SOC Reports Explained: What Is SOC and What Are the Different Types of SOC Reports?
In today’s digital business environment, organizations increasingly rely on cloud platforms, SaaS applications, IT service providers, data processors, and third-party vendors to deliver critical services. As businesses become more interconnected, customers and stakeholders want greater assurance that their information is being protected and that important business processes are operating effectively.
This is where SOC reports come into the picture.
SOC, or System and Organization Controls, is a framework of reporting services designed to provide assurance about controls implemented by service organizations. SOC reports can help organizations demonstrate that they have appropriate controls in place to address areas such as financial reporting, information security, availability, confidentiality, privacy, and processing integrity.
Among the different SOC reports, SOC 2 has become particularly important for technology companies, SaaS providers, cloud service providers, and organizations handling sensitive customer information.
But what exactly is SOC? What are the different types of SOC reports? And which report is appropriate for your organization?
This guide explains the major SOC reports, their purpose, differences, benefits, and how businesses can prepare for a SOC examination.
What Is SOC?
SOC stands for System and Organization Controls. SOC reporting provides independent assurance over controls maintained by a service organization.
SOC reports are especially relevant to organizations that provide services to other businesses. For example, a cloud provider may host customer data, a SaaS company may process business information, or an outsourced IT provider may manage critical technology infrastructure.
Customers often need confidence that these service providers have appropriate controls to protect information and operate their services reliably.
A SOC examination evaluates controls against specific criteria depending on the type of SOC engagement.
It is important to understand that SOC is not a single certification. Different SOC reports serve different purposes, and the appropriate report depends on the nature of the services, risks, customers, and controls being evaluated.
What Is a SOC Report?
A SOC report is an independent examination report that provides information about an organization’s controls.
The report is generally prepared following an examination conducted by an independent licensed CPA firm or other qualified service auditor, depending on the applicable requirements.
The purpose of the report is to provide customers, management, and other authorized users with assurance about relevant controls.
For example, a technology company may use a SOC 2 report to demonstrate that it has controls addressing security and other applicable Trust Services Criteria.
A SOC report can therefore become an important part of a company’s vendor due diligence and customer assurance process.
What Are the Different Types of SOC Reports?
The SOC family includes several types of reports designed for different purposes. The most commonly discussed are:
- SOC 1
- SOC 2
- SOC 3
- SOC for Cybersecurity
- SOC for Supply Chain
Among these, SOC 1 and SOC 2 are particularly relevant to many service organizations.
Let’s look at each type.
-
SOC 1 Report
A SOC 1 report focuses on controls that are relevant to a customer’s internal control over financial reporting.
SOC 1 is particularly relevant when a service organization’s activities can affect the financial reporting of its customers.
For example, organizations providing outsourced services related to payroll processing, transaction processing, financial systems, or other services that could affect financial reporting may require a SOC 1 examination.
The primary question is:
Do the service organization’s controls support reliable financial reporting for its customers?
SOC 1 reports are therefore different from SOC 2 reports, which focus on broader information and operational controls.
SOC 1 Type 1 vs Type 2
SOC 1 can generally be issued as:
Type 1: Evaluates the design and implementation of controls at a specific point in time.
Type 2: Evaluates the design, implementation, and operating effectiveness of controls over a specified period.
This distinction between Type 1 and Type 2 is also important when discussing SOC 2.
-
SOC 2 Report
SOC 2 is one of the most important SOC reports for technology and service organizations.
SOC 2 evaluates controls against the Trust Services Criteria, which include:
- Security
- Availability
- Processing Integrity
- Confidentiality
- Privacy
Security is commonly applicable to SOC 2 examinations, while the other criteria are included based on the organization’s services and objectives.
SOC 2 is particularly relevant for:
- SaaS companies
- Cloud service providers
- IT service providers
- Data processing organizations
- Managed service providers
- Technology companies
- FinTech organizations
- Healthcare technology companies
- Organizations handling customer information
A SOC 2 report can provide customers with greater confidence that an organization’s controls address relevant risks.
SOC 2 Type 1
A SOC 2 Type 1 report evaluates whether relevant controls are suitably designed and implemented as of a specified date.
It provides a point-in-time view of the organization’s control environment.
This can be useful for organizations that are establishing their compliance program and want to demonstrate that appropriate controls have been designed and implemented.
SOC 2 Type 2
A SOC 2 Type 2 report goes further by evaluating the operating effectiveness of controls over a defined period.
Instead of only asking whether controls are appropriately designed, the examination provides evidence regarding whether those controls operated effectively during the examination period.
This makes SOC 2 Type 2 particularly valuable to customers looking for evidence of an organization’s ongoing control effectiveness.
Because of its depth, SOC 2 Type 2 preparation generally requires organizations to maintain appropriate policies, procedures, technical controls, records, monitoring activities, and evidence over time.
- SOC 3 Report
A SOC 3 report is also based on the Trust Services Criteria but is designed for general use.
Unlike a SOC 2 report, which contains detailed information intended for specific users, SOC 3 reports can generally be distributed more broadly.
This makes SOC 3 useful for organizations that want to publicly demonstrate that they have undergone an independent examination without disclosing the detailed control information contained in a SOC 2 report.
For example, an organization may use a SOC 3 report or related public-facing information as part of its website, sales material, or customer assurance strategy.
- SOC for Cybersecurity
SOC for Cybersecurity is designed to provide information and assurance regarding an organization’s cybersecurity risk management program.
Cybersecurity has become a major concern for organizations across industries because cyber incidents can affect operations, customers, finances, and reputation.
A SOC for Cybersecurity engagement can help communicate information about an organization’s cybersecurity risk management efforts to relevant stakeholders.
It is different from SOC 2 because SOC 2 focuses on controls related to applicable Trust Services Criteria, whereas SOC for Cybersecurity is specifically designed around cybersecurity risk management.
- SOC for Supply Chain
Modern organizations depend heavily on third-party suppliers and service providers.
A weakness in a supplier’s environment can potentially create risks for the organization and its customers.
SOC for Supply Chain is designed to provide information about controls over risks associated with supply chain activities.
It can be relevant to organizations that need greater transparency regarding controls related to their supply chain and third-party relationships.
SOC 1 vs SOC 2 vs SOC 3
Although these reports are part of the SOC family, they serve different purposes.
| SOC Report | Primary Focus | Typical Use |
| SOC 1 | Controls relevant to financial reporting | Financial and transaction-related service providers |
| SOC 2 | Security and other applicable Trust Services Criteria | SaaS, cloud and technology service providers |
| SOC 3 | Trust Services Criteria with general-use reporting | Public assurance and marketing |
| SOC for Cybersecurity | Cybersecurity risk management | Organizations demonstrating cybersecurity risk management |
| SOC for Supply Chain | Supply chain risk and controls | Organizations managing supply chain risks |
Choosing the appropriate SOC engagement depends on the organization’s services, customer expectations, risks, and control objectives.
SOC 2 Type 1 vs Type 2: What’s the Difference?
One of the most common questions organizations ask is whether they should pursue SOC 2 Type 1 or Type 2.
The primary difference is the period evaluated.
SOC 2 Type 1 provides an assessment of controls at a specific point in time.
SOC 2 Type 2 evaluates the operating effectiveness of controls over a defined period.
For organizations that need to demonstrate sustained control effectiveness to enterprise customers, SOC 2 Type 2 is often particularly valuable.
However, the right approach depends on the organization’s maturity, customer requirements, compliance objectives, and readiness.
What Are the Benefits of SOC Reporting?
SOC reporting can provide several business benefits.
- Builds Customer Trust
Customers want assurance that their data and services are being handled securely. An independent SOC report can provide evidence supporting that assurance.
- Supports Enterprise Sales
Large organizations often conduct extensive vendor due diligence before signing contracts. A relevant SOC report can help address customer security and compliance requirements.
- Strengthens Internal Controls
Preparing for a SOC examination encourages organizations to formalize policies, procedures, access controls, monitoring, risk management, incident response, and other activities.
- Improves Vendor Assurance
SOC reports can also help organizations demonstrate that risks associated with their services and operations are being appropriately addressed.
- Provides Competitive Advantage
For technology companies competing in global markets, demonstrating a mature control environment can help differentiate their services.
How to Prepare for a SOC Examination
Organizations should avoid waiting until the examination begins to start preparing.
A structured preparation approach can include:
Step 1: Define the scope
Identify the services, systems, locations, processes, and organizational units that will be included.
Step 2: Identify applicable criteria
Determine which Trust Services Criteria or other applicable requirements are relevant to the engagement.
Step 3: Conduct a readiness or gap assessment
Review existing controls and identify gaps before the formal examination.
Step 4: Implement required controls
Address identified gaps through policies, procedures, technical controls, monitoring, and governance activities.
Step 5: Collect evidence
Maintain appropriate evidence demonstrating that controls have been implemented and operated.
Step 6: Monitor controls
Organizations should continuously monitor their controls rather than treating compliance as a one-time exercise.
Step 7: Prepare for the examination
Ensure that relevant documentation, records, personnel, systems, and evidence are ready for the independent examination.
How Can a SOC 2 Readiness Assessment Help?
A SOC 2 readiness assessment can help an organization understand its current level of preparedness before undergoing a formal examination.
A readiness assessment may review areas such as:
- Governance
- Risk management
- Information security
- Access management
- Change management
- Incident management
- Vendor management
- Business continuity
- Asset management
- Security monitoring
- Policies and procedures
- Control evidence
The organization can then prioritize remediation activities based on identified gaps.
This approach can reduce surprises during the formal examination and help establish a more mature compliance environment.
Frequently Asked Questions About SOC Reports
Is SOC a certification?
SOC is generally associated with independent examination and reporting rather than an ISO-style certification. The specific type of SOC report depends on the purpose and scope of the engagement.
Which SOC report is best for a SaaS company?
SOC 2 is commonly relevant for SaaS companies because it evaluates controls against applicable Trust Services Criteria.
Is SOC 2 Type 2 better than Type 1?
They serve different purposes. Type 1 provides a point-in-time assessment, while Type 2 provides evidence about operating effectiveness over a period. Organizations should select the approach based on their business and customer requirements.
How long does SOC 2 preparation take?
The timeline varies significantly depending on the organization’s size, scope, existing controls, technology environment, maturity, and identified gaps.
Does SOC 2 replace ISO 27001?
No. SOC 2 and ISO/IEC 27001 are different frameworks and serve different purposes. Some organizations choose to implement both because their customers or markets require different forms of assurance.
Conclusion
SOC reports provide organizations with a structured way to demonstrate the effectiveness of controls and provide assurance to customers and other stakeholders.
While SOC 1 focuses primarily on controls relevant to financial reporting, SOC 2 addresses security and other applicable Trust Services Criteria, and SOC 3 provides a more general-use form of reporting. Other SOC engagements, such as SOC for Cybersecurity and SOC for Supply Chain, address specific assurance needs.
For technology companies, SaaS providers, cloud service providers, and organizations handling customer information, understanding the differences between SOC reports is essential before deciding which engagement is appropriate.
If your organization is considering SOC 2 Type 1 or SOC 2 Type 2, a readiness assessment can be a practical starting point. It can help identify gaps, prioritize remediation, and prepare your organization for the formal examination process.
Need help preparing for SOC 2?
Qualitcert can support organizations with SOC 2 readiness, gap assessment, control implementation guidance, documentation, and audit preparation. Contact our team to discuss your organization’s scope, objectives, and SOC 2 readiness requirements.
