SOC 1 vs SOC 2: Which Audit Does Your Company Actually Need in 2026?
Last quarter, a Series B fintech company came to us with a problem that was costing them roughly $1.2 million in stalled pipeline. Their prospects -- mid-market banks and credit unions -- kept asking for "a SOC report." The company's compliance lead interpreted that as SOC 2 and spent five months preparing. When the first prospect's vendor risk team reviewed the report, they sent back a single line: "We require a SOC 1 report covering controls relevant to our financial reporting. Please advise on timeline."
Five months. Tens of thousands of dollars in audit fees. Hundreds of engineering hours. Wrong report.
This is not an uncommon mistake. The naming convention -- SOC 1, SOC 2, SOC 3 -- implies a sequence, as if SOC 2 is simply a more advanced version of SOC 1. It is not. These are fundamentally different audits that evaluate different categories of controls for different audiences. Choosing the wrong one does not just waste money. It delays deals, frustrates prospects, and erodes the trust you were trying to build.
This guide will give you absolute clarity on the differences between SOC 1 and SOC 2, when you need each (or both), what they cost, how long they take, and a concrete decision framework so you never spend a dollar on the wrong audit.
What Is a SOC 1 Report?
A SOC 1 report (formally known as a SOC 1 report under the SSAE 18 standard, and historically as the SAS 70 report before 2011) is an audit report that evaluates a service organization's internal controls over financial reporting (ICFR). It is issued by a licensed CPA firm and governed by the American Institute of Certified Public Accountants (AICPA).
The critical phrase is "internal controls over financial reporting." A SOC 1 is not about your cybersecurity posture, your data privacy practices, or your system availability. It is specifically about whether your organization's controls could affect the accuracy and integrity of your clients' financial statements.
If a company outsources a process to you -- payroll processing, claims administration, loan servicing, payment processing, revenue recognition, pension fund management -- and that process feeds into their financial statements, their external auditor needs assurance that your controls are reliable. That assurance comes in the form of a SOC 1 report.
Who requests SOC 1 reports?
SOC 1 reports are not requested by procurement teams or IT security reviewers. They are requested by:
- Your clients' external auditors (the Big 4 or regional CPA firms auditing your client's financial statements)
- Your clients' internal audit teams responsible for Sarbanes-Oxley (SOX) compliance
- Financial controllers and CFOs at client organizations who need to document reliance on third-party service organizations
This is a key difference from SOC 2, where the request usually comes from InfoSec, procurement, or legal. SOC 1 requests come from the finance and audit side of the house.
What controls does a SOC 1 cover?
Unlike SOC 2, which has a standardized set of Trust Service Criteria, SOC 1 controls are custom-defined for each engagement. You and your auditor determine which controls are relevant to your clients' financial reporting. Common control areas include:
- Transaction processing accuracy and completeness
- Authorization and approval workflows for financial transactions
- Data input validation and error handling
- Reconciliation procedures between systems
- Segregation of duties in financial processing
- Access controls over financially sensitive systems and data
- Change management for systems that process financial data
- Backup and recovery procedures for financial records
The scope is narrower than SOC 2 in some ways (no requirement to cover availability, privacy, or broad cybersecurity) but deeper in others (auditors will test specific transaction-level controls with extensive sample testing).
SOC 1 Type 1 vs SOC 1 Type 2
Just like SOC 2, the SOC 1 framework has two report types:
SOC 1 Type 1 evaluates whether your controls are suitably designed as of a specific date. The auditor examines your control descriptions, tests that the controls exist, and issues an opinion on their design. It is a point-in-time assessment -- a snapshot.
SOC 1 Type 2 evaluates whether your controls were not only suitably designed but also operated effectively over a specified period, typically 6 to 12 months. The auditor performs extensive testing -- pulling transaction samples, examining audit trails, verifying that reconciliation procedures were actually performed on the dates they were supposed to be performed.
| Dimension | SOC 1 Type 1 | SOC 1 Type 2 |
|---|---|---|
| Evaluation scope | Design of controls | Design + operating effectiveness |
| Time frame | Point in time (single date) | Period of time (6-12 months) |
| Sample testing | Minimal -- walk-throughs and inquiries | Extensive -- 25-60 samples per control |
| Typical timeline to report | 4-8 weeks | 6-12 months (observation period + fieldwork) |
| Client auditor acceptance | Limited -- often only acceptable as interim | Widely accepted for financial statement reliance |
| Cost range | $20,000-$50,000 | $40,000-$100,000+ |
In practice, most clients' auditors require SOC 1 Type 2. A Type 1 may be acceptable for a first-year engagement or when a service organization is new, but it is generally considered a stepping stone. If your clients are publicly traded or SOX-regulated, their auditors will almost certainly require Type 2.
What Is a SOC 2 Report?
SOC 2 is an audit report that evaluates a service organization's controls over security, availability, processing integrity, confidentiality, and privacy -- the five Trust Service Criteria (TSCs) defined by the AICPA. Unlike SOC 1, which focuses on financial reporting controls, SOC 2 focuses on operational and security controls relevant to technology and data handling.
SOC 2 has become the de facto security standard for SaaS companies, cloud service providers, data processors, and any technology vendor that stores or processes customer data. When an enterprise prospect sends you a security questionnaire or asks "Do you have a SOC report?" in the context of evaluating your product's security, they almost always mean SOC 2.
We have written extensively about SOC 2 elsewhere on this site. For a comprehensive deep dive, see our Complete SOC 2 Compliance Guide and our SOC 2 Compliance page. Rather than duplicate that content here, we will focus on the aspects of SOC 2 that matter most for comparison with SOC 1.
The key points for this comparison:
- SOC 2 uses standardized criteria (the Trust Service Criteria), unlike SOC 1's custom control set
- SOC 2 is requested by InfoSec, procurement, and legal teams at your prospects, not by their auditors
- SOC 2 covers cybersecurity, data handling, and operational resilience, not financial reporting accuracy
- SOC 2 also comes in Type 1 (point-in-time) and Type 2 (period-of-time) variants
- SOC 2 Type 2 is the market standard for enterprise SaaS sales in 2026
SOC 1 vs SOC 2: The Core Differences
This is the section most people come to this article for. Here is a detailed, side-by-side comparison covering every dimension that matters.
| Dimension | SOC 1 | SOC 2 |
|---|---|---|
| Full name | System and Organization Controls 1 | System and Organization Controls 2 |
| Governing standard | SSAE 18 (AT-C Section 320) | SSAE 18 (AT-C Section 205) |
| Primary focus | Internal controls over financial reporting (ICFR) | Security, availability, processing integrity, confidentiality, privacy |
| Control framework | Custom -- defined per engagement | Standardized -- AICPA Trust Service Criteria |
| Who requests it | Client auditors, internal audit, finance/CFO teams | InfoSec, procurement, legal, vendor risk teams |
| Why they request it | Financial statement audit reliance | Vendor security evaluation and due diligence |
| Typical requesting industries | Banking, insurance, financial services, pension funds | SaaS, cloud, healthcare IT, fintech, any data processor |
| Report types | Type 1 (design) and Type 2 (design + effectiveness) | Type 1 (design) and Type 2 (design + effectiveness) |
| Observation period (Type 2) | 6-12 months | 3-12 months (6-12 typical) |
| Who performs the audit | Licensed CPA firm | Licensed CPA firm |
| Report distribution | Restricted -- shared under NDA with user auditors | Restricted -- shared under NDA with prospects/customers |
| Scope of controls tested | Financial transaction processing, reconciliation, authorization, segregation of duties | Access controls, encryption, monitoring, incident response, change management, vendor management |
| Overlap with SOX compliance | Direct -- SOC 1 is a core component of SOX ICFR reliance | Indirect -- SOC 2 may support SOX IT general controls |
| Overlap with HIPAA | Minimal | Significant -- many SOC 2 controls map to HIPAA safeguards |
| Overlap with ISO 27001 | Minimal | Substantial -- approximately 70% control mapping |
| Typical auditor fee (Type 2) | $40,000-$100,000+ | $20,000-$70,000 |
| Total first-year cost | $60,000-$200,000 | $50,000-$300,000 (includes remediation labor) |
| Annual renewal cost | $35,000-$80,000 | $25,000-$60,000 |
The fundamental distinction: SOC 1 answers the question, "Can we rely on this vendor's controls when auditing our own financial statements?" SOC 2 answers the question, "Is this vendor's security posture trustworthy enough to handle our data?"
These are not interchangeable. A SOC 2 report, no matter how comprehensive, does not satisfy a client auditor's requirement for SOC 1 assurance over financial reporting controls. And a SOC 1 report does not tell a prospect's InfoSec team whether your platform encrypts data at rest or has an incident response plan.
When You Need SOC 1
You need a SOC 1 report when your services directly affect your clients' financial statements. Here are the most common scenarios:
1. Payroll processing
If you process payroll on behalf of other companies, every payroll run generates journal entries in your clients' general ledgers -- salary expense, tax withholding liabilities, benefit deductions, employer tax contributions. Your clients' auditors need assurance that your payroll calculations are accurate, that tax withholdings are correct, that direct deposits are authorized, and that your reconciliation procedures catch errors. Companies like ADP, Paychex, and Gusto all maintain SOC 1 reports.
2. Payment processing and merchant services
Payment processors handle transaction authorization, settlement, and fund transfers that flow directly into clients' revenue, accounts receivable, and cash accounts. Stripe, Square, and Adyen all maintain SOC 1 reports because their clients' auditors need assurance over transaction processing accuracy.
3. Claims administration (insurance)
Third-party claims administrators process insurance claims that directly affect an insurer's loss reserves, claims expense, and balance sheet liabilities. Auditors of insurance companies rely heavily on TPAs' SOC 1 reports.
4. Loan servicing and mortgage processing
Loan servicers manage payment collection, interest calculation, escrow administration, and default processing -- all of which feed directly into the financial statements of banks and mortgage companies that originated the loans.
5. Fund administration and custody
Companies that calculate net asset values (NAV), process subscriptions and redemptions, or hold assets in custody for investment funds are classic SOC 1 candidates. The fund's auditor cannot issue a clean opinion on the fund's financial statements without reliance on the administrator's controls.
6. Revenue recognition and billing platforms
If your SaaS platform handles invoicing, subscription billing, revenue recognition, or accounts receivable management for clients, those outputs flow directly into their financial statements. Think of billing platforms like Zuora, Chargebee, or Recurly -- their enterprise clients' auditors often require SOC 1 reports.
The litmus test for SOC 1
Ask yourself this question: If your system produced an incorrect output, would it cause a material misstatement in your client's financial statements?
If the answer is yes, you likely need a SOC 1.
When You Need SOC 2
You need a SOC 2 report when your prospects and customers are evaluating the security, availability, and data handling practices of your organization. The request usually comes during the sales cycle, not from an auditor but from the prospect's InfoSec, procurement, or legal team.
1. SaaS companies selling to enterprise buyers
This is the most common SOC 2 use case. If you sell software that stores, processes, or transmits customer data, enterprise buyers will require a SOC 2 report as part of vendor due diligence. In 2026, SOC 2 Type 2 is a non-negotiable requirement for most enterprise deals above $50,000 ACV.
2. Cloud infrastructure and managed service providers
If you provide hosting, infrastructure, or managed IT services, your customers need assurance that your operational and security controls meet a baseline standard. AWS, Google Cloud, and Azure all maintain SOC 2 reports -- and their customers expect the same from smaller providers.
3. Healthcare technology vendors
While HIPAA is the regulatory baseline for healthcare data, SOC 2 is increasingly expected in addition to HIPAA compliance. Many healthcare enterprise buyers require both a BAA and a SOC 2 report. See our Complete SOC 2 Compliance Guide for details on how SOC 2 and HIPAA work together.
4. Data analytics and AI platforms
Companies that process, analyze, or store sensitive data on behalf of clients -- customer analytics platforms, AI/ML services, data warehousing providers -- face growing SOC 2 requirements as data privacy and security concerns intensify.
5. Any company handling sensitive customer data
If you store PII, PHI, financial data, or other sensitive information for clients, expect SOC 2 to come up in every enterprise sales conversation.
The litmus test for SOC 2
Ask yourself this question: Do your prospects' security or procurement teams need assurance about how you protect their data?
If the answer is yes, you need a SOC 2. For most technology companies in 2026, the answer is yes.
When You Need Both SOC 1 AND SOC 2
Some companies genuinely need both reports. This is more common than many realize, and the cost of maintaining both is significant -- so it is worth understanding exactly when dual reporting is necessary.
Scenario 1: Fintech and payment platforms
A payment processing company handles financial transactions (SOC 1 territory) and stores sensitive cardholder and merchant data (SOC 2 territory). Their bank clients' auditors require SOC 1. Their SaaS clients' InfoSec teams require SOC 2. Both requirements are legitimate, and neither report satisfies the other.
Scenario 2: Payroll and HR SaaS
A modern payroll platform like Rippling or Deel processes payroll (SOC 1) and stores sensitive employee PII, benefits data, and compliance documentation (SOC 2). Banks and large enterprises that use the platform require SOC 1 for their financial statement audits. Technology companies that use the same platform require SOC 2 for their vendor security reviews.
Scenario 3: Financial data aggregation
Companies that aggregate financial data -- think Plaid, Finicity, or Yodlee -- both process financial information that affects their clients' reporting (SOC 1) and handle massive volumes of sensitive consumer financial data (SOC 2).
Scenario 4: Insurance technology platforms
InsurTech companies that handle claims processing, underwriting calculations, or policy administration often need SOC 1 for their insurance carrier clients and SOC 2 for the broader technology platform security evaluation.
How to manage dual SOC reporting efficiently
If you need both, the good news is that there is significant overlap in the audit process:
- Use the same auditor for both reports. Most CPA firms that perform SOC 1 audits also perform SOC 2 audits. Running both engagements with the same firm reduces coordination overhead, allows shared walkthroughs, and often results in a 15-25% cost reduction versus using two separate firms.
- Align observation periods. Run both SOC 1 Type 2 and SOC 2 Type 2 over the same 12-month period so that fieldwork can overlap.
- Identify shared controls. Access controls, change management, backup procedures, and incident response processes are often relevant to both reports. Document them once, test them once (where possible), and reference the same evidence in both engagements.
- Use a single GRC platform. Managing two separate audit evidence packages in spreadsheets is a recipe for errors and audit fatigue. A platform like QuickTrust can centralize evidence collection and map controls to both SOC 1 and SOC 2 requirements simultaneously.
Expected cost for dual reporting (Year 1): $100,000-$300,000, depending on complexity. This is not double the cost of a single report, because of the control overlap -- typically 40-60% more than a single report.
SOC 1 vs SOC 2 Cost Comparison
Cost is one of the most common questions we receive, and the honest answer is that both audits are significant investments. Here is a transparent breakdown.
SOC 1 Cost Breakdown (2026)
| Cost Component | Type 1 | Type 2 |
|---|---|---|
| Auditor fees (mid-tier CPA firm) | $20,000-$50,000 | $40,000-$100,000 |
| Auditor fees (Big 4) | $50,000-$120,000 | $80,000-$200,000 |
| Control documentation and mapping | $10,000-$25,000 (labor) | $10,000-$25,000 (labor) |
| Remediation and implementation | $15,000-$40,000 | $15,000-$40,000 |
| GRC platform | $0-$15,000/year | $0-$15,000/year |
| Total Year 1 (mid-tier) | $45,000-$130,000 | $65,000-$180,000 |
SOC 2 Cost Breakdown (2026)
| Cost Component | Type 1 | Type 2 |
|---|---|---|
| Auditor fees (mid-tier CPA firm) | $15,000-$35,000 | $25,000-$60,000 |
| Auditor fees (Big 4) | $35,000-$80,000 | $60,000-$120,000 |
| Engineering remediation labor | $30,000-$80,000 | $40,000-$100,000 |
| GRC platform | $0-$15,000/year | $0-$15,000/year |
| Penetration test | $10,000-$25,000 | $10,000-$25,000 |
| Policy and documentation | $5,000-$15,000 | $5,000-$15,000 |
| Total Year 1 (mid-tier) | $60,000-$170,000 | $90,000-$215,000 |
Why SOC 1 auditor fees are often higher
SOC 1 audits tend to have higher auditor fees because of the depth of transaction testing required. In a SOC 2 Type 2 audit, the auditor samples evidence of control operation -- access reviews completed, monitoring alerts acknowledged, change tickets approved. In a SOC 1 Type 2 audit, the auditor samples actual financial transactions, traces them through your system, and verifies calculation accuracy. This is more labor-intensive and requires auditors with specific financial reporting expertise.
However, SOC 2 often has higher total cost because the remediation effort is typically larger. SOC 2 controls span your entire technology stack -- cloud infrastructure, CI/CD pipelines, endpoint management, identity systems, monitoring platforms -- whereas SOC 1 controls focus on the specific systems and processes that handle financial data.
How to reduce costs for either audit
- Use a compliance automation platform to reduce evidence collection labor by 60-80%. QuickTrust's open-source GRC platform automates evidence gathering and maps controls to both SOC 1 and SOC 2 requirements.
- Start with the right scope. Over-scoping is the most common source of cost overruns. Include only the systems and controls that are genuinely in scope for your clients' needs.
- Choose a specialized auditor. Mid-tier and boutique firms that specialize in SOC audits are typically 40-60% less expensive than Big 4 firms, with comparable report quality for most companies.
- Run readiness assessments before the formal audit. A $5,000-$10,000 readiness assessment can prevent $30,000-$50,000 in re-remediation costs.
SOC 1 vs SOC 2 Timeline Comparison
Understanding the timeline is critical for planning, especially when a client or prospect is waiting on your report.
SOC 1 Timeline
| Phase | Duration | Details |
|---|---|---|
| Scoping and planning | 2-4 weeks | Define control objectives with auditor; identify systems in scope |
| Control documentation | 3-6 weeks | Document control descriptions, process narratives, flowcharts |
| Remediation (if needed) | 4-12 weeks | Fix gaps identified during planning and documentation |
| Type 1 fieldwork | 2-4 weeks | Auditor performs walk-throughs and design testing |
| Type 1 report issuance | 2-3 weeks | Report drafting, management review, final issuance |
| Total for Type 1 | 3-6 months | From engagement to report |
| Type 2 observation period | 6-12 months | Controls must operate continuously during this period |
| Type 2 fieldwork | 3-6 weeks | Extensive sample testing during and after observation period |
| Type 2 report issuance | 2-4 weeks | Report drafting, management review, final issuance |
| Total for Type 2 | 9-18 months | From engagement to report |
SOC 2 Timeline
| Phase | Duration | Details |
|---|---|---|
| Scoping and planning | 1-3 weeks | Select Trust Service Criteria; define system boundaries |
| Readiness assessment | 2-4 weeks | Gap analysis against TSC requirements |
| Remediation and implementation | 4-12 weeks | Implement controls, configure monitoring, write policies |
| Type 1 fieldwork | 2-4 weeks | Auditor tests control design |
| Type 1 report issuance | 2-3 weeks | Report drafting and issuance |
| Total for Type 1 | 2-5 months | From engagement to report |
| Type 2 observation period | 3-12 months | Minimum 3 months; 6-12 months is standard |
| Type 2 fieldwork | 2-5 weeks | Sample testing of control operation |
| Type 2 report issuance | 2-3 weeks | Report drafting and issuance |
| Total for Type 2 | 6-15 months | From engagement to report |
Key timeline differences
SOC 1 timelines tend to be slightly longer than SOC 2 for two reasons:
-
Control documentation is more complex. SOC 1 requires detailed process narratives and flowcharts for each financial process in scope. These take time to create, especially if your processes have not been formally documented before.
-
Observation periods are typically longer. While SOC 2 Type 2 has a minimum 3-month observation period (though 6-12 months is standard), SOC 1 Type 2 observation periods are almost always 6-12 months. Client auditors generally will not accept a SOC 1 covering less than 6 months.
The fastest path for either report: Work with an implementation partner like QuickTrust that can accelerate the pre-audit phases. Companies that use QuickTrust's Certification Fast Track program typically complete SOC 2 Type 1 in 6-10 weeks and significantly compress the pre-observation preparation for Type 2.
What About SOC 3? When Does It Make Sense?
SOC 3 is the lesser-known sibling, and it serves a distinctly different purpose.
A SOC 3 report is essentially a public-facing summary of a SOC 2 Type 2 report. It contains the auditor's opinion on whether your controls met the Trust Service Criteria, but it does not include the detailed control descriptions, test results, or exceptions that a SOC 2 report contains.
Key characteristics of SOC 3
- Publicly distributable. Unlike SOC 1 and SOC 2 reports, which are shared under NDA, a SOC 3 can be posted on your website, included in marketing materials, and shared freely.
- Based on SOC 2 Type 2. You cannot get a SOC 3 without completing a SOC 2 Type 2 audit first. The SOC 3 is produced from the same engagement.
- No detailed control descriptions. The report includes the auditor's opinion and a description of the system, but not the granular control testing details.
- Minimal incremental cost. Since it is produced from the same audit as SOC 2 Type 2, the additional cost for a SOC 3 is typically $2,000-$5,000.
When SOC 3 makes sense
Use SOC 3 when you need public proof of compliance without sharing proprietary details. Specific scenarios:
- Marketing and trust signals. You want to display a compliance badge or statement on your website without sharing your full SOC 2 report publicly.
- Broad distribution to non-technical stakeholders. Some prospects want quick validation without reading a 100-page report. A SOC 3 summary gives them the auditor's opinion upfront.
- Marketplace listings. If you sell through platforms like AWS Marketplace, Salesforce AppExchange, or similar, a SOC 3 can be attached to your listing as a trust signal.
- Self-service sales motions. For low-ACV, high-volume sales where prospects do not go through formal procurement, a publicly available SOC 3 removes friction.
When SOC 3 does NOT make sense
SOC 3 will not satisfy enterprise procurement teams, vendor risk management programs, or any buyer that performs substantive security reviews. These teams need the full SOC 2 report with detailed control descriptions and test results. SOC 3 is a marketing tool, not a compliance tool.
There is no SOC 1 equivalent of SOC 3. SOC 1 reports are always restricted-use documents shared only with management and user auditors.
SOC 1 vs SOC 2 vs SOC 3: Quick Reference
| Dimension | SOC 1 | SOC 2 | SOC 3 |
|---|---|---|---|
| Focus | Financial reporting controls | Security and operational controls | Same as SOC 2 (summary) |
| Distribution | Restricted (NDA) | Restricted (NDA) | Public |
| Detail level | Full control descriptions + test results | Full control descriptions + test results | Summary opinion only |
| Report types | Type 1, Type 2 | Type 1, Type 2 | Based on Type 2 only |
| Primary audience | Client auditors, finance teams | InfoSec, procurement, legal | Marketing, public trust |
| Standalone value | Yes | Yes | No -- requires SOC 2 Type 2 first |
| Typical cost (incremental) | N/A | N/A | $2,000-$5,000 on top of SOC 2 Type 2 |
How to Decide: A Decision Framework
If you are still unsure which report you need, work through this decision tree. It takes less than two minutes and will give you a clear answer.
Step 1: Who is asking for the report?
If the request comes from your client's external auditor, internal audit team, or CFO/controller --> You likely need SOC 1. These stakeholders are concerned with financial statement reliability, not general cybersecurity.
If the request comes from a prospect's InfoSec team, procurement department, or legal team --> You likely need SOC 2. These stakeholders are evaluating your security posture as part of vendor due diligence.
If both types of stakeholders are asking --> You may need both. Continue to Step 2.
Step 2: What does your service do for your clients?
If your service processes financial transactions, calculates financial figures, or generates outputs that feed into your clients' financial statements --> SOC 1 is required for those clients.
If your service stores, processes, or transmits client data but does NOT directly affect their financial reporting --> SOC 2 is the right report.
If your service does both (e.g., you process payments AND store sensitive data) --> You likely need both SOC 1 and SOC 2.
Step 3: What industry are your clients in?
START HERE: What industry are your primary clients in?
|
+--> Banking, Insurance, Financial Services
| |
| +--> Does your service process their financial transactions?
| |
| +--> YES --> SOC 1 required (likely Type 2)
| | Also consider: Do they also need security assurance? --> Add SOC 2
| |
| +--> NO --> SOC 2 likely sufficient
| (But confirm with client -- financial services often requires both)
|
+--> SaaS / Technology / Cloud
| |
| +--> SOC 2 required (Type 2 for enterprise deals)
| SOC 1 NOT typically required unless you process financial data
|
+--> Healthcare
| |
| +--> SOC 2 + HIPAA compliance required
| SOC 1 only if you process financial/billing data for healthcare payers
|
+--> Government / Public Sector
| |
| +--> SOC 2 likely required
| Consider FedRAMP or StateRAMP depending on data sensitivity
| SOC 1 only if processing government financial data
|
+--> Pension / Retirement / Fund Administration
| |
| +--> SOC 1 required (almost certainly Type 2)
| SOC 2 may also be requested for data security assurance
|
+--> E-commerce / Retail
|
+--> SOC 2 for data security assurance
PCI DSS if handling cardholder data
SOC 1 only if you manage their financial/billing systems
Step 4: Validate with your clients
After working through the framework above, confirm with your most important clients or prospects. Ask them directly:
- "Our compliance team is planning our audit roadmap. Can you confirm whether your team requires a SOC 1, SOC 2, or both?"
- "If you require SOC 1, can you share the specific control objectives your auditor needs us to address?"
This five-minute conversation can save you six months and tens of thousands of dollars.
Common Mistakes Companies Make Choosing Between SOC 1 and SOC 2
After working with hundreds of companies navigating SOC compliance, we see the same mistakes repeatedly. Here are the most costly ones.
Mistake 1: Assuming SOC 2 covers everything SOC 1 does
This is the most common and most expensive mistake. A company gets SOC 2 certified, confident they have "the SOC report," and then a major client's auditor rejects it because they need SOC 1 assurance over financial reporting controls. SOC 2 and SOC 1 evaluate different control sets for different purposes. One does not substitute for the other.
Mistake 2: Getting SOC 1 when you actually need SOC 2
The reverse mistake is less common but still happens, particularly with companies founded in regulated industries that have historically provided SOC 1 reports to bank clients. When they start selling to SaaS and technology companies, those buyers want SOC 2 -- and the SOC 1 report does not satisfy the requirement.
Mistake 3: Over-scoping the SOC 1 engagement
SOC 1 controls should be limited to those relevant to your clients' financial reporting. Some companies (and some auditors) include controls that are tangentially related or not relevant at all, inflating the scope, cost, and duration of the audit. Before finalizing scope, ask: "Would a failure of this control cause a material misstatement in our client's financial statements?" If the answer is no, it likely does not belong in your SOC 1.
Mistake 4: Under-scoping the SOC 2 engagement
On the SOC 2 side, the opposite problem is common. Companies include only the Security (Common Criteria) Trust Service Criteria to minimize scope and cost. But if your product has uptime SLAs (Availability), processes transactions (Processing Integrity), or handles regulated personal data (Privacy), omitting those criteria makes your report incomplete in the eyes of sophisticated buyers.
Mistake 5: Starting with Type 2 when Type 1 would unblock deals now
For both SOC 1 and SOC 2, a Type 1 report can be delivered in 2-5 months. A Type 2 requires 6-18 months. If you have deals stalled today, getting a Type 1 report now -- while simultaneously starting your Type 2 observation period -- is almost always the right strategy. Do not let perfect be the enemy of good.
Mistake 6: Using different auditors for SOC 1 and SOC 2
If you need both reports, using two different CPA firms doubles your coordination overhead, duplicates walk-throughs and evidence requests, and eliminates any cost efficiencies from shared controls. Use the same firm for both engagements whenever possible.
Mistake 7: Treating SOC compliance as a one-time project
Both SOC 1 and SOC 2 require annual re-examination. If you implement controls, pass the audit, and then let controls lapse, your next report will include exceptions that erode client trust. Build continuous compliance into your operations from day one.
Frequently Asked Questions
Is SOC 1 harder than SOC 2?
Neither is inherently "harder" -- they test different things. SOC 1 requires deep knowledge of your financial processing workflows and detailed transaction-level documentation, which can be challenging if those processes have never been formally mapped. SOC 2 requires a broad security infrastructure (access controls, encryption, monitoring, incident response, vendor management) that may require significant engineering investment. For technology companies, SOC 2 typically involves more remediation work. For financial services companies with mature financial processes, SOC 1 documentation is often straightforward but the audit testing is intensive.
Can a SOC 2 report satisfy a SOC 1 requirement?
No. A SOC 2 report evaluates security and operational controls. It does not evaluate internal controls over financial reporting. A client auditor who needs SOC 1 assurance will not accept a SOC 2 report, regardless of how comprehensive it is. The reverse is also true -- a SOC 1 report does not satisfy InfoSec teams requesting SOC 2.
Do I need SOC 1 if I am a SaaS company?
Most SaaS companies only need SOC 2. You would need SOC 1 only if your SaaS product processes financial data that feeds into your clients' financial statements -- for example, if you provide billing, accounting, payroll, revenue recognition, or financial reporting functionality. A project management tool, CRM, or marketing platform would not typically need SOC 1.
How long does a SOC 1 audit take?
For Type 1: 3-6 months from engagement to report. For Type 2: 9-18 months, because the observation period (during which your controls must operate effectively) is typically 6-12 months, followed by fieldwork and report issuance. Planning should start at least 12 months before you need your first SOC 1 Type 2 report.
Can I do SOC 1 and SOC 2 at the same time?
Yes, and this is recommended if you need both. Running dual engagements with the same CPA firm allows you to share evidence, align observation periods, and reduce total cost by 15-25%. Your auditor can coordinate fieldwork to minimize disruption to your team.
What is the difference between SOC 1 and SSAE 18?
SSAE 18 (Statement on Standards for Attestation Engagements No. 18) is the overarching attestation standard under which SOC 1 reports are issued. Think of SSAE 18 as the rulebook and SOC 1 as the specific type of examination performed under that rulebook. SSAE 18 replaced SSAE 16 in 2017, which itself replaced SAS 70 in 2011. If someone asks for an "SSAE 18 report," they are almost certainly asking for a SOC 1.
Is SOC 1 required for SOX compliance?
SOC 1 is not required by SOX itself, but it is a critical tool for SOX compliance. When a publicly traded company outsources a process to a service organization, its auditors need to evaluate the service organization's controls over financial reporting. A SOC 1 report provides that assurance. Without it, the company's auditor may need to perform their own testing of the service organization's controls -- which is far more expensive and disruptive.
How often do I need to renew my SOC 1 or SOC 2?
Both SOC 1 and SOC 2 reports are issued annually. There is no formal "renewal" -- you undergo a new audit each year. Clients and their auditors expect a current report (typically dated within the last 12 months). Letting your report lapse signals to clients that compliance is not a priority, which can trigger security reviews and potentially jeopardize the relationship.
Get Audit-Ready in 6-10 Weeks with QuickTrust
Whether you need SOC 1, SOC 2, or both, the preparation process does not have to consume your team for months. QuickTrust's Certification Fast Track program combines AI-powered compliance automation with hands-on implementation by experienced engineers who build and configure your controls -- so your internal team can stay focused on product and revenue.
Here is what that looks like in practice:
- Week 1-2: Scoping and gap assessment. We identify exactly which report(s) you need, define the control objectives, and map your current state against requirements.
- Week 3-6: Control implementation and remediation. Our engineers implement the controls -- configuring your cloud infrastructure, writing policies, setting up monitoring, and building the evidence collection pipeline.
- Week 6-8: Audit readiness testing. We perform an internal readiness assessment against your auditor's criteria, close any remaining gaps, and prepare your evidence package.
- Week 8-10: Auditor engagement. We coordinate with your CPA firm, manage the fieldwork process, and ensure a clean report with no surprises.
For SOC 2 Type 1, most companies are audit-ready within 6-10 weeks. For SOC 1 Type 1, timelines are similar. For Type 2 engagements, we compress the pre-observation preparation so your observation period starts as early as possible -- and we provide continuous monitoring throughout to ensure no control gaps develop during the observation window.
100% first-time pass rate across all engagements. No re-remediation. No audit surprises. No wasted months.
Learn how QuickTrust can accelerate your SOC 1 or SOC 2 compliance -- or talk to our team to determine exactly which audit your company needs.