SOC 1 vs SOC 2 vs SOC 3: Complete Comparison Guide

Key Takeaways

Point	Summary
SOC 1	For companies that affect client financial statements (payroll, payment processors)
SOC 2	For SaaS and cloud services - evaluates security and operational controls
SOC 3	Public summary of SOC 2 for marketing - requires completing SOC 2 first
Most tech companies	Need SOC 2, not SOC 1
SOC 3 is not a shortcut	You must complete a full SOC 2 Type II audit before getting SOC 3

Quick Answer: If you're a SaaS or cloud company, you need SOC 2. SOC 1 is for financial processors. SOC 3 is a public marketing version of SOC 2 (requires SOC 2 first).

Quick Overview

Report	Purpose	Audience	Use Case
SOC 1	Financial reporting controls	Auditors, finance teams	Companies affecting client financial statements
SOC 2	Security and operational controls	Customers, prospects	SaaS, cloud services, data processors
SOC 3	General security posture	General public	Marketing, public trust

SOC 1: Financial Reporting Focus

What is SOC 1?

SOC 1 (formerly SSAE 16, SAS 70) evaluates controls relevant to user entities' financial reporting. It's designed for service organizations whose services impact their clients' financial statements.

Who Needs SOC 1?

• Payroll processors
• Claims processors
• Payment processors
• Financial data centers
• Loan servicing companies
• Trust companies
• Benefits administrators

SOC 1 Framework

SOC 1 reports are based on control objectives that you define, specific to your service and its impact on clients' financial reporting.

Key characteristics:

• Control objectives defined by service organization
• Tests whether controls achieve those objectives
• Focused on financial data accuracy and completeness
• Used by financial auditors of client companies

SOC 1 Types

Type	Coverage	Use
Type I	Control design at a point in time	Initial assessment
Type II	Control effectiveness over a period	Ongoing assurance

When SOC 1 is Required

Your clients' auditors may require SOC 1 when:

• You process financial transactions on their behalf
• Your services affect their financial statement assertions
• They need to rely on your controls for their own audit

SOC 2: Security and Operations Focus

What is SOC 2?

SOC 2 evaluates controls based on the Trust Services Criteria: Security, Availability, Processing Integrity, Confidentiality, and Privacy. It's designed for technology and cloud service providers.

Who Needs SOC 2?

• SaaS companies
• Cloud service providers
• Data centers
• Managed service providers
• IT service companies
• Any company handling customer data

SOC 2 Framework

SOC 2 reports are based on the AICPA's Trust Services Criteria:

Criterion	Focus
Security (Required)	Protection against unauthorized access
Availability	System uptime and accessibility
Processing Integrity	Complete, accurate processing
Confidentiality	Protection of confidential information
Privacy	Personal information handling

SOC 2 Types

Type	Coverage	Typical Use
Type I	Control design at a point in time	Quick compliance credential
Type II	Control effectiveness over 3-12 months	Enterprise customer requirement

When SOC 2 is Required

Customers require SOC 2 when:

• Evaluating your security practices
• Assessing vendor risk
• Meeting their own compliance requirements
• Making purchasing decisions

SOC 3: Public Trust Report

What is SOC 3?

SOC 3 is a general-use report based on the same Trust Services Criteria as SOC 2, but designed for public distribution. It's essentially a summary version of SOC 2.

Key Differences from SOC 2

Aspect	SOC 2	SOC 3
Distribution	Restricted (NDA required)	Public
Detail Level	Comprehensive (~100+ pages)	Summary (~10 pages)
Control Details	Describes specific controls	High-level overview only
Test Results	Detailed test results	Pass/fail summary
Use	Customer due diligence	Marketing, public trust

Who Needs SOC 3?

Organizations that want to:

• Publicly demonstrate security commitment
• Use compliance for marketing
• Provide assurance without NDA requirements
• Display a "seal" on their website

SOC 3 Requirements

To get a SOC 3 report, you must:

1. Complete a SOC 2 Type 2 audit
2. Receive an unqualified opinion from your auditor
3. Request the SOC 3 version from your auditor

Understanding "Unqualified Opinion" vs "No Exceptions":

These terms are often confused but mean different things:

• Unqualified opinion: The auditor's overall conclusion that controls were suitably designed and operating effectively. This is the standard "passing" opinion.
• Exceptions: Specific instances where a control didn't operate as intended during testing (e.g., an access review was missed one month).

An auditor can issue an unqualified opinion even when some exceptions exist, provided those exceptions are minor and don't undermine the overall effectiveness of your control environment. The opinion reflects the auditor's professional judgment about your controls as a whole—not a requirement for perfection.

Important: SOC 3 is not a shortcut. It requires completing the full SOC 2 audit first.

Detailed Comparison

Purpose and Focus

Report	Primary Purpose	Control Focus
SOC 1	Support financial audits	Financial reporting
SOC 2	Demonstrate security practices	Security and operations
SOC 3	Public trust building	Security (summarized)

Report Contents

Section	SOC 1	SOC 2	SOC 3
Auditor's Opinion	✓	✓	✓
System Description	✓	✓	Brief
Control Objectives	Custom defined	Trust Services Criteria	Trust Services Criteria
Control Activities	Detailed	Detailed	Not included
Test Results	Detailed	Detailed	Summary only
Management Assertion	✓	✓	✓

Distribution and Use

Aspect	SOC 1	SOC 2	SOC 3
Distribution	Restricted	Restricted	Public
NDA Required	Yes	Yes	No
Can share publicly	No	No	Yes
Marketing use	No	Limited	Yes
Website seal	No	No	Yes

Typical Audiences

Audience	SOC 1	SOC 2	SOC 3
Client's External Auditors	Primary	Secondary	Rarely
Prospective Customers	Rarely	Primary	Secondary
Existing Customers	Sometimes	Primary	Secondary
General Public	No	No	Primary
Regulators	Sometimes	Sometimes	Rarely

Cost Comparison

Report	Type I Cost	Type II Cost
SOC 1	$15K - $40K	$25K - $60K
SOC 2	$12K - $30K	$20K - $50K
SOC 3	N/A	+$3K - $8K (addon to SOC 2)

Note: SOC 3 is always an add-on to SOC 2 Type II, not standalone.

Decision Guide

You Need SOC 1 If:

• You process financial transactions for clients
• Your services impact client financial statements
• Client auditors request SOC 1 reports
• You're in payroll, claims, or payment processing
• Financial data accuracy is your primary value

You Need SOC 2 If:

• You're a SaaS or cloud service provider
• You store or process customer data
• Customers ask about your security practices
• You're selling to enterprises
• Security is a key buying criterion

You Need SOC 3 If:

• You already have SOC 2 Type II
• You want to publicly showcase compliance
• Marketing wants a security credential
• You want a seal for your website
• Customers want quick assurance without NDA

You Might Need Both SOC 1 and SOC 2 If:

• You process financial data AND other customer data
• Some customers request SOC 1, others request SOC 2
• You serve both financial auditors and security teams

Common Scenarios

Scenario 1: SaaS Company

Situation: B2B software company serving enterprise customers

Recommendation: SOC 2

Why: Customers care about security of their data, not financial reporting controls

Scenario 2: Payroll Provider

Situation: Payroll processing for businesses

Recommendation: SOC 1 + possibly SOC 2

Why:

• SOC 1: Payroll affects client financial statements
• SOC 2: May be requested by security-conscious customers

Scenario 3: Cloud Infrastructure Provider

Situation: IaaS/PaaS provider

Recommendation: SOC 2 + SOC 3

Why:

• SOC 2: Customer security due diligence
• SOC 3: Public trust and marketing

Scenario 4: Healthcare Software

Situation: Software handling patient data

Recommendation: SOC 2 (with Privacy criterion)

Why: Focus on data security and privacy, not financial reporting

Scenario 5: Financial Data Analytics

Situation: Platform analyzing financial data for clients

Recommendation: Potentially both SOC 1 and SOC 2

Why:

• SOC 1: Analytics may affect client financial reporting
• SOC 2: Security of the data being analyzed

Pursuing Multiple SOC Reports

SOC 1 + SOC 2 Together

If you need both:

Overlapping areas:

• Access controls
• Change management
• Monitoring
• Vendor management

Different focus:

• SOC 1: Financial reporting accuracy
• SOC 2: Security and operational controls

Approach:

1. Unified gap assessment
2. Implement shared controls once
3. Add SOC 1-specific financial controls
4. Add SOC 2-specific security controls
5. Coordinate audits (same or different auditors)

SOC 2 + SOC 3 Together

SOC 3 is derived from SOC 2, so:

1. Complete SOC 2 Type II audit
2. Receive an unqualified opinion (minor exceptions are acceptable)
3. Request SOC 3 report from auditor (small additional fee)
4. Use SOC 3 for public/marketing purposes

Frequently Asked Questions

"Can I skip SOC 2 and just get SOC 3?"

No. SOC 3 requires completing a full SOC 2 Type II audit first. It's a summary of SOC 2, not a shortcut.

"Do I need both SOC 1 and SOC 2?"

Maybe. It depends on your services. If you affect client financial statements AND handle sensitive data, you may need both. Most technology companies only need SOC 2.

"Which SOC report do enterprises usually request?"

SOC 2. For technology and SaaS purchases, SOC 2 is the standard request. SOC 1 is typically only requested when financial auditors are involved.

"Is SOC 3 enough for enterprise sales?"

Usually not. Enterprises typically want the detailed SOC 2 report. SOC 3 is good for general marketing but doesn't satisfy enterprise due diligence requirements.

"Can I use the same auditor for SOC 1 and SOC 2?"

Yes. Many CPA firms perform both. Using the same auditor can provide efficiencies, though you can also use different auditors if preferred.

Summary Table

Question	SOC 1	SOC 2	SOC 3
Do I affect client financials?	✓
Do I handle customer data?		✓
Do customers ask about security?		✓	✓
Do I want public marketing use?			✓
Am I a SaaS/cloud company?		✓
Am I a financial processor?	✓	Sometimes

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Sources

• AICPA SOC Suite of Services - Official overview of SOC 1, SOC 2, and SOC 3 reports
• AICPA SOC 2® Guide - Detailed guidance for SOC 2 and SOC 3 engagements
• AICPA Trust Services Criteria - Framework for SOC 2 and SOC 3 evaluations