Maintaining compliance with specific standards can establish credibility and confidence as your business grows. Below, you can discover the differences among SOC 1, SOC 2, and SOC 3 compliance, which can help you determine which type of compliance your organization needs to fulfill its obligations and meet its clients’ expectations. By understanding these differences, you can make informed decisions and demonstrate your commitment to meeting the necessary standards for your industry.
Let’s check the three types of compliance respectively!
SOC 1
SOC 1 is a report that focuses on internal controls related to financial reporting for businesses that use third-party service providers to process their financial transactions. The report provides assurance to clients and stakeholders that the service organization has implemented effective controls over its financial processes.
- Definition: SOC 1 report is a report that provides assurance to clients and stakeholders that the service organization has implemented effective controls over its financial processes.
- Purpose: The purpose of the SOC 1 report is to provide assurance to clients and stakeholders that the service organization has implemented effective controls over its financial processes. The report is specifically focused on internal controls related to financial reporting.
- Types: There are two types of SOC 1 reports: SOC 1 Type I and SOC 1 Type II. A SOC 1 Type I report provides a snapshot of the service organization’s controls at a specific point in time, while a SOC 1 Type II report covers a period of at least six months and provides more comprehensive information about the effectiveness of the organization’s controls.
- Examples: SOC 1 reports are required for businesses that provide outsourced services that could impact their clients’ financial reporting, such as payroll processing, claims processing, or investment management. Additionally, businesses that undergo a financial audit may also require a SOC 1 report to demonstrate to auditors that their service provider has effective financial controls in place.
- Audit process: The SOC 1 audit process typically involves an auditor reviewing the service organization’s controls and testing their effectiveness over the financial reporting process. The auditor will also review the organization’s documentation and policies related to financial reporting, and may perform additional tests as needed to ensure the controls are operating effectively.
SOC 1 reports provide clients with assurance that their service provider has effective financial controls in place, and can help businesses meet compliance requirements related to financial reporting. It’s important for businesses to carefully consider their specific needs and requirements when determining whether a SOC 1 report is necessary. The report is specifically designed for businesses that use third-party service providers to process their financial transactions, and is focused on internal controls related to financial reporting. Businesses that require a SOC 1 report should work with their service provider and auditor to ensure that the report covers the appropriate controls and meets their specific needs.
SOC 2
SOC 2 is a report that focuses on internal controls related to security, availability, processing integrity, confidentiality, and privacy for businesses that use third-party service providers to process their data. The report provides assurance to clients and stakeholders that the service organization has implemented effective controls over its data management processes.
- Definition: A SOC 2 report is a report that provides assurance to clients and stakeholders that the service organization has implemented effective controls over its data management processes, specifically related to security, availability, processing integrity, confidentiality, and privacy.
- Purpose: The purpose of the SOC 2 report is to provide assurance to clients and stakeholders that the service organization has implemented effective controls over its data management processes.
- Types: There are two types of SOC 2 reports: SOC 2 Type I and SOC 2 Type II. A SOC 2 Type I report provides a snapshot of the service organization’s controls at a specific point in time, while a SOC 2 Type II report covers a period of at least six months and provides more comprehensive information about the effectiveness of the organization’s controls.
- Trust Services Criteria (TSC) used in SOC 2 report: The Trust Services Criteria are a set of principles and criteria used to evaluate the effectiveness of an organization’s controls related to security, availability, processing integrity, confidentiality, and privacy. The TSC are used as the basis for the SOC 2 report.
- Examples: SOC 2 reports are required for businesses that provide outsourced services that could impact their clients’ data management processes, such as cloud service providers, data centers, or software as a service (SaaS) providers. Additionally, businesses that undergo an IT audit may also require a SOC 2 report to demonstrate to auditors that their service provider has effective data management controls in place.
- Audit process: The SOC 2 audit process typically involves an auditor reviewing the service organization’s controls and testing their effectiveness over the data management processes. The auditor will also review the organization’s documentation and policies related to the TSC, and may perform additional tests as needed to ensure the controls are operating effectively.
SOC 2 reports provide clients with assurance that their service provider has effective controls over their data management processes, specifically related to security, availability, processing integrity, confidentiality, and privacy. It’s important for businesses to carefully consider their specific needs and requirements when determining whether a SOC 2 report is necessary. The report is specifically designed for businesses that use third-party service providers to process their data, and is focused on controls related to the TSC. Businesses that require a SOC 2 report should work with their service provider and auditor to ensure that the report covers the appropriate controls and meets their specific needs.
Read More SOC 2 Checklist : Security Compliance Made Simple
SOC 3
SOC 3 is a report that provides a high-level overview of an organization’s controls related to security, availability, processing integrity, confidentiality, and privacy. The report is designed to be a general-use report that can be freely distributed to anyone, including clients, stakeholders, and the general public.
- Definition: A SOC 3 report is a report that provides a high-level overview of an organization’s controls related to security, availability, processing integrity, confidentiality, and privacy. The report is designed to be a general-use report that can be freely distributed to anyone, including clients, stakeholders, and the general public.
- Purpose: The purpose of the SOC 3 report is to provide a high-level overview of an organization’s controls related to security, availability, processing integrity, confidentiality, and privacy that can be freely distributed to anyone, including clients, stakeholders, and the general public.
- Types: There is only one type of SOC 3 report, which provides a general-use report that can be freely distributed to anyone, including clients, stakeholders, and the general public.
- Trust Services Criteria (TSC) used in SOC 3 report: The Trust Services Criteria (TSC) are a set of principles and criteria used to evaluate the effectiveness of an organization’s controls related to security, availability, processing integrity, confidentiality, and privacy. The TSC are used as the basis for the SOC 3 report.
- Examples: SOC 3 reports are not required, but can be useful for businesses that want to provide a high-level overview of their controls related to security, availability, processing integrity, confidentiality, and privacy to clients, stakeholders, and the general public.
- Audit process: The SOC 3 audit process is similar to the SOC 2 audit process, with the auditor reviewing the service organization’s controls related to the TSC and testing their effectiveness. However, the SOC 3 report is designed to provide a high-level overview of the controls, rather than a detailed examination.
SOC 3 reports provide a high-level overview of an organization’s controls related to security, availability, processing integrity, confidentiality, and privacy that can be freely distributed to anyone, including clients, stakeholders, and the general public. While SOC 3 reports are not required, they can be useful for businesses that want to provide transparency to their clients and stakeholders about their controls related to the TSC. Businesses that are considering a SOC 3 report should work with their service provider and auditor to ensure that the report covers the appropriate controls and meets their specific needs.
Comparing SOC 1 vs SOC 2 vs SOC 3
So, how can we compare SOC 1, SOC 2, and SOC 3 compliance? The table below can make it easier to understand!
| Aspect | SOC 1 | SOC 2 | SOC 3 |
| Focus | Financial reporting | Non-financial reporting | General overview of controls |
| Applicability | Service organizations that provide outsourced services | Service organizations that provide outsourced services | Service organizations that provide outsourced services |
| Reporting | Report on controls relevant to user organizations’ ICFR | Report on controls relevant to user organizations’ systems | Report on controls related to security, availability, processing integrity, confidentiality, and privacy that can be distributed publicly |
| Trust Services Criteria (TSC) | N/A (uses SSAE 18) | Security, availability, processing integrity, confidentiality, and privacy | Security, availability, processing integrity, confidentiality, and privacy |
| Auditor’s Opinion | Unqualified or qualified | Unqualified or qualified | Unqualified or disclaim (cannot express an opinion on effectiveness of controls) |
| Type of Report | Type 1: description of system and controls at a point in time, Type 2: description of system and controls over a period of time | Type 1: description of system and controls at a point in time, Type 2: description of system and controls over a period of time | General-use report that can be freely distributed to anyone, including clients, stakeholders, and the general public |
Conclusion
Given that each type of SOC is different, it is so crucial for organizations to get a good understanding of the distinctions between the three types of compliance, including their focus, applicability, reporting, Trust Services Criteria, auditor’s opinion, and type of report, to determine which one is most appropriate for their business needs. By doing so, they can navigate the complex regulatory landscape and ensure that their clients’ data is secure, their operations are reliable, and their reputation remains intact.