Security compliance Designing security programs SOC 1 SOC 2

The difference between SOC 1 and SOC 2

There can be a lot of confusion around compliance frameworks, especially those with similar names like SOC 1 and SOC 2 — which stand for System and Organization Controls — and ISO 27701 and ISO 27001.

In this post, we’re going to take a look at exactly what the differences are between SOC 1 and SOC 2, as well as how those differ from SOC 1 Type 1 vs. Type 2 and SOC 2 Type 1 vs. Type 2. (Wait, those are different too?!) Yeah, it can be a bit of a jargon jumble, but not to worry, we’re here to help sort all that out! Let’s get to it.

What is SOC 1?

When you think of SOC 1, think of financial controls.

That’s because — to put it simply — SOC 1 focuses on outsourced financial controls, with control objectives focused on both business and IT processes at the service organization. In other words, it addresses outsourced services performed by service organizations, and tests those controls relevant to the company’s end users’ or customers' financial statements. In this sense, the biggest difference between a SOC 1 and SOC 2 is the focus of examination.

So who would need to issue a SOC 1 report? Companies like payroll service providers or payroll processing firms, employee retirement or benefit plan operators, investment advisors, loan servicers, and trust departments would need one because they all impact the financial reporting of their customers. By undergoing a SOC 1 compliance audit, the service provider can present the report to their customers, ensuring them that all of their financial data is being properly protected.

What is SOC 2?

When you think of SOC 2, think of non-financial controls.

That’s because this attestation — one of the most common — is focused on controls having to do with data, IT, security, business operations, access, and more. Essentially, it demonstrates to your end users that you’ve adopted a robust security program to protect their data.

The companies that usually undergo SOC 2 audits include software as a service (SaaS) providers, managed service providers, cloud service providers, banking and financial services companies, data centers, and more. It’s really for any organization or technology service provider that stores, processes, or transmits customer data.

Wait, is SOC 1/SOC 2 the same as Type 1/Type 2? No!

Now here comes the confusing bit: Both SOC 1 and SOC 2 have a Type 1 and a Type 2, meaning there are four reports in total.

SOC 1 Type 1 vs Type 2

For SOC 1, the main difference between a Type 1 and Type 2 is that a Type 1 report demonstrates the proper design of controls at a certain point in time, whereas a Type 2 report — which also focuses on the design and operation of controls — further demonstrates that controls are operating effectively over a (usually longer) period of time — typically about 12 months. 

SOC 2 Type 1 vs Type 2

When it comes to SOC 2, the Type 1 and Type 2 reports are similar to that of SOC 1 Type 1 and Type 2 in that an audit is required to evaluate a particular point in time to assess the design of your company’s controls and decide whether they adequately cover the appropriate criteria. A SOC 2 Type 2 report, also similar to SOC 1 Type 2, adds an additional audit to assess whether controls have been operating over a period of time, typically between six and 12 months. 

This audit is repeated annually but doesn't have to be synced to the calendar year. In fact, many companies choose a quarter-end for their annual cadence for reporting purposes.

Want to learn more about SOC 2 Type 1 and Type 2? Read this.

Do you need both SOC 1 and SOC 2?

Whether you’ll need a SOC 1 report, a SOC 2 report, or both depends on your organization, what it does, and who it serves as outlined above. However, any organization that wants to take a proactive approach to risk management would be smart to achieve at least one of the two depending on their main business activities.

Why? Because not only can a SOC report give your company a competitive advantage, it can also help you win new customers and partners and close deals faster.

How Strike Graph simplifies SOC 2 compliance 

Strike Graph can help you achieve SOC 2 compliance 86% faster:

  • Go from start to certification on one platform
  • Only invest time and energy into the SOC 2 controls that are necessary for your business
  • Automate SOC 2 evidence collection and maintenance reminders
  • Assign responsibility to appropriate team members within your company
  • Maintain compliance easily
  • Cross-apply controls to future cybersecurity certifications

Here’s how it works: Strike Graph’s all-in-one compliance platform lets you design, operate, measure, and certify your security program all in one place. No extra vendors, no extra time, no extra costs. 

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