Which SOC Report is Right for You?

Explore SOC report nuances with AAFCPAs: Your partner in unraveling and mastering SOC compliance for your business’s needs.

Navigating the landscape of Service Organization Control (SOC) reports can be complex, yet understanding the differences between SOC 1, SOC 2, and SOC 3 reports is essential for businesses leveraging third-party services. Each report serves a unique purpose, tailored to meet the varied needs of service organizations and their stakeholders.

SOC 1 reports focus on controls at a service organization that impact a user entity’s internal control over financial reporting, making them crucial for financial compliance and audit readiness. SOC 2 reports take a broader approach, assessing controls related to security, availability, processing integrity, confidentiality, and privacy—vital for businesses concerned with operational resilience and compliance with industry standards. In contrast, SOC 3 reports provide a general overview of a service organization’s adherence to trust service principles, designed for public distribution and often used as a marketing tool to demonstrate commitment to high operational standards.

No matter which SOC report is relevant to your needs—whether ensuring financial reporting compliance, securing sensitive information, or publicly demonstrating your commitment to operational excellence—AAFCPAs can guide you through the intricacies of SOC reporting. With our expertise, we’ll help you identify the best path forward and provide you with the SOC report that aligns with your strategic goals and compliance requirements.

Get Started with Your SOC Report

AAFCPAs is a true partner. They’re always there for us to help us grow and anticipate challenges or changes on the horizon. They’ve worked with us on all types of SOC reports [SOC 1 Type 1 and 2 plus SOC 2 Type 1 and 2] along with special attestations, process assessments, and SOC readiness. And they make audits clear and understandable. But more importantly, they give us context and guidance because they know us—perhaps even better than many of our own employees.”

Michael Marotta | Governance, Risk, and Compliance Officer, Public Consulting Group LLC (PCG)

SOC 1 Reports: Essential for Financial Reporting Compliance and Audit Preparedness

What are SOC 1 Reports? SOC 1 reports provide a detailed evaluation of the controls at third-party service providers that affect your internal controls over financial reporting (ICFR). These controls are fundamental for adhering to financial regulations and are vital during financial statement audit processes. Governed by the American Institute of Certified Public Accountants (AICPA) and its SSAE 18 standards, SOC 1 reports allow service organizations to showcase the effectiveness of their control mechanisms.

Customizable Controls to Meet Your Business Objectives The flexibility of SOC 1 reports lies in their ability to be customized to the specific operational objectives of the third-party service provider. This adaptability makes SOC 1 an indispensable tool for businesses seeking to ensure their outsourced processes align with their financial compliance and audit readiness goals.

Who Needs SOC 1 Reports? The primary audience for SOC 1 reports includes:

  • Management of Third-Party Service Providers: Demonstrating their commitment to maintaining robust internal controls over financial reporting.
  • User Entities (Clients of Service Providers): Gaining assurance that the outsourced services do not compromise their financial reporting integrity.
  • External Auditors of User Entities: Relying on SOC 1 reports for audit planning and execution purposes.

The Importance of SOC 1 in Supporting Compliance and Decision-Making For businesses leveraging outsourced services, understanding, and utilizing SOC 1 reports is crucial. These reports not only affirm the reliability of the controls in place at third-party service providers but also support strategic decision-making and compliance with financial regulations.

SOC 2 Reports: Comprehensive Overview of Controls for Security, Availability, and More

What are SOC 2 Reports? SOC 2 reports focus on a service organization’s controls related to five key trust service principles: security, availability, processing integrity, confidentiality, and privacy. These detailed assessments are crucial for businesses that outsource operational functions impacting these areas. SOC 2’s flexibility allows organizations to select the principles most relevant to their services while adhering to standardized testing and control criteria. This ensures a consistent approach to assessing and reporting on the effectiveness of these controls.

Why SOC 2 Reports Are Vital for Your Business. SOC 2 reports are invaluable for comprehensive oversight, enhancing vendor management programs, bolstering internal governance, and streamlining risk management strategies. They also play a crucial role in meeting regulatory requirements. By evaluating and reporting on the adequacy and effectiveness of controls concerning the selected trust service principles, SOC 2 reports provide deep insights into the service organization’s operational resilience and compliance.

Intended Audience for SOC 2 Reports. SOC 2 reports cater to a broad audience, including but not limited to:

  • Management and Governance Bodies of Service Organizations: Demonstrating adherence to high standards of security, availability, and more.
  • Customers and Users of Services: Ensuring the services they rely on are secure and reliable.
  • Regulators and Industry Watchdogs: Verifying compliance with industry standards and regulations.
  • Business Partners and Suppliers: Establishing trust in the service organization’s operational capabilities.

Leveraging SOC 2 for Enhanced Trust and Compliance. For entities that depend on third-party services affecting security, availability, processing integrity, confidentiality, or privacy, SOC 2 reports are indispensable tools. They not only affirm the service organization’s commitment to maintaining high standards but also provide assurance to stakeholders on the robustness of the organization’s internal controls.

SOC 3 Reports: Public Validation of a Service Organization’s Commitment to Trust Services Principles

Overview of SOC 3 Reports Unlike the more detailed and restricted SOC 1 and SOC 2 reports, SOC 3 reports offer a high-level overview of a service organization’s controls related to security, availability, processing integrity, confidentiality, and privacy. Designed for public distribution, SOC 3 reports affirm that a service provider has undergone and successfully completed a SOC 2 assessment, meeting the AICPA’s standards for trust services principles. This report provides essential information in a simplified format that’s accessible to anyone, making it an ideal tool for demonstrating a service organization’s commitment to maintaining high standards of control and operation.

Why SOC 3 Reports Matter. SOC 3 reports are particularly valuable for service organizations looking to build trust and transparency with a wider audience. By summarizing the effectiveness of their controls without disclosing sensitive or detailed information, SOC 3 reports serve as an accessible credential that can be shared with prospective customers, partners, and the general public. This makes SOC 3 reports an excellent resource for marketing and demonstrating compliance with industry best practices.

Intended Audience for SOC 3 Reports. The primary users of SOC 3 reports include:

  • Prospective Customers: Providing assurance on the service organization’s operational excellence and commitment to trust services principles.
  • General Public and Other Stakeholders: Offering a clear, understandable validation of the service provider’s controls without the need for specialized knowledge to interpret the report.

Leveraging SOC 3 for Enhanced Market Trust. For service organizations aiming to differentiate themselves and reassure a broad audience of their commitment to security, privacy, and operational integrity, SOC 3 reports are an invaluable asset. By publicly demonstrating that they have met the rigorous standards set forth in a SOC 2 assessment, organizations can enhance their marketability and build stronger trust with customers and partners.

AAFCPAs’ SOC report process delivers fast results, providing clients with actionable insights and growth and betterment plans. Our efficient team management ensures a timely report with the least amount of hassle.

AAFCPAs’ SOC Report Leaders

James Jumes
James Jumes

James Jumes

MBA, M.Ed. | Partner, Business Process & IT Consulting
Robyn Leet
Robyn Leet

Robyn Leet

Partner, Business Process Assessments & Attestations
Andrew Mathieson
Andrew Mathieson

Andrew Mathieson

CISA, CDPSE, CCSFP, HITRUST, CISRCP, CCSK | Director, Business Process & IT Consulting
Certified Ethical Hacker Logo