit (Type II) | $15,000 - $35,000 |
| Internal Resources | $10,000 - $25,000 |
| Total Annual | $33,000 - $83,000 |
| Cost Component | Range |
|---|---|
| Initial Assessment | $5,000 - $12,000 |
| Gap Remediation | $15,000 - $50,000 |
| Annual Audit (Type II) | $25,000 - $75,000 |
| Internal Resources | $20,000 - $50,000 |
| Total Annual | $65,000 - $187,000 |
While SOC 2 typically costs more upfront, it often provides greater ROI through competitive advantage, customer acquisition, and premium pricing opportunities. SOC 1 is usually driven by client requirements rather than competitive positioning.
Don't choose an audit type based on industry alone. Evaluate your specific business model, customer requirements, and strategic objectives.
Think about where your business will be in 2-3 years. What started as a SOC 1 need might evolve into SOC 2 requirements as you grow.
Choose the audit that provides the greatest return on investment through customer satisfaction, competitive advantage, and risk mitigation.
For organizations that serve both financial and technology markets, consider maintaining both SOC 1 and SOC 2 reports. This provides comprehensive coverage and positions you for maximum market opportunities.
Example: A payroll company might need SOC 1 for its core payroll services but SOC 2 for its employee self-service portal and mobile applications.
Our compliance experts can help you evaluate your specific needs and choose the right SOC audit approach for your organization.