SOC 2 vs SOC 1

Thoropass University SOC 2 for Startups

SOC 2 vs SOC 1

What is SOC 1?

What does it test? Unlike SOC 2, SOC 1 hones in on internal controls that impact customer financial reporting and is tested based on objectives the auditor and the business agree to. These objects depend on what your customers need for their own financial reporting. For example, how effective are auditors in evaluating tax statements? 

Who needs it? Any large public, or non-public, company will require their service providers to get a SOC 1 if they impact their financial reporting, even indirectly. 

What is SOC 2?

What does it test? Service Organization Control 2 is a procedure that examines service providers. The audit determines if they are securely managing 3rd party data to protect and ensure privacy. SOC 2 uses the COSO framework to test your internal controls against five Trust Services Criteria: security, availability, confidentiality, privacy, and processing integrity. 

Who needs it? SOC 2 has become the gold standard for SaaS solutions. In many cases, enterprise buyers require all vendors to get SOC 2 compliance. This makes the audit particularly important for growth-focused B2B startups that are starting to attract enterprise customers in order to move upmarket. Today, more SaaS startups than ever choose to pursue SOC 2 in order to satisfy enterprise customers’ needs.

How similar are SOC 1 vs SOC 2 reports?

Both SOC 1 and SOC 2 reports come in different flavors. A Type 1 audit tests the design of your compliance program at one point in time. A Type 2 audit, on the other hand, tests not only your compliance program but also the operating effectiveness of controls over time. Generally most businesses should start with a Type 1 and build towards a Type 2, unless a specific client requires a Type 2 immediately. (More on SOC 2 types here)

When do you need a SOC report?

Increased regulations, security threats, and data protection standards are pushing compliance requirements downstream. If it is not blocking a deal now, it will if you plan to grow. The longer you wait, the more complex, time consuming, and costly it will be. Technical and operational debt will accrue and complicate changing organizational behaviors. 

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