SOC 1 vs SOC 2: When You Need a Financial-Controls Report
Everyone talks about SOC 2 — but a lot of service providers actually need a SOC 1. The difference is simple once you see it: SOC 2 is about security; SOC 1 is about controls that affect your customers’ financial reporting.
What SOC 1 is for
A SOC 1 (under SSAE 18) reports on a service organisation’s controls relevant to its clients’ Internal Control over Financial Reporting (ICFR). If a mistake in your service could flow through to a customer’s financial statements, their auditors will want a SOC 1.
SOC 1 vs SOC 2 at a glance
| SOC 1 | SOC 2 | |
|---|---|---|
| Focus | Financial-reporting controls | Security & Trust Services Criteria |
| Audience | Customer auditors & finance | Security, procurement, risk teams |
| Defined by | Your own control objectives | AICPA Trust Services Criteria |
| Types | Type I & Type II | Type I & Type II |
Who typically needs a SOC 1
Payroll & payments processors
Errors flow directly into client financials.
Billing, lending & financial SaaS
You compute or hold numbers that hit the books.
Benefits & claims administrators
Your processing affects reported liabilities.
How to prepare
- Define clear, testable control objectives tied to financial-reporting risks.
- Map controls to each objective and assign owners.
- Start with a Type I (design) if you’re new, then plan a Type II window.
- Collect evidence continuously so the observation period isn’t a scramble.
- Consider a combined approach if customers want both SOC 1 and SOC 2.
The bottom line
If your service can move a number on a customer’s financial statements, you’ll eventually be asked for a SOC 1 — no amount of SOC 2 will substitute. Many providers end up maintaining both; the good news is the evidence discipline is the same.
Run SOC 1 and SOC 2 side by side
Cyber Horizon tracks control objectives, automates evidence collection, and supports SOC 1 and SOC 2 from one platform — so audit season stops being a fire drill.
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