The different SOC reporting options can seem confusing. How do you know what kind of report is right for your service organization? Well, it all depends on what kind of information you and your clients need to have assessed, as well as the organizations involved in the report. Let’s take a closer look.
The Difference Between SOC 1 & SOC 2 Reports
The most requested SOC reports are SOC 1 and SOC 2. While similar, there are key differences to consider when it comes to your business needs.
The SOC 1 report analyzes the controls your business has in place that have an impact on your client’s financial statements. A SOC 1 report offers peace of mind when it comes to how your organization processes sensitive data. Examples of organizations that likely need a SOC 1 include, but are not limited to:
- Payroll processors
- Receivables collection agencies
- Third-party administrators (claims processing, benefit plan recordkeepers, etc.)
A SOC 2 report details information about your service organization controls in the context of the trust services criteria: security, availability, integrity, confidentiality, and privacy. Depending on your needs, the SOC 2 report can analyze any or all categories of the trust services criteria. The types of service organizations that likely need a SOC 2 include, but are not limited to:
- Software as a Service (SaaS) providers
- Managed service providers
- Service organizations that need to provide vendor security assessments
The type of services your organization provides could be a determining factor in deciding which SOC report is right for your business. Some organizations may require both a SOC 1 and a SOC 2.
SOC Type 1 Report vs. SOC Type 2 Report
Not only are there different kinds of SOC report, there are different types of each report to consider as well.
- A Type 1 report focuses on management’s description of a service organization’s system and the suitability of the design of the controls related to the applicable trust services criteria.
- A Type 2 report focuses on management’s description of a service organization’s system, the suitability of the design and operating effectiveness of the controls related to the applicable trust services throughout a specified period, usually six-to-twelve months.
Many organizations will opt for a Type 1 report when starting the SOC compliance process for the first time. It can act as a deliverable you can share with your clients to show that you have controls in place while waiting for the time period necessary for a Type 2 report.
Your SOC Reporting and Compliance Partner
When it comes to SOC reporting, we are confident that our work will exceed your expectations! Our streamlined process allows you to complete your SOC examination with minimal disruptions. If you’re ready to determine the type of SOC examination you need, contact the experienced team at Auditwerx today!