The short answer
SOC 1 and SOC 2 are both attestation reports from an independent CPA firm. They are not maturity levels. Neither one is better than the other. They answer different questions for different readers.
A SOC 1 report covers controls at a service organization that are relevant to user entity internal control over financial reporting. In plain terms, it helps a customer's auditor see whether your service could affect the numbers in the customer's financial statements.
A SOC 2 report covers controls over security, availability, processing integrity, confidentiality and privacy. It is built for customers who need evidence that you protect their data and systems. The report follows criteria chosen for that purpose, not financial statement risk.
| Aspect | SOC 1 | SOC 2 |
|---|---|---|
| Primary question answered | Can your controls affect the numbers in our financial statements? | Can your controls protect our data and systems under the criteria you selected? |
| Criteria | Control objectives set for financial reporting risks. | Trust Services Criteria: security plus selected categories. |
| Typical readers | Customer finance teams and external auditors. | Customer security, procurement, and vendor risk teams. |
| Scope boundary | Controls relevant to user entity internal control over financial reporting. | Controls over the systems and data in the system description. |
| Evidence focus | Approvals, reconciliations, processing logs, change tickets, access records. | Access reviews, monitoring, incidents, backups, vendor reviews, change records. |
| Report content | Control objectives, controls, tests, results, system description, auditor opinion. | Management assertion, system description, criteria mapping, tests, results, auditor opinion. |
| Common trigger | Customer auditor needs evidence for a financial statement audit. | Customer security review or contract requires assurance over data protection. |
How SOC 1 works
SOC 1 work starts with control objectives. Management writes objectives for the service, such as accurate processing, timely billing, or complete data transfer. The auditor then tests the controls that support those objectives.
The scope is narrow by design. It includes controls that could affect the customer's financial statements. Common examples are change management for billing code, access to payment files, job scheduling, reconciliation checks, backup restoration, and incident handling where it touches processing. A strong security control that has no link to financial reporting may be left out.
For a Type 2 report, the auditor tests operating effectiveness over a period. Evidence includes approvals, tickets, logs, reconciliations, and exception records. The report lists control objectives, controls, tests, results, and any exceptions. It also states whether subservice organizations are carved out or included, and it names complementary user entity controls that customers must perform. A SOC 1 report supports the customer's audit, but it does not replace the customer auditor's own risk assessment.
How SOC 2 works
SOC 2 uses the Trust Services Criteria. Security is always in scope. Availability, processing integrity, confidentiality and privacy are optional, so a report can cover security only or several categories. Each category adds controls and evidence.
Management writes a system description: the services, boundaries, components, people, procedures, data, and commitments. The auditor tests whether controls meet the selected criteria for the period. Evidence often includes access reviews, change tickets, monitoring alerts, incident records, backup tests, vendor reviews, and policy acknowledgments.
A SOC 2 report is read by security teams, procurement, and vendor risk reviewers. They look for gaps in the system description, missing controls, exceptions, and complementary user entity controls. The privacy criterion is not a full privacy law audit. It tests controls against selected privacy criteria, so do not treat it as a substitute for a legal review of your obligations.
When to choose SOC 1
Choose SOC 1 when a customer's auditor needs evidence for a financial statement audit, or when your service feeds financial reporting. Payroll, billing, payment processing, claims administration, loan servicing, fund administration and managed hosting for financial systems are common cases.
Ask for the exact request in writing. A customer may ask for SOC 1 because their audit firm uses it, not because they want a general security review. Match control objectives to the risks the customer auditor cares about. Do not add controls just to make the report longer.
Watch the boundary. A clean SOC 1 report does not prove your security program is strong. It proves controls relevant to financial reporting operated as described. If customers also send security questionnaires, you may need a SOC 2 report or a shared control matrix to avoid answering the same questions twice.
When to choose SOC 2
Choose SOC 2 when customers ask how you protect their data, systems, and service commitments. SaaS platforms, cloud hosting, managed services, data processors and IT support providers are typical users. Security reviews and vendor risk teams often ask for it.
Pick criteria with care. Security only is common. Add availability only if you have clear uptime commitments and evidence. Add confidentiality if you handle sensitive data under contracts. Add processing integrity if accuracy is central to the service. Add privacy only if you can meet the criteria and have the records to prove it.
Define the system boundary before you write policy. List the infrastructure, software, people, data flows, and subservice organizations in scope. Keep out-of-scope systems out for a reason. Then map each criterion to controls and evidence. If a customer asks for SOC 1 and SOC 2, decide which report is primary and reuse controls where you can, but keep the scopes distinct.
Costs and effort to consider
Cost drivers differ. SOC 1 effort rises with the number of control objectives, transaction types, locations, and subservice organizations. SOC 2 effort rises with the number of criteria, systems in scope, and the maturity of access, change, incident, and vendor management.
Both reports need evidence that exists before the audit period. Policies alone are not enough. You need tickets, logs, approvals, reviews, and records of exceptions. Remediation is often the largest task. A gap assessment before the audit period is cheaper than fixing controls during fieldwork.
Budget time for an annual cycle, not a one-time project. Reports expire, customers ask for the current period, and controls drift. One option for SOC 2 scoping is the Cloudverg SOC 2 readiness assessment at a $7,500 fixed price, which maps your controls to the Trust Services Criteria and gives you a remediation roadmap. Compare it with audit firms, compliance tools, and internal work before you choose.
Frequently asked questions
Does a SOC 2 report replace a SOC 1 report?
No. They answer different questions. A SOC 2 report gives assurance over security and related criteria, not over controls tied to a customer's financial statements. Some service organizations need both reports for different customers.
Can one company get both SOC 1 and SOC 2 reports?
Yes. The reports can share evidence for common controls, such as access and change management. The scopes and criteria stay separate, and each report has its own system description and auditor opinion.
How long does a SOC 1 or SOC 2 report take?
It depends on scope, readiness, and report type. A first report often needs months of remediation before fieldwork starts. Later annual cycles can move faster if evidence is collected throughout the year.