Customers, partners, and procurement teams increasingly expect service organizations to prove that their controls are designed and operating effectively. For many businesses, a SOC audit is no longer just a compliance exercise—it is a critical step in building trust, accelerating sales, and meeting third-party risk requirements. Understanding the different types of SOC reports can help your organization choose the right path and prepare with confidence.
Learn about the different types of SOC audit reports and which type of audit your organization should have.
A SOC audit report assesses an organization’s ability to provide secure outsourced services. A SOC audit report provides a potential client with insight into the potential risks associated with outsourcing certain financial and technology-related business functions. It also enables a service provider to demonstrate competency and security to potential clients.
SOC reports commonly include SOC 1, SOC 2, and SOC 3 reports. Depending on the assurance needed, a SOC 1 or SOC 2 examination may be issued as either a Type 1 or Type 2 report.
SOC 1 and SOC 2 audits focus on reporting different things. The choice between whether an organization should undergo a SOC 1 or SOC 2 audit depends on the type of services the business provides:
SOC 1 audits are for organizations that perform services that have financial impacts on their clients. In a SOC 1 audit, testing focuses on the organization’s internal financial reporting controls.
Organizations that may require a SOC 1 audit include payment processors, billing organizations, and collections agencies.
SOC 2 audits are designed for organizations providing other types of services. These reports focus on the internal operational and IT controls the organization has in place. Managed Service Providers (MSPs), cloud service providers (Software as a Service, Infrastructure as a Service, etc.), and outsourced IT providers are examples of organizations that may be asked to undergo a SOC 2 audit.
In a SOC 2 examination, organizations are evaluated against the Trust Services Criteria. Security is required in every SOC 2 report, and the other categories may be included based on the services provided and customer commitments:
Complementary User Entity Controls (CUECs) are controls that customers of the service organization are expected to perform in their own environment for the control objectives or Trust Services Criteria to be fully achieved. For example, a service provider may restrict privileged access within its platform, while the customer remains responsible for properly approving user access requests and protecting its own endpoints.
Both SOC 1 and SOC 2 audits and reports can be performed in a couple of different ways. These different assessment methods are labeled as Type 1 and Type 2.
Getting a SOC audit should be a structured, collaborative, and evidence-driven process where an independent firm works closely with your team to understand your environment, define the scope, and then systematically validate that your security and compliance controls are not only well-designed but actually operating as intended in real-world conditions. This process typically involves kickoff meetings, detailed evidence requests, interviews with key personnel, and ongoing interaction as your auditor reviews policies, tests controls, and examines records. The involved activity ultimately culminates in an objective report that provides assurance to customers and stakeholders that your organization’s controls are effective and trustworthy.
A SOC examination is performed by or in close partnership with an independent CPA firm. Management is responsible for defining the system, designing and operating controls, and providing evidence to support those controls, while the auditor evaluates the design of the controls and, for Type II reports, tests whether they operated effectively during the review period.
The scope of a SOC examination is based on the services provided, the systems and infrastructure that support those services, relevant personnel and processes, applicable locations, subservice organizations, and the criteria selected for testing. Clearly defining scope helps ensure the report reflects the environment customers rely on and avoids gaps in coverage.
Auditors typically request documentation and records that demonstrate how controls are designed and how they operate in practice. Common examples include security policies, access reviews, onboarding and offboarding records, change management tickets, vulnerability remediation records, incident response documentation, backup and recovery evidence, vendor review records, and security awareness training completion logs.
A readiness assessment helps organizations identify gaps in controls, evidence, and documentation before a formal examination begins. This can reduce delays, minimize exceptions, and help teams determine whether they are better positioned for a Type I report first or ready to support a Type II review period. For many organizations, preparation takes weeks or months depending on the maturity of the environment and the complexity of the in-scope services.
SOC 2 audits may also be combined with evaluations against other regulatory frameworks. For example, if the services that an organization provides involve touching protected health information (PHI), they may be asked to undergo a SOC 2 + HIPAA audit. Organizations processing financial information for their customers may require a SOC 2 + PCI audit. Or an organization may be asked to demonstrate their compliance with a range of regulations by demonstrating compliance with the HITRUST CSF via a SOC 2 + HITRUST audit.
Related Reading: New HIPAA Rules Tighten Cybersecurity for Healthcare Organizations
One common area of confusion is the difference between SOC 2 and ISO 27001 audits. While both include an external audit of security controls, they have different approaches and end goals. After an ISO 27001 audit, an organization can receive a compliance certificate if their Information Security Management System (ISMS) correctly identifies, analyzes, and addresses all of the risks associated with its information assets. In contrast, a SOC 2 report assesses the organization’s controls designed to manage information security risks to their customers’ data.
A SOC 3 report covers the same controls as a SOC 2 report; however, whereas a SOC 2 report is not for public consumption, a SOC 3 report but is specifically intended for a general audience. This truncated version easier to understand includes the auditor’s insights and is made to be shared with customers, used in sales and marketing, and put on your website.
SOC audits are designed to assess the effectiveness of the controls that a service organization has in place to protect its clients. Meeting the requirements to pass a SOC audit requires preparation and knowledge and shouldn’t begin when a current or potential client asks for a report.
Are you ready to apply more rigor to your SOC audit reporting? Reach out to start the conversation.