Need to understand how SOC 1, SOC 2, and SOC 3 differ? This guide explains how each SOC report works, who needs which one, and when to pursue it. You’ll also get practical checklists, scaling strategies, and expert tips to help you prepare for a successful audit.

SOC 1 vs. SOC 2 vs. SOC 3

SOC 1, SOC 2, and SOC 3 are audit reports that help businesses assess the trustworthiness of third-party service providers. SOC 1 focuses on financial reporting controls, SOC 2 evaluates how a company safeguards its data, and SOC 3 provides a public summary of SOC 2.

Different purposes of the SOC reports

SOC 1 addresses financial reporting, SOC 2 focuses on system and data security, and SOC 3 emphasizes public transparency based on SOC 2 compliance. All three involve independent audits, but each serves a different purpose depending on what your company needs to demonstrate.

Here’s a closer look:

• SOC 1 evaluates how your systems — or the services you provide — could affect your clients’ financial statements. These reports test custom control objectives that your company defines with an auditor, typically covering financial workflows and related IT systems.
• SOC 2 assesses broader risks related to how your company manages customer data. It follows a standardized framework — the Trust Services Criteria — which includes security, availability, confidentiality, processing integrity, and privacy.
• SOC 3 is based on your SOC 2 audit results but excludes sensitive technical details. It’s designed for public audiences — ideal for demonstrating compliance in sales materials, investor communications, or on your website.
  
  

Who needs each SOC report

SOC 1 is typically required if your services have an impact on client financials. You need SOC 2 if you manage or process sensitive customer data. You can use SOC 3 to publicly share your SOC 2 results.

Here are the details:

• SOC 1 is common for payroll processors, claims administrators, loan servicers, or any business whose work directly affects a client’s financial reporting.
• SOC 2 is typically pursued by cloud platforms, SaaS providers, managed IT services, and any other companies that store or transmit customer data. It’s often required in vendor security reviews or procurement processes.
• SOC 3 is helpful for companies that want to promote their SOC 2 compliance without sharing the full, confidential report. It’s widely used in marketing and investor relations to build trust with prospects and stakeholders.
  
  

SOC reports are not just a formality — they’re becoming a standard part of enterprise risk management. A 2022 study published in the Review of Accounting Studies found that nearly 30% of S&P 500 companies engage in SOC audits, particularly as a way to address cyber risk and meet stakeholder expectations around data security.

Access Note: SOC 2 reports are confidential and typically shared under a non-disclosure agreement (NDA). SOC 3 provides a public summary of the SOC 2 audit, maintaining privacy while demonstrating compliance.

When to get each SOC report

Your business needs a SOC 1 report if your services impact your clients’ financial reporting. Clients often require SOC 2 compliance for assurance that you handle data securely. Businesses can obtain a SOC 3 report, typically for marketing purposes, only after completing a SOC 2 audit.

The details:

• SOC 1 may be required during onboarding or audits if your work affects client accounting or internal controls.
• SOC 2 is now a standard part of vendor questionnaires and procurement due diligence. If you store, process, or transmit client data, even outside of finance, you’ll likely need to demonstrate SOC 2 compliance.
• SOC 3 can be added once you’ve completed a SOC 2 audit. It’s ideal when you want to publicly showcase your compliance posture without sharing internal documentation.
  
  

Both SOC 1 and SOC 2 come in two types:

• Type 1: A snapshot of control design at a specific point in time
• Type 2: A review of how effectively those controls operated over a period (typically 3 to 12 months)
  
  

Many companies start with a Type 1 to meet immediate needs and later move to a Type 2 for stronger, longer-term assurance.

If your SOC 2 Type 2 report doesn't fully cover a client’s review period, you may need a SOC 2 bridge letter to explain what controls remained in place between the end of the audit period and the current date.

After your SOC 2 audit is complete, make sure your team is aligned on how to operationalize and communicate the results. Here’s what to do after getting your SOC 2.

Differences between SOC 1, SOC 2, and SOC 3

SOC 1, SOC 2, and SOC 3 differ in purpose, audience, and scope. SOC 1 audits focus on financial reporting controls. SOC 2 reports assess data security and privacy using standardized criteria. SOC 3 reports summarize SOC 2 findings for public use, without disclosing sensitive system details.

SOC 1 vs. SOC 2 reports

SOC 1 and SOC 2 differ based on the type of risk they evaluate. SOC 1 audits focus on financial reporting processes that may affect your clients' accounting. SOC 2 audits evaluate the effectiveness of your organization's security and management of customer data.

Although CPA firms conduct both audits using similar methods, each serves a different compliance objective:

• Use SOC 1 if your services impact a client’s financial reporting. You and your auditor jointly define the control objectives, typically focusing on accounting systems, payroll processing, or other transaction workflows.
  
  
• Use SOC 2 if you handle sensitive customer data. SOC 2 audits measure how your controls align with the Trust Services Criteria (TSC), a standardized framework developed by the AICPA. The framework includes controls in five domains (categories):
  
  
  • Security (required): Measures whether your systems are protected against unauthorized access, both physical and logical. This includes access controls, firewalls, encryption, and monitoring. Every SOC 2 audit must include the security category.
  • Availability: Assesses whether your systems are reliably available for use as promised. Controls in this category support system uptime, performance monitoring, disaster recovery, and incident response.
  • Processing integrity: Evaluates whether your systems process data accurately, completely, and promptly. This applies when your services involve handling transactions, calculations, or automated workflows.
  • Confidentiality: Examines how your company protects confidential information such as intellectual property, financial data, or trade secrets. Controls may include encryption, access restrictions, and secure data disposal.
  • Privacy: Reviews how your organization collects, uses, stores, and discloses personal information. This category is most relevant if you handle personal data subject to privacy regulations, such as the Health Insurance Portability and Accountability Act (HIPAA) or the General Data Protection Regulation (GDPR).
    
    

The biggest difference between SOC 1 and SOC 2 controls boils down to this:

• SOC 1 control objectives are custom to your business and tailored around financial processes.
• SOC 2 control objectives are standardized, and every audit evaluates your implementation against the same TSC framework, even if the controls you use vary.
  
  

Also, note that SOC 1 and SOC 2 each have two types — Type 1 and Type 2:

• SOC 1 Type I: Evaluates whether your controls are properly designed as of a specific date.
• SOC 1 Type 2: Evaluates whether those controls operated effectively over a defined period, usually 3–12 months.
• SOC 2 Type 1: Assesses the design of the controls.
• SOC 2 Type 2: Assesses the design and operational effectiveness over time.
  
  

SOC 2 vs. SOC 3 reports

SOC 2 and SOC 3 originate from the same audit but serve different purposes. SOC 2 provides in-depth, confidential reporting for customers under a non-disclosure agreement (NDA), while SOC 3 offers a high-level summary that excludes sensitive details and is suitable for public use.

If your company completes a SOC 2 audit, you may also choose to issue a SOC 3 report. Both reports are based on the same evaluation of your systems against the Trust Services Criteria, but they serve very different purposes:

• SOC 2 reports include detailed information about your internal systems, controls, and the results of specific audit tests. These reports are intended for customers and partners who need to assess your data protection practices as part of their due diligence process. Because they often contain confidential information, you’ll typically share them only under a nondisclosure agreement (NDA).
  
  
• SOC 3 reports present the same overall audit conclusion, but in a simplified, public-facing format. They strip out technical descriptions, test results, and control-level detail. SOC 3 reports are ideal for companies that want to demonstrate their compliance posture to a wider audience — such as prospective customers, partners, or investors — without disclosing proprietary information.
  
  

So, why would you publish a SOC 3 report? If your sales or marketing teams need a way to prove compliance without managing NDAs or vetting individual report requests, a SOC 3 can help. Many companies publish SOC 3 reports on their websites or include them in RFP responses, pitch decks, or investor materials.

Also, remember that you can’t get a SOC 3 report on its own. A SOC 3 is only available after you’ve successfully completed a SOC 2 audit. It’s essentially an optional add-on that expands how you share your SOC 2 results.

For prospective clients, the SOC 3 report may not be sufficient. They will want to review the details in your SOC 2 report, says Dan Chemnitz, Associate Practice Director at cybersecurity and compliance firm 360 Advanced. Chemnitz holds certifications including CISA, CRISC, CDPO, and PCIP.

“A SOC 3 is useful in demonstrating you have engaged a third-party firm to help your organization obtain SOC compliance,” he says. “However, a client or prospect looking to conduct thorough due diligence of your organization’s General Computer Controls (GCCs) will require a SOC 2 with supporting documentation (e.g., certificate of insurance, policies/standards, etc.) to help them gain comfort and understanding of your organization.”

Other SOC frameworks

In addition to SOC 1, SOC 2, and SOC 3, newer SOC reporting options address cybersecurity programs, supply chain risks, and multi-framework compliance. These reports enable businesses to meet the evolving demands of customers, regulators, and partners.

As the compliance landscape expands, the AICPA has introduced additional SOC reporting frameworks to address broader types of risk. These options may be relevant depending on your business model, industry, or customer base.

SOC 2 Plus

SOC 2 Plus is a tailored approach that enables companies to combine SOC 2 with additional compliance frameworks — such as HIPAA, HITRUST, ISO 27001, NIST CSF, or PCI DSS — into a single audit process. This can streamline evidence collection and reduce redundancy across overlapping standards.

At first glance, bundling frameworks through SOC 2+ seems like an efficient way to save time and money. In some cases, it is — especially when a company is already managing requirements across several regulatory or customer frameworks. However, this approach comes with tradeoffs.

“Bundling frameworks with SOC 2 Plus can make sense, but it can also add complexity and additional audit requirements,” says Elliott Harnagel, Product and Compliance Strategist at Strike Graph.

“One thing to keep in mind with SOC 2 Plus is that bundling controls from other frameworks into a SOC 2 Type 2 report subjects those other controls to SOC 2 Type 2 audit methodology. While sample testing is not widely used in ISO 27001 or NIST assessments, SOC 2 Type 2 audits require sample testing for many controls.”

For example, if you bundle ISO controls into your SOC 2 Plus report, those ISO controls must also be tested using SOC 2’s more rigorous sampling approach. This can result in more audit work, not less.

Harnagel adds, “The main value with a SOC 2 Plus is only having to gather evidence for one audit, and somewhat simplified work with control mappings.”

However, instead of bundling frameworks into a single SOC 2 report, he recommends using a GRC (Governance, Risk, and Compliance) platform for evidence collection, control mapping, and documentation.

Combined with an audit firm capable of assessing multiple frameworks, this approach can preserve efficiency while avoiding unnecessary complexity.

Who uses it: SaaS companies, managed service providers, and cloud vendors facing multiple or overlapping compliance obligations.

SOC for Cybersecurity

SOC for Cybersecurity provides a high-level assessment of your company’s enterprise-wide cybersecurity risk management program. Unlike SOC 1 and SOC 2, it’s not limited to service organizations or third-party vendors.

This report is useful if you want to:

• Demonstrate the strength of your cybersecurity program to investors, regulators, or board members
• Assure customers without tying it to a specific product or service
• Meet internal risk management or disclosure requirements

Who uses it: Public companies, critical infrastructure providers, and security-focused organizations seeking transparency at the corporate level.

SOC for Supply Chain

SOC for Supply Chain evaluates the integrity and security of your production and distribution systems. It’s designed for businesses that manufacture, assemble, or deliver goods and need to demonstrate control over third-party and upstream risks.

The audit examines how your company manages vendor oversight, product quality, delivery timelines, operational disruptions, and information security across the supply chain

Who uses it: Manufacturers, logistics companies, and critical suppliers in regulated or high-risk industries.

Which SOC report does your company need? 

If your company needs to demonstrate strong data protection practices, pursue a SOC 2. If you want a version of that report you can share publicly, add a SOC 3. If your services affect client financial reporting, start with a SOC 1.

The right SOC report depends on the type of services your company provides and what kind of assurance your clients or stakeholders require:

• Choose SOC 1 if your services impact clients’ financial statements, such as payroll processing, fund reconciliation, or claims administration.
  Choose SOC 2 if your company handles customer data and needs to show how you manage security, privacy, and system reliability
• Choose SOC 3 if you want a simplified, public-facing version of your SOC 2 audit to share with prospects, partners, or investors.
  
  

“Regardless of the audit report you choose to pursue, achieving SOC 1 or SOC 2 compliance is a valuable milestone in demonstrating organizational maturity,” Harnagel says.

“Internally, pursuing an audit can give a useful deadline and push to formalize internal processes and add organization around foundational security practices like access control, vendor management, and monitoring. Externally, having an audit report that can be provided to prospects and current customers can unlock revenue and help remove compliance or security-based roadblocks during the sales process.”

How to scale SOC compliance using external resources

You can scale SOC 1 and SOC 2 compliance by outsourcing technical tasks, such as monitoring, logging, and control testing, while maintaining strategy and ownership in-house. A hybrid approach helps reduce audit fatigue, accelerate timelines, and maintain a defensible compliance posture.

How to scale SOC 1 at your company

Scaling SOC 1 compliance requires strong documentation, repeatable control execution, and well-defined ownership across finance, operations, and IT. As your company grows, outsourcing and automation can help reduce audit fatigue and maintain consistent control performance.

Here are key strategies for scaling SOC 1:

• Standardize financial control procedures
  If you support multiple clients, create core templates for transaction approvals, reconciliations, and exception logs that can be adapted per engagement. This makes your audit prep faster and less error-prone.
• Automate control tracking where possible
  Use workflow tools or ticketing systems to automate control execution, like who approved a payment, when a reconciliation was completed, or which user accessed financial data. Automating this audit trail cuts manual effort and avoids missing evidence.
• Assign clear internal ownership
  As teams grow, ensure control owners are clearly defined—not just for execution, but also for evidence collection and responding to auditor requests.
• Document your IT and access controls early
  Although SOC 1 primarily focuses on financial reporting, most audits also include IT controls. Standardize policies for access, change management, and segregation of duties. This will also help if you pursue SOC 2 or ISO 27001 in the future.
• Consider third-party support for readiness and controls
  If your finance or IT team isn’t experienced in control frameworks, a readiness consultant or fractional compliance advisor can help structure controls, gather evidence, and interface with your auditor. This is especially useful for your first SOC 1 or when transitioning from Type I to Type II.

“SOC 1 reports are focused on internal controls over financial reporting (ICFR), and the control set is highly customized to the organization’s environment,” says Richard Stevenson, Director of Audit and Compliance at LJB CPA. “Because of this, a readiness assessment is strongly recommended to ensure the right controls are in place and appropriately scoped.”

Even when outsourcing financial processing (e.g., to a third-party payroll platform), you’re still responsible for showing that you monitor, review, and control how that vendor impacts your clients’ financial reporting.

How to scale SOC 2 at your company

Outsourcing parts of your SOC 2 preparation can help your company scale faster, save time, and avoid costly missteps. Many companies outsource specialized tasks — such as logging, monitoring, and incident response — to managed service providers while retaining control of their core strategy.

When companies begin preparing for a SOC 2 audit, a common question arises: What can we outsource — and what do we need to own?

For most organizations, the answer depends on internal expertise, deadlines, and audit readiness. While every company’s needs differ, several functions are consistently outsourced:

• Security logging and alerting
  Many companies rely on managed service providers (MSPs) to configure and monitor logging systems. These tools track suspicious activity and generate alerts — key audit evidence that systems are actively monitored.
• Intrusion detection and incident response
  If you lack in-house security staff, outsourcing these tasks allows for 24/7 coverage. Be sure your Incident Response Plan documents the MSP’s responsibilities, and ensure all incident actions are logged and accessible for auditors.
• Penetration testing and risk assessments
  Auditors often prefer third-party evaluations for high-risk areas. External firms bring objectivity, and their reports carry more weight than internal testing alone.
• Policy development and documentation
  Compliance platforms and consulting firms often offer pre-built templates for required policies — such as change management, access control, and vendor risk management — helping you jump-start documentation without starting from scratch.
  
  

Stevenson, director at LJB CPA, offers this guidance for companies considering SOC 2:
“SOC 2 compliance involves complex technical and procedural controls across domains like security, availability, and confidentiality. If your internal team lacks experience in areas like access control, encryption, vulnerability management, or incident response, it may be more efficient to outsource to specialists who can ensure controls are implemented correctly from the start.”

Even if you outsource execution, you’re still responsible for:

• Understanding how each control works
• Ensuring required evidence is accessible during the audit
• Maintaining oversight and accountability
  
  

Your company must guide the compliance strategy, even if third parties support implementation.

“Many successful companies choose a hybrid approach: maintaining ownership of core security processes while outsourcing specialized tasks like readiness assessments, policy development, or penetration testing,” Stevenson says. “This allows you to stay in control while benefiting from external expertise and scalability.”

Even with external support, internal preparation still matters. Before engaging a CPA firm, companies should conduct their own readiness exercise to understand the audit framework and define how their controls will be evaluated.

“You also need to understand that the SOC 2 criteria are not prescriptive,” says Chemnitz of 360 Advanced.  “There are very few ‘thou shalts.’  You need to understand the requirements, and you can craft the controls to be tested by the SOC assessor to meet those criteria.  If you do not have the bandwidth to support or the expertise internal to your organization, you can partner with an advisor to help prepare you and ensure your first attempt is straightforward and successful.”

When SOC outsourcing makes strategic sense

Stevenson identifies five key factors that can help determine whether outsourcing makes sense for your organization:

• Internal expertise
  If your team lacks hands-on experience with areas such as access control, encryption, or incident response, outsourcing can help you avoid costly mistakes. As Stevenson notes, “It may be more efficient to outsource to specialists who can ensure controls are implemented correctly from the start.”
• Time-to-compliance pressure
  If a prospective customer requires SOC 2 certification quickly, external support can accelerate your audit timeline. According to Stevenson, “Third-party compliance firms often have predefined templates, tools, and testing workflows that reduce ramp-up time and help you hit critical deadlines.”
• Objectivity and accountability
  Independent firms can enhance your audit posture, particularly in high-risk areas such as penetration testing and monitoring. “Auditors prefer when certain high-risk areas are validated externally,” Stevenson explains, “because it adds credibility and independence to the process.”
• Cost-benefit analysis
  While building everything in-house may seem cost-effective at first, the true cost includes ongoing training, documentation, and headcount. A hybrid model — outsourcing select functions while retaining strategic control — often balances cost and sustainability better over time.
• Scalability and operational maturity
  Early-stage companies often outsource heavily at the start. “As you grow, you can bring more functions in-house as your internal capabilities expand,” says Stevenson, emphasizing that outsourcing doesn’t have to be permanent.
  
  

SOC 1 and SOC 2 compliance readiness checklists

You can download our compliance checklists for SOC 1 and 2. They show the domains, controls, and descriptions to help you prepare for compliance.

Download the compliance checklists for SOC 1 and SOC 2 reports.

The Future of SOC readiness is here

Checklists are a great start, but they’re no substitute for having proactive compliance management software that utilizes AI to perform a framework gap analysis for you. Strike Graph’s AI-powered compliance management platform combines automation with agentic AI capabilities to help you identify gaps, streamline your audit preparation, and build a defensible compliance program.

Whether you're pursuing SOC 1, SOC 2, or SOC 2+, our GRC platform, which was purpose-built for AI, can help you avoid redundant audit work:

• Automates evidence collection from anywhere in your tech stack
• Quickly tests evidence against control requirements 
• Instantly assess what’s missing when adopting a standard
• Customize your findings to your actual tech stack and existing controls

Let’s make your first — or next — SOC report faster, smarter, and easier.  See how Strike Graph AI can make SOC compliance almost painless.

Smarter compliance starts with AI.

FAQs on SOC 1 vs. SOC 2 vs. SOC 3

Here are answers to frequently asked SOC questions.

• Why do customers ask for SOC 2 reports?
  SOC 2 reports are a standard requirement in vendor security reviews. As supply chain risks have increased, companies seek assurance that their partners have robust security measures in place. A SOC 2 report helps demonstrate that your organization meets a baseline level of control over data privacy, availability, and system security.
  
  
• What are the Trust Services Criteria for SOC 2?
  The Trust Services Criteria are a set of principles used to evaluate a company’s controls during a SOC 2 audit. They cover security, availability, processing integrity, confidentiality, and privacy. The framework is flexible — companies choose their own controls to meet these standardized criteria.
  
  Here are the SOC 2 criteria.
  
  
• When do I need both SOC 1 and SOC 2 reports?
  You may need both SOC 1 and SOC 2 reports if your customers want assurance over financial processes and data security. SOC 1 focuses on financial reporting controls, while SOC 2 addresses the protection of customer data and systems. Companies offering both transactional and data-driven services often need both.
  
  
• When should I just get a SOC 2 report?
  If your firm does not have significant financial reporting obligations, you do not need a SOC 1 report. Software firms and managed IT service providers are the most common types of companies that pursue SOC 2 attestation.
  
  
• Why do marketers want a SOC 3 report?
  Marketers request SOC 3 reports because they can be easily used as collateral on websites and in advertising. Because SOC 2 reports should not be shared publicly, it isn't easy to use them to drive marketing efforts.
  
  
• Is a SOC 3 report the same as a SOC 2 report?
  No. A SOC 3 report is a public-facing summary of a SOC 2 audit. It contains the same overall conclusions but omits sensitive details. SOC 2 reports are more detailed and confidential, typically shared under an NDA. You must complete a SOC 2 before issuing a SOC 3.
  
  
• Is SOC 2 or SOC 3 better?
  Neither is inherently better — they serve different purposes. SOC 2 provides detailed, confidential information for customers performing due diligence. SOC 3 is a simplified summary meant for public use. Companies often use SOC 2 for client reviews and SOC 3 for marketing or general trust-building.