Know Your SOCs: Understanding SOC 1, SOC 2, and SOC 3 Reports
When it comes to compliance and third-party risk management, mismatched SOC reports can cause confusion and missed expectations. If you’ve ever been unsure which SOC report is relevant—or what makes them different—this guide will clear things up.
Let’s break down the basics and help you understand which SOC report is right for your business.
What Is a SOC Report?
SOC stands for System and Organization Controls, and these reports are issued by independent auditors to evaluate the internal controls of a service organization. There are three main types of SOC reports, and each serves a different purpose depending on your services and your audience.
SOC 1: For Financial Reporting Controls
A SOC 1 report focuses on internal controls over financial reporting (ICFR). If your company provides services like payroll processing, credit card processing, or anything that could directly impact your client’s financial statements, a SOC 1 is the right report.
Key things to know:
- Management defines the controls to be tested.
- Tailored to each organization—useful, but can be hard to compare across companies.
- Most relevant to financial auditors and regulators.
For example, since payroll is typically a major line item in financial statements, a payroll provider’s internal controls would be scrutinized under SOC 1 to ensure they’re reliable and secure.
SOC 2: Operational Controls for Trust and Transparency
A SOC 2 report is based on a standardized framework developed by the AICPA. It’s designed to evaluate how well a company manages data, system availability, and overall IT operations.
SOC 2 focuses on five Trust Services Criteria:
- Security (required)
- Availability
- Processing Integrity
- Confidentiality
- Privacy
Companies choose which criteria to include based on their business model—but security is always required. The consistent framework makes SOC 2 reports easier to compare across companies and industries, which is one reason they’ve become so widely adopted.
SOC 2 is ideal for technology companies, SaaS providers, and any business that handles sensitive data or supports client operations.
SOC 3: A Public-Friendly SOC 2
A SOC 3 report is essentially a more summarized version of a SOC 2. It’s designed for general public consumption and includes the same scope of assessment—but with less detail. While SOC 1 and SOC 2 reports are typically shared only under NDA or by request, SOC 3 reports can be posted on your website or shared freely with customers and stakeholders.
Same effort, different format:
- Based on the SOC 2 framework
- No sensitive or proprietary control details
- Great for marketing, transparency, and trust-building
Choosing the Right SOC Report
Here’s a quick cheat sheet to help you decide:
| Report | Focus | Audience | Shareability |
| SOC 1 | Financial reporting controls | Auditors, regulators | By request only |
| SOC 2 | Operational and IT controls | Clients, partners | By request only |
| SOC 3 | Public version of SOC 2 | General public | Freely shareable |
Final Thoughts
Understanding the differences between SOC 1, SOC 2, and SOC 3 reports can help your business stay compliant, build trust with clients, and avoid confusion during audits or vendor assessments. Make sure you select the right SOC report for your service model—and don’t hesitate to ask your auditor or compliance consultant if you’re not sure which one fits.
Want help determining which SOC report you need—or how to prepare for your next audit? Reach out and let’s talk compliance strategy.