SOC 1 vs SOC 2: Key Differences and When You Need Them

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Clients requesting SOC 1 or SOC 2 compliance can leave companies wondering: What’s the difference?  More importantly, which one do we actually need? These reports aren’t just another checkbox - they shape trust, security, and financial accountability for businesses handling sensitive data or transactions. 

SOC 1 focuses on financial reporting controls, while SOC 2 digs into security, availability, and privacy. Understanding the difference ensures you meet client expectations, avoid compliance gaps, and choose the right audit for your business. 

This guide breaks down SOC 1 vs SOC 2, key differences, when they apply, and how to navigate the audit process efficiently. 

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TL;DR 

• SOC 1 focuses on financial reporting, while SOC 2 evaluates the security, availability, processing integrity, confidentiality, and privacy of customer data.
• SOC 1 is required for businesses impacting financial reporting, while SOC 2 is needed for companies handling sensitive customer data (e.g., SaaS, cloud providers, IT services).
• SOC 2 audits follow five Trust Service Criteria (TSC) – Security is mandatory, while others (Availability, Processing Integrity, Confidentiality, Privacy) are optional.
• SOC 2 Type 1 audits check controls at a moment in time, while SOC 2 Type 2 assesses security effectiveness over 3-12 months.
• SOC compliance builds trust, reduces risks, and meets client/regulatory demands. Regular monitoring, access controls, and automation help maintain compliance.
• CloudEagle helps businesses stay SOC 2-compliant by tracking SaaS access, enforcing security policies, and automating compliance workflows for hassle-free audits.

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What is SOC 1? 

SOC 1 (Service Organization Control 1) is an audit report that evaluates how well a company manages financial reporting controls. If your business affects your client’s financial statements, SOC 1 ensures you have the right internal controls in place to prevent errors, fraud, or misstatements. 

SOC 1 reports are based on the Statement on Standards for Attestation Engagements (SSAE 18) and focus on how your systems handle financial transactions, payroll processing, billing, and similar activities. It doesn’t assess security, availability, or privacy; only controls that impact financial data.

Who needs it? 

If your business provides services that could impact a client’s financial reporting, you likely need SOC 1 compliance. Common industries include:

• Payroll providers: Every salary payment and tax withholding are processed accurately. 
• Payment processors: Verifying financial transactions are handled securely and reported correctly. 
• Accounting and financial services: Ensuring accurate bookkeeping, invoicing, and reconciliation.
• SaaS platforms with financial data: If your software influences financial reporting, SOC 1 may be required. 

A SOC 1 audit assures auditors, regulators, and clients that your financial processes are controlled, reducing the risk of compliance issues or financial misstatements. 

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What is SOC 2?

SOC 2 (Service Organization Control 2) is an audit designed to evaluate how well a company safeguards customer data across five key areas: security, availability, processing integrity, confidentiality, and privacy. It’s not about financial reporting; it’s about whether your systems can protect sensitive information from breaches, leaks, or operational failures.

SOC 2 reports are built on the Trust Services Criteria (TSC) and apply to any business that stores, processes, or transmits customer data. Unlike SOC 1, SOC 2 audits focus on cybersecurity, data protection, and operational risks.

Who needs it? 

If your business handles customer data, particularly in the cloud, SOC 2 compliance is often required. Industries that typically need SOC 2 include: 

• SaaS providers: Ensuring secure handling of customer data in multi-tenant environments. 
• Cloud service providers: Protecting hosted applications and infrastructure from cyber threats. 
• Data centers and managed IT services: Demonstrating security and uptime reliability. 
• Healthcare and legal tech companies: Protecting private client data from unauthorized access. 

Many enterprise clients and regulators expect SOC 2 compliance to verify that a company meets modern security and data privacy standards.‍

SOC Trust Service Criteria (TSC) ‍

SOC 2 audits are based on five Trust Service Criteria (TSC) that dictate how companies should handle data security and privacy: 

1. Security: Protect systems from unauthorized access, breaches, and cyber threats. 
2. Availability: Ensuring systems remain online and accessible to customers. 
3. Processing integrity: Verifying that data processing is accurate, complete and timely. 
4. Confidentiality: Restricting access to sensitive business and customer data. 
5. Privacy: Protecting personal information in compliance with privacy laws like GDPR and CCPA. 

While Security is mandatory for SOC 2 compliance, businesses can choose which of the other four criteria apply to them. For example, a SaaS platform with an uptime guarantee may focus on Availability, while a legal tech company handling NDAs may prioritize Confidentiality. 

Meeting these criteria requires more than just policies; it demands continuous monitoring and enforcement. That’s why many businesses rely on security tools to track system access, enforce encryption, and manage compliance workflows. Platforms like CloudEagle.ai, which is SOC 2 Type 2 certified and ISO 27001 compliant, offer built-in audit logs, network firewalls, and SSO authentication to help enforce these security standards.

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SOC 1 vs SOC 2: Key Differences

Understanding the difference between SOC 1 and SOC 2 can save businesses from unnecessary audits and compliance headaches. The table breaks down the core distinctions between them:

SOC 1 vs SOC 2: Side-by-side comparison 

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Key takeaways: 

• SOC 1 is about financial controls. SOC 2 is about security. 

• If you impact financial reporting, you likely need SOC 1. 

• If you store or process customer data, you likely need SOC 2. 

• Both audits can have Type 1 (point-in-time) or Type 2 (ongoing effectiveness) reports. 

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SOC 1 vs SOC 2 vs SOC 3: Where does SOC 3 fit? 

SOC 3 is essentially a public-facing version of SOC 2.

• SOC1: Focuses on financial reporting controls of service organizations handling client financial data. 

• SOC 2: Evaluates security, availability, processing integrity, confidentiality, and privacy based on the Trust Services Criteria (TSC). 

• SOC 3: Covers the same criteria as SOC 2 but provides a general-use report that doesn’t include sensitive details. It’s designed for public distribution; ideal for marketing and proving compliance without disclosing audit specifics. 

SOC 3 is less detailed but useful for companies wanting to showcase compliance to customers without sharing an in-depth audit report. 

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‍SOC 2 Type 1 vs SOC 2 Type 2: What’s the difference? ‍

Both SOC 2 Type 1 and SOC Type 2 evaluate a company’s security, availability, processing integrity, confidentiality, and privacy controls, but they differ in scope and timing. 

• SOC 2 Type 1: A snapshot of security controls at a specific point in time. It assesses whether controls are designed properly but doesn’t verify if they’re working over time. 

• SOC 2 Type 2: A long-term evaluation that examines how well security control operates over a period (typically 3-12 months). It provides a more comprehensive view of security effectiveness. 

If you need quick validation, SOC 2 Type 1 works. If you want to demonstrate ongoing compliance and security maturity, SOC 2 Type 2 is the way to go. 

SOC 2 Type 1 vs. SOC 2 Type 2: Key Differences 

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When do you need SOC 1 or SOC 2 Compliance?

Choosing between SOC 1 and SOC 2 depends on what your business does and the kind of data you handle.‍

You need SOC 1 If:

• Your service affects financial transactions or reporting (e.g., payroll providers, and payment processors).
• Clients require assurance that your controls won’t impact their financial integrity.

You need SOC 2 If:

• Your business handles sensitive customer data and must prove security, availability, processing integrity, confidentiality, or privacy.
• You operate in SaaS, cloud computing, or data storage, where trust and security are critical.

Some companies may require both SOC 1 and SOC 2, especially if they impact financial reporting and handle customer data security.

Pro tip: Managing SOC 2 compliance requires strict access control, audit logging, and security monitoring. Tools like CloudEagle can help businesses monitor SaaS access, enforce security policies, and maintain compliance standards - making audits easier and reducing risk.

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The SOC 1 & SOC 2 Audit Process (Step-by-Step Guide)

Both SOC 1 and SOC 2 audits follow a structured process. Here’s how it works:

‍1. Define scope and objectives

• Determine whether you need SOC 1, SOC 2, or both.
• Identify the systems and controls that must be assessed.

2. Conduct a readiness assessment

• A pre-audit evaluation to identify gaps before the official audit.
• Helps avoid compliance issues and costly delays.

3. Implement security controls

• Strengthen policies around data security, access management, and monitoring.
• Ensure compliance with SOC Trust Services Criteria (for SOC 2).
• One of the biggest challenges? Visibility into who has access to what. Without proper tracking, shadow IT and unauthorized access can put compliance at risk. Platforms like CloudEagle help by automating access controls, flagging unused licenses, and providing real-time security monitoring - reducing compliance blind spots.

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4. Perform the audit (Type 1 or Type 2)

• A Type 1 audit verifies controls at a single point in time.
• A Type 2 audit evaluates control effectiveness over 3-12 months.

5. Receive the SOC report

• The auditor provides a detailed report on your compliance.
• Type 2 reports offer greater assurance to clients.

6. Maintain ongoing compliance

• Regularly monitor security controls.
• Conduct annual audits to maintain SOC certification. With tools like CloudEagle, you get automated security tracking, access controls, and audit logs make it easier to stay compliant year-round. 

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SOC audits aren’t just about compliance - they build trust with customers and stakeholders, proving that your security and financial controls are reliable. 

SOC Compliance Best Practices 

Achieving SOC 1 or SOC 2 compliance isn’t a one-time task - it’s an ongoing commitment. To maintain compliance and streamline audits, follow the best practices: 

1. Conduct a readiness assessment first 

• Before the official audit, perform an internal readiness assessment to identify gaps in your controls. 
• This reduces the risk of failing an audit and saves time on remediation. 

2. Define clear security policies 

• Document data handling, access controls, and risk management procedures. 
• Ensure policies align with SOC 2 Trust Services Criteria (security, availability, integrity, confidentiality, privacy). 

3. Strengthen access controls 

• Implement role-based access control (RBAC) to limit sensitive data exposure. Use CloudEagle’s identity governance features to automate access provisioning and ensure only authorized users can access sensitive SaaS applications.
• Use multi-factor authentication (MFA) to reduce unauthorized access risks. 

4. Monitor and log all activity 

• Set up real-time monitoring for system changes, user access, and security events. CloudEagle provides detailed audit trail logs, helping businesses track who accessed which applications and when; crucial for SOC compliance.
• Maintain detailed logs for incident investigations and compliance reporting.

5. Regularly train employees on security 

• Employees are the weakest security link if not properly trained. 
• Conduct regular security awareness training on phishing, access management, and compliance obligations. 

6. Automate compliance where possible 

• Use compliance automation tools to track, report, and enforce security policies. For example, CloudEagle automates SaaS security audits by continuously monitoring access, identifying risks, and ensuring policy enforcement - saving teams hours of manual work. 
• Automating security audits and risk assessments saves time and reduces human error. 

7. Conduct routine security testing 

• Schedule penetration tests and vulnerability scans to identify weaknesses before an auditor does. 
• Regular testing ensures controls remain effective year-round. 

8. Continuously improve and adapt 

• Compliance isn’t static - security threats and regulations evolve. CloudEagle helps businesses stay audit-ready by adapting to evolving compliance requirements, tracking changes in access policies, and maintaining full visibility into SaaS usage.
• Regularly review security controls, update policies, and refine processes to stay ahead. 

By following these best practices, businesses can pass SOC audits with confidence, avoid las-minute surprises, and build trust with clients. 

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Stay Compliant Without the Stress

SOC 1 and SOC 2 aren’t just compliance checkboxes - they’re how businesses prove trust and security. Whether you handle financial transactions or sensitive customer data, choosing the right SOC framework helps protect your business, streamline operations, and build confidence with clients. The key is preparing early and staying audit-ready year-round.

Keeping up with security requirements doesn’t have to be complicated. 

CloudEagle’s SOC 2 Type 2-certified platform helps businesses enforce access controls, track SaaS usage, and automate compliance workflows. With audit logs, security monitoring, and built-in reporting, you’ll always be one step ahead of your next SOC audit - without the manual hassle.

‍Read next: 

• SaaS Compliance: A Quick Guide for SaaS Buyers 

     → Understand the key compliance factors to consider when selecting SaaS applications.

• 7 Best Compliance Automation Tools

     → Explore the best tools to streamline audits and ensure continuous compliance.

• 6 Alarming SaaS Security Risks in 2024 and Ways to Mitigate Them 

     → Discover the top security risks businesses face and how to manage them effectively.

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FAQs

‍1. What is the main difference between SOC 1 and SOC 2?

SOC 1 focuses on financial controls related to customer transactions and reporting, while SOC 2 evaluates security, availability, processing integrity, confidentiality, and privacy of customer data. If your service impacts financial statements, you need SOC 1; if you handle sensitive customer data, you need SOC 2.

2. Do I need SOC 2 compliance if I’m a SaaS provider? 

Yes, most SaaS providers benefit from SOC 2 compliance since it proves they follow strict security and privacy controls. If your platform stores, processes, or transmits customer data, clients may require SOC 2 certification to ensure their information is protected.

3. How long does a SOC 2 audit take? 

A SOC 2 Type 1 audit (point-in-time review) can take weeks to a few months, while a SOC 2 Type 2 audit (evaluation over time) typically lasts 3-12 months. The total timeline depends on audit readiness, control implementation, and remediation efforts.

4. Can a company have both SOC 1 and SOC 2 reports? 

Yes, businesses that impact financial reporting and handle sensitive customer data may need both SOC 1 and SOC 2 compliance. For example, a payroll processing company may need SOC 1 for financial transactions and SOC 2 to prove data security.

5. How much does SOC 2 certification cost? 

SOC 2 audits can range from $20,000 to $100,000+, depending on factors like company size, audit scope, readiness, and security controls. Additional costs may include compliance automation tools, consultant fees, and ongoing monitoring to maintain certification.

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