2023-11-23-104048000000_in network security

SOC 1 vs SOC 2: Comparing the Differences

Organizations that manage user’s sensitive data and personal information are required to provide documentation of their steps to keep the data secure. This is where the SOC examination plays its part. SOC examination is a standard set for entities that provide services directly related to the user’s control system. Organizations providing services like SaaS, financial reports, data centers, and payment processes are required to fulfill these standards.

In this blog, we will learn about different types of SOC standards and what are the differences between them.

SOC 1 vs SOC 2 report

The major difference between SOC 1 and SOC 2 reports is the controls they examine. It is also dependent upon the user needs they meet.

SOC 1 sets the standard for an organization’s control over financial reporting. Entities taking services from these organizations can ask for a SOC 1 report to evaluate the effect of those organizations’ control over their own financial statements.

SOC 2 is a bit aggressive in terms of safety. It examines the organization’s control using five criteria.

  • Security
  • Availability
  • Processing Integrity
  • Confidentiality
  • Privacy

This report may be requested by a broad range of users that need assurance about a service organization’s controls.

Let’s understand the two types of SOC reports in detail

SOC 1

Any company that relies on a service provider to manage their reporting processes. Although it is not a mandatory compliance, it plays a vital role in generating trust within customers.

They help you validate the controls and inform the clients that you have a well-secured process. It makes the clients comfortable and secure about their financial statements.

Types of SOC 1 reports

There are two types of SOC 1 report. Type 2 and Type 1. Let’s dive deep and understand the types of SOC 1 report.

Type 2: Type 2 report evaluates the fairness of the description of the service organization’s system. It also evaluates the suitability of design and effectiveness of the controls required to achieve related control objectives included in the description throughout a specific period.

Type 1: A type 1 report evaluates the fairness of the management’s descriptions of the organization system and the suitability of the design of the controls required to achieve the related control objectives included in the description as of a specified date.

Who needs an SOC 1 report?

If your services impact the financial operations of your users, you must have a SOC 1 audit to match the standards. Businesses that deal with the below-mentioned processes need to be SOC 1 compliant

  • Payroll Processing Software
  • Billing Management Platforms
  • Trust Companies
  • Financial Reporting Software

These are just some examples. However, to eradicate the confusion keep in mind that if your services are impacting the financial situation of any organization, you need to be SOC 1 compliant.

How to Get SOC 1 Report

SOC 1 is an attestation report which means that the opinion of an external auditor/ certified public accountant (CPA) will be the deciding factor for the report.

The first step from the organization’s end should be to define controls that are directly linked to users’ financial operations. The CPA will analyze those controls and decide if they are working accordingly or not.

The deciding factor usually includes

  • Scope: The scope of engagement
  • Responsibilities: What are the responsibilities of the organization?
  • Design: The design of controls
  • Description: What is the description management provided regarding the controls?
  • Type: The type of report being used
  • Opinion: the opinion of CPA after all the testing and examination

If the audit is successful, you will receive proper documentation conveying the same. You can send the same to your clients and stakeholders so that they can use it whenever they are going through a financial audit themselves.

SOC 2

Unlike SOC 1 which focuses on financial reporting, SOC 2 examination focuses on the operations and compliance sides. SOC 2 reports are dependent on the Trust Services Criteria established by the AICPA. The principles are

  • Security
  • Availability
  • Processing Integrity
  • Confidentiality
  • Privacy

A point to note is that only security compliance is necessary for SOC 2 compliance. The rest of the principles are important but not mandatory. However, it is advised to be in compliance with all the principles for a better and safer environment for customer information.

Types of SOC 2 Reports

Just like SOC 1, SOC 2 also has two types of reports.

Type 2: It evaluates the management’s description of an organization’s system. It also covers the design suitability and operating effectiveness of controls over an extended period of time.

Type 1: This report evaluates the management’s description of a service organization’s system along with the suitability of the control’s designs at a specific point in time.

Who Needs a SOC 2 Report?

SOC 2 compliance is required to be followed by any technology service provider or SaaS company that handles or stores customer data. Third-party vendors or other partner firms working with service providers should also consider achieving and maintaining SOC 2 compliance to ensure the integrity of their systems.

SOC 2 is a voluntary framework which means it is not mandatory. However, it is always advised that entities managing the personal information of their customers must comply with SOC 2 standards for their own safety.

The example of organization’s that might need to comply with SOC 2 guidelines can be:

  • Cloud Service provider
  • SaaS Provider
  • HR Management System
  • Recruitment Platform
  • Host Data Center

How to Get a SOC 2 Report

Just like SOC 1, SOC 2 also needs an attestation report where the decision will be made by a CPA. There are no specific guidelines provided by AICPA to prepare for a SOC 2 audit. It depends on the specific industry regulations and the type of service your organization provides.

The best way to prepare for an audit is to analyze how your services impact the user’s organizations and identify the risks and potential issues. For instance, if you are a payment processing company for an e-commerce business, you should focus on the integrity principle in your controls. On the other hand, if your business provides HR management services, you should focus on principles like confidentiality and privacy.

There are no decided guidelines set by AICPA which makes the process a bit confusing. A readiness assessment will be very helpful for figuring out the current status of your controls. It will help you in spotting the potential gaps in your system and prepare you for the audit.

Benefits of SOC 2 Audit

  • SOC 2 compliance gives you an edge in the safety of your digital world. There are many benefits of implementing the SOC 2 guidelines. Let’s have a look at some of them.
  • SOC 2 audit helps you in improving your overall security outlook
  • Customers and partners feel more confident as you will have the right tools and procedures to safeguard sensitive information.
  • SOC 2 requirements often overlap with other frameworks such as HIPAA and ISO 27001. If you are SOC 2 compliant, you will automatically be under the adherence policy of HIPAA and ISO 27001.
  • The reputation of your brand increases as a security-conscious company. This creates a powerful advantage for your brand by keeping you ahead of your competition.
  • Achieving SOC 2 Compliance will help you avoid any sort of data breach that leads to financial or reputation damage.

SOC 2 Compliance and IAM

It would be very safe to say that you cannot achieve SOC 2 compliance if you do not use any sort of IAM. SOC 2 compliance and IAM go hand in hand with each other. IAM helps in enforcing access controls that are fundamental to the security, confidentiality, and privacy principles of SOC 2.

Modern IAM applications have multiple safety features like multi-factor authentication, identity federation, identity lifecycle management, password auto-resets, and granular access control. These features are very helpful in the journey to become SOC 2 compliant.

If your organization is SOC 2 compliant it signifies that the company takes data security and privacy seriously. Whenever someone is looking for a SaaS provider in the market, they might expect an SOC 2 compliance report.

Why Do Service Organizations Need SOC Reports?

SOC report is proof conveying the customers that you will keep their personal information safe. It denotes a sense of responsibility and increases trust among customers and stakeholders.

If you are SOC certified, you can rest assured that your organization is safe from any threats related to User’s integrity. It helps you position your organization as a reliable, ethical, and compliant option in the market.

It will give you more control over your processes and operations. You will be able to identify potential leaks in your controls and amend them timely. Your clients will be more comfortable working with you if you have a SOC certification.

How Cyber Cops Can Help?

Cyber Cops is a leading firm in the realm of digital safety. We provide cyber security to various organizations and can help you too with your SOC audit. Though all the details necessary are covered in the blog, if you feel like this is a hassle for you, you can always contact us.

Cyber Cops is always ready to help you with your cyber security. We will not only take care of your safety, but also guide you about the latest threats in the market so that you can stay a step ahead of malpractitioners.

We believe that a strong business needs a strong working structure that is free of any vulnerability and loopholes. As the name suggests, we are your protection in the cyber world.

Scroll to Top