Last Updated on January 30, 2026 by Narendra Sahoo
Understanding the difference between SOC 1 and SOC 2 reports is critical for service organizations responding to customer audits, financial reviews, or security assessments. While both reports provide assurance over controls, they serve very different purposes and are requested by different stakeholders.
This guide explains SOC 1 vs SOC 2, when each report is required, and how to determine which one makes sense for your organization.
1️⃣ Which SOC Report Do I Need?
As a service organization, audit and assurance requests from clients are not a matter of if, but when. As organizations grow, serve regulated customers, or support critical business processes, questions around SOC 1 vs SOC 2 inevitably arise.
In practice, clients are not asking about SOC reports out of curiosity. They are responding to regulatory obligations, auditor requirements, vendor risk assessments, or enterprise security reviews. The challenge for many organizations is understanding which SOC report applies to their specific role in the ecosystem and whether one report is sufficient or if both are required.
The distinction between SOC 1 and SOC 2 is not about maturity or size, but about what risk your services introduce to your clients. SOC 1 focuses on controls that impact a customer’s financial reporting, while SOC 2 addresses how securely an organization protects customer data and systems. Choosing the wrong report can result in unnecessary audits, delayed deals, or repeated client questions.
👉 Organizations are often asked:
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Which SOC report do our customers expect?
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Are we required to obtain SOC 1, SOC 2, or both?
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Does our role impact financial statements, data security, or both?
Understanding these differences early allows organizations to align audit efforts with real customer expectations, avoid redundant assessments, and build trust as they scale. The sections below break down when SOC 1 is required, when SOC 2 is appropriate, and when organizations may need both.
2️⃣ Do I need a SOC 1?
A SOC 1 report is required when your services directly impact a customer’s financial reporting. These engagements focus on controls relevant to Internal Control over Financial Reporting (ICFR) and are performed in accordance with SSAE standards.
In practical terms, SOC 1 is not driven by security concerns, but by financial accuracy and audit reliance. If errors or control failures within your systems could affect a client’s financial statements, auditors will typically request a SOC 1 report to rely on your controls during their own financial audits.
You are likely to need a SOC 1 report if your organization:
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Processes or supports payroll, billing, or claims
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Handles transaction processing that feeds into client financial statements
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Provides services relied upon by external auditors during financial reporting
Common examples include payroll service providers, claims processors, loan servicing platforms, and outsourced accounting or finance operations.
While SOC 1 requests are generally less frequent than SOC 2 requests, they tend to be non-negotiable when required. In scenarios where financial reporting risk exists, clients and their auditors often insist on a SOC 1 report regardless of other security or compliance certifications.
3️⃣ Do I need a SOC 2?
A SOC 2 report is required when your organization stores, processes, or transmits customer data, even if you do not directly impact financial reporting. Unlike SOC 1, which focuses on financial controls, SOC 2 addresses how securely and reliably your systems protect information.
SOC 2 assessments evaluate an organization’s controls against the Trust Services Criteria, which include:
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Security
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Availability
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Processing Integrity
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Confidentiality
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Privacy
If your customers rely on your systems to protect sensitive data, maintain uptime, or ensure data accuracy, a SOC 2 report is often a baseline expectation during vendor risk assessments, procurement reviews, and enterprise due diligence.
You are likely to need a SOC 2 report if your organization:
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Operates as a SaaS, cloud, or technology service provider
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Stores or processes customer, employee, or personal data
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Supports enterprise or regulated clients
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Is asked to complete detailed security questionnaires or audits
Common examples include SaaS platforms, cloud hosting providers, fintech companies, digital health vendors, and data analytics providers.
In today’s environment, SOC 2 is increasingly viewed as a trust requirement rather than a differentiator. For many technology-driven businesses, especially those selling to enterprises, the absence of a SOC 2 report can delay sales cycles, block contracts, or raise concerns during security and compliance reviews.
4️⃣ Do I need a SOC 1 and a SOC 2 report?
Organizations may require both SOC 1 and SOC 2 reports when their services impact customer financial reporting and handle sensitive data or critical systems. In these scenarios, a single SOC report is often insufficient to address the full range of client, auditor, and regulatory expectations.
A SOC 1 report provides assurance over controls related to financial accuracy and reporting, while a SOC 2 report demonstrates how effectively an organization protects data and ensures system security, availability, and confidentiality. When both risk areas are present, clients and auditors typically expect coverage through separate but complementary reports.
Example:
A fintech company that processes payment transactions or settlement activities on behalf of clients may be required to provide a SOC 1 report for financial reporting purposes, while also maintaining a SOC 2 report to address data security, privacy, and platform reliability.
Obtaining both reports allows organizations to present a complete assurance picture, reducing follow-up questions, avoiding duplicate audits, and building trust with customers, auditors, and regulators as the business scales.
5️⃣ SOC 1 vs SOC 2 – Quick Comparison
| Feature | SOC 1 Report (ICFR) | SOC 2 Report (Trust Services) |
|---|---|---|
| Primary Purpose | Assurance over Internal Controls over Financial Reporting (ICFR) | Assurance over security and protection of systems and data |
| Risk Addressed | Financial reporting accuracy and integrity | Data security, availability, and privacy risks |
| Best Suited For | Payroll processors, claims processors, billing platforms, financial service providers | SaaS companies, cloud service providers, IT services, healthtech, fintech |
| Typical Client Expectation | Confidence that financial data used in audits is accurate | Confidence that sensitive data is handled securely |
| Primary Report Users | Auditors, CFOs, finance teams, regulators | Customers, prospects, security teams, vendor risk teams |
| Control Focus | Transaction processing and financial controls | Security, availability, processing integrity, confidentiality, privacy |
| Common Buyer Trigger | External financial audits or regulatory requirements | Enterprise sales, vendor risk reviews, security questionnaires |
6️⃣ Who Typically Requests SOC 1 vs SOC 2 Reports?
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SOC 1 is typically requested by auditors and finance teams
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SOC 2 is requested by customers, prospects, and vendor risk teams
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This reinforces buyer reality and improves intent matching
7️⃣ How to Decide Which SOC Report Makes Sense for You
Choosing between SOC 1, SOC 2, or both depends on the risk your services introduce to your clients, not just your industry or company size.
The right decision is typically driven by three factors:
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How your services are used:
If your systems or processes affect a client’s financial statements, SOC 1 is required. If you store, process, or secure customer data or systems, SOC 2 is expected. - What your clients and auditors ask for:
Enterprise customers, regulators, and external auditors increasingly specify which SOC report they require. Contractual and procurement requirements often determine the correct report more clearly than internal preference. - Where your business is heading:
Organizations planning to scale, sell to regulated industries, or support enterprise clients should align SOC reporting with future expectations, not just current needs.
Many technology and cloud-based service providers begin with SOC 2, as it addresses a broad range of security, availability, and data protection concerns. However, when services also impact financial reporting, SOC 1 becomes equally important. In such cases, maintaining both reports provides comprehensive assurance and avoids repeated client inquiries or audit gaps.
8️⃣ Common Mistakes When Choosing Between SOC 1 and SOC 2
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Assuming SOC 2 replaces SOC 1
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Choosing SOC 1 when customers want SOC 2
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Delaying SOC planning until deals are blocked
9️⃣ Frequently Asked Questions
1.What is the main difference between SOC 1 and SOC 2 reports?
A SOC 1 report focuses on internal controls over financial reporting (ICFR) – it’s used when the client’s financial statements may be impacted. Meanwhile, a SOC 2 report evaluates controls related to Trust Services Criteria: security, availability, processing integrity, confidentiality, and privacy. It’s about how well systems protect and manage data beyond just financial implications.
2.Do I need a SOC 1 or SOC 2 report for my business?
It depends on what your clients require. If you’re handling data that impacts their financial statements, clients may ask for a SOC 1 report. If you’re managing sensitive data, ensuring uptime, or providing cloud services, a SOC 2 report is more appropriate. Some organizations may need both, depending on their services and customer expectations.
3.Can an organization have both SOC 1 and SOC 2 audits in place?
Yes. If your business operations include services that affect financial reporting and services involving data security, privacy, or operational availability, you may benefit from having both SOC reports. It gives stakeholders confidence that both financial and non-financial assurances are met.
4.Which stakeholders/customers are most interested in SOC 1 vs SOC 2 reports?
Clients like banks, financial institutions, or those regulated for financial reporting tend to ask for SOC 1 reports. On the other hand, technology customers, SaaS clients, or companies concerned with data protection, uptime, or privacy will often request SOC 2 reports. The stakeholder type often drives the report requirement.
5.How do I decide on the scope for a SOC 2 report?
Start by identifying what your clients require (which criteria: security, availability, etc.), assessing your system boundaries (which services, infrastructure, or processes are in scope), and considering regulatory or contractual obligations. Also, factor in whether you want Type 1 or Type 2 (single point vs over a period). Clarify scope early with auditors to avoid surprises.
🔟 Final Thoughts
At the end of the day, the right SOC report depends on what your clients expect and what your services impact.
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Narendra Sahoo (PCI QPA, PCI QSA, PCI SSF ASSESSOR, CISSP, CISA, CRISC, 27001 LA) is the Founder and Director of VISTA InfoSec, a global Information Security Consulting firm, based in the US, Singapore & India. Mr. Sahoo holds more than 25 years of experience in the IT Industry, with expertise in Information Risk Consulting, Assessment, & Compliance services. VISTA InfoSec specializes in Information Security audit, consulting and certification services which include GDPR, HIPAA, CCPA, NESA, MAS-TRM, PCI DSS Compliance & Audit, PCI PIN, SOC2 Compliance & Audit, PDPA, PDPB to name a few. The company has for years (since 2004) worked with organizations across the globe to address the Regulatory and Information Security challenges in their industry. VISTA InfoSec has been instrumental in helping top multinational companies achieve compliance and secure their IT infrastructure.
