What Are the Types Of SOC: Difference, SOC Report, Benefits, Challenges

This article provides a comprehensive overview of the three types of SOC reports—SOC 1, SOC 2, and SOC 3—and helps businesses determine which one aligns with their needs. It explains the main difference between SOC 1 vs SOC 2, clarifies SOC 2 vs SOC 3, and outlines the difference between a SOC 2 Type 1 vs Type 2. Readers will also learn about timelines, challenges, and decision criteria across different types of SOC reports. 

What Are The Types Of SOC?

The three types of SOC reports—SOC 1, SOC 2, and SOC 3—serve distinct purposes based on the nature of services provided and the type of assurance required. Each is issued by a licensed CPA firm in accordance with the AICPA’s Statement on Standards for Attestation Engagements (SSAE 18). 

SOC 1: Focused on Financial Reporting Controls

• Evaluates internal control over financial reporting (ICFR)
• Relevant when outsourced services impact clients' financial statements
• Common in payroll processors, loan servicing, and financial SaaS firms
• Results in a SOC 1 report, which is intended for user auditors and stakeholders in financial reporting. 

• Comes in two forms
  • Type 1: Reviews control design at a point in time
  • Type 2: Assesses both design and operational effectiveness over a period.

SOC 2: Focused on Data Security and System Trustworthiness

• Addresses controls related to security, availability, processing integrity, confidentiality, and privacy
• Designed for technology service organizations like cloud providers, SaaS platforms, and MSPs
• The SOC 2 report is technical and typically restricted to customers and partners
• Two types
  • Type 1: Examines control design
  • Type 2: Evaluates how effectively controls operate over time

• Helps fulfill vendor assurance needs and builds trust in data handling practices
• Organizations that need a SOC for compliance or procurement frequently prioritize SOC 2

SOC 3: Public Assurance of Security Controls

• Similar scope to SOC 2 but designed for public distribution
• Lacks detailed technical data, making it suitable for marketing or general trust assurance
• Results in a SOC 3 report summarizing compliance with the same Trust Services Criteria used in SOC 2
• Ideal for companies wanting to publicly demonstrate security without exposing sensitive system details. 

What is SOC 1?

SOC 1 (System and Organization Controls 1) is an attestation report focused on evaluating a service organization’s internal controls over financial reporting (ICFR). It is primarily intended for auditors and clients who rely on a vendor’s systems to ensure accurate financial data. Common use cases include payroll providers, billing processors, and financial SaaS platforms. SOC 1 comes in two forms: Type I, which reviews the design of controls at a specific point in time, and Type II, which tests their operational effectiveness over a defined period. 

What is SOC 2?

SOC 2, short for System and Organization Controls 2, is an attestation standard developed by the American Institute of Certified Public Accountants (AICPA). It is designed specifically for service organizations that handle sensitive customer data, including SaaS providers, cloud hosting companies, and managed IT services. 

Why is SOC 2 Important for B2B Buyers?

For B2B buyers, SOC 2 compliance is not a checkbox—it’s a critical trust signal that a service organization meets stringent standards for managing and safeguarding customer data. In an environment where data security failures can result in reputational damage, regulatory penalties, and lost business, SOC 2 provides buyers with evidence-based assurance of a vendor’s internal security posture. 

• Demonstrates operational maturity: A SOC 2 Type 2 report proves controls are in place and working over time
• Reduces vendor risk: Confirms strong security controls aligned with buyer expectations
• Accelerates procurement: Replaces manual security reviews with a validated SOC 2 audit
• Supports regulatory alignment: Reflects adherence to data protection standards like GDPR and HIPAA
• Strengthens vendor comparisons: Vendors with SOC 2 are prioritized over those without
• Clarifies SOC differences: Buyers focused on data security prefer SOC 2, while SOC 1 is for financial reporting
• Validates downstream risk controls: Reveals inherited controls from infrastructure partners using types of SOC reports. 

What Is SOC 3?

SOC 3 (System and Organization Controls 3) is a general-use report that provides a public summary of a service organization’s compliance with the same Trust Services Criteria used in SOC 2. Unlike SOC 2, which is detailed and restricted to auditors, customers, and partners, SOC 3 is designed for broad distribution—such as publishing on a company website or including in marketing materials. It confirms that an organization has passed a SOC 2 Type II audit but excludes sensitive system details

What Is the Difference Between SOC 1, SOC 2, and SOC 3?

Do You Need SOC 2 Type 1 Before Type 2?

No, a SOC 2 Type 1 report is not mandatory before pursuing a SOC 2 Type 2 report. However, many service organizations opt to complete Type 1 first as a preparatory step. A Type 1 audit assesses whether your internal controls are designed appropriately at a specific point in time. In contrast, a Type 2 audit evaluates whether those controls are not only well-designed but also operationally effective over a continuous period, typically between three to twelve months. 

For organizations new to SOC 2® compliance and audits, starting with a Type 1 can help identify gaps and confirm readiness before entering the more rigorous observation period required for a Type II report. This is especially useful in early-stage companies or those without prior audit history. Additionally, buyers who need a SOC 2 report on short notice may accept a Type 1 as an interim demonstration of control design until the Type 2 is completed. 

That said, if your systems are mature, policies are enforced, and logging and monitoring practices are already in place, there is no requirement to do Type 1 first. Many companies with robust control environments—especially those leveraging SOC 2 compliance automation—go directly for Type 2. This is common in companies with previous SOC 1 or SOC 2 experience or those under customer or regulatory pressure to show sustained effectiveness across an audit period. 

In conclusion, while you don’t need a SOC 2 Type 1 before Type 2, it can serve as a strategic checkpoint. The decision depends on your current level of control maturity, audit experience, and the expectations of your stakeholders. 

What Is a SOC Report and Why Does It Matter?

A SOC report—short for System and Organization Controls report—is an independent, third-party attestation that evaluates how well a service organization manages the risks associated with data security, privacy, and operational integrity. These reports are governed by the AICPA’s SSAE 18 standard and are a critical part of vendor risk management for any organization that outsources key services. 

For organizations aiming to achieve SOC compliance, a SOC report not only satisfies enterprise procurement requirements but also builds lasting trust with customers and partners. It enables transparency, reduces the burden of one-off audits, and helps align with regulatory frameworks. 

In industries where you’ll need a SOC report to win contracts or operate in regulated markets, undergoing a SOC audit becomes a strategic necessity. Whether it’s a first-time SOC 2 attestation or a recurring SOC 1 audit, these reports are foundational to proving that your internal environment is secure, compliant, and enterprise-ready. 

Which SOC Report Do You Need for Your Business?

Choosing the right SOC report depends entirely on what your business does, who your customers are, and what kind of data you process. The three types of SOC reports—SOC 1, SOC 2, and SOC 3—serve distinct use cases, and selecting the wrong one can delay contracts, misalign with stakeholder needs, or fail to meet audit expectations. 

• Choose SOC 1 if your services affect financial reportin
  • Required for organizations like payroll processors or fund administrators
  • Ensures compliance with internal control over financial reporting (ICFR)
  • Select SOC 1 Type 1 for design-only assurance or Type 2 for operational effectiveness
• Choose SOC 2 if your business handles sensitive data or operates in the clou
  • Applies to SaaS platforms, MSPs, data processors, and cloud service providers
  • Focuses on security, confidentiality, availability, processing integrity, and privacy
  • Start with SOC 2 Type 1 to assess control design
  • Proceed to SOC 2 Type II compliance to demonstrate effectiveness over time
  • Use SOC 2 compliance automation to streamline readiness and reporting
• Choose SOC 3 for public-facing security assuranc
  • Ideal for publishing trust reports without technical detail
  • Based on the same criteria as SOC 2 Type 2 but in a simplified format
  • Supports SOC 3 compliance and brand transparency
• When in doubt, follow this alignment
  • SOC 1 = Financial control assuranc
  • SOC 2 = Security and operational assuranc
  • SOC 3 = Public summary of SOC 2 for marketing purpose

You’ll likely need a SOC report if you're scaling into enterprise markets or handling customer data. Selecting the correct type ensures audit alignment and meets buyer expectations. 

What Are the Benefits of Each SOC Report Type?

Each of the three types of SOC reports—SOC 1, SOC 2, and SOC 3—offers distinct advantages depending on the nature of your business, the expectations of your clients, and your compliance goals. Understanding the benefits of the different types ensures the right investment in audit and assurance programs. 

Benefits of SOC 1 Report

• Supports financial reporting assurance 
• Meets audit requirements for regulated industries 
• Strengthens credibility with finance teams 
• Demonstrates control maturity for transactional system

Benefits of SOC 2 Report

• Validates data security and system integrity 
• Preferred by enterprise buyers and legal teams 
• Flexible reporting options: Type 1 vs Type 
  • Type 1 confirms control design (point-in-time)
  • Type 2 verifies control effectiveness over time and is often required for long-term partnerships
• Enables scalability in compliance
  Organizations can adopt SOC 2 compliance automation to streamline the audit process
• Differentiates your offering
  Buyers who request a SOC 2 often reject vendors without one, especially in SaaS and cloud services

Benefits of SOC 3 Report

• Ideal for public trust and marketing 
• Confirms successful SOC 2 Type 2 audit 
• Supports brand transparency and trust-building 
• Simplifies stakeholder communicatio

Selecting the right report depends on business model, industry, and the specific SOC compliance and audits your clients expect. 

What Are the Challenges and Timelines for Each SOC Type?

Each of the three types of SOC reports—SOC 1, SOC 2, and SOC 3—presents distinct challenges and time commitments depending on control maturity, business complexity, and audit readiness. Selecting the right path requires understanding the operational and compliance overhead involved in each type.