Business

Soc 1 Vs Soc 2 Vs Soc 3: What’s The Difference?

Are you a new company that is in the software field? Maybe you’re a services provider? If you answered Yes to either question, you might have heard of something called “SOC Report”. But what exactly is it?

What is a SOC Report?

SOC stands for Service Organization Controls. It is a measure of your company’s quality of services, processes, and overall operations. If you are a software company or service provider in any capacity, you will need to furnish a SOC report.

The SOC report is a type of attestation report that assures regulators of your compliance to security and service quality standards.

SOC 1 vs SOC 2 vs SOC 3

You need to hire an external, impartial, certified public accountant (CPA) to conduct the audit. The CPA will conduct a series of tests to check how well your various processes work and how compliant they are. Then the CPA will issue a SOC Report validating the extent of your SOC compliance.

Types of SOC Reports

You may need to get a SOC report for multiple business processes when it comes to SOC compliance. The type of business processes/operations you engage in determines the type of SOC report you need from the CPA.

There are three types of reports you need to know about.

SOC 1 Report

Are you outsourcing your company’s payroll processes or payment management to an external, third-party service company? Do you plan to hire an external verification agency to vet a client or employee’s background? In these cases, you will need to comply with SOC 1.

Essentially, the SOC 1 report is needed by companies who are outsourcing their internal financial services to an external party. SOC 1 is also needed if you outsource services that may put your client’s financial information & statements at risk or affect them somehow.

SOC 2 Report

The SOC 2 report focuses on non-financial processes and operations. Specifically, the CPA checks if you have met all of the Trust Service Principles (TSPs) mandated for service providers. These TSPs include.

  • Confidentiality
  • Accessibility
  • Security
  • Processing integrity.
  • Privacy

So, let’s say you plan to offer a SaaS facility, network monitoring service or data backup/repository services. Irrespective of whether you use an external technology vendor to provide these services or not, you’ll need to furnish a SOC2 report. This report ensures you have complied with all five TSPs with care.

SOC 3 Report

Both the SOC 1 and SOC2 reports are confidential. Your organization does not have to share this report with anyone other than a regulator. But, let’s say your customers want to know whether you comply with the TSPs or not. In that case, you can get the CPA to give you a SOC 3 report, in addition to the SOC 2 report.

This is because the SOC 3 is a public document, and it must be made available for anyone who wishes to peruse it. A SOC 3 example would be a report you have made because an organization you are providing cloud services to asks for your TSP compliance status.

Soc 1 vs Soc 2 vs Soc 3 – Which one should you get?

Now you know what SOC types there are. But you may have more questions.

Will only the SOC 1 report be sufficient?

Is SOC 2 or SOC 3 better?

Should I get all SOC 1, 2, 3 certifications?

We can help you answer these questions.

Only if you are an intermediary between a client and a payroll company, who has access to the client’s (and their client’s) financial data, will just the SOC 1 be sufficient. Most service providers and software companies will need to get both the SOC 1 and SOC 2 reports made by the CPA.

So, there is no question of SOC 1 vs SOC 2. Both are equally important.

Another major difference between SOC 1 and SOC 2 is the intention of testing. SOC 1 focuses on whether your company has put in place the right compliance measures and how well-designed they are. SOC 2, on the other hand, focuses on the quality and effectiveness of these processes over a period of many months.

Your CPA will be able to give you a SOC 1 report within a month, while you may need to wait 3-4 months for your SOC 2 report to arrive. Plus, the extensiveness of the testing will also be greater for the SOC 2 report.

Now, as for SOC 3 – this is optional and completely dependent on your company’s requirements. Not every client will ask to see your SOC compliance status. But, if the services you offer pose a high risk to your client or their clients, then you will need to get the SOC 3 made as a precautionary measure.

These SOC 3 reports aren’t very detailed, and they usually only contain a summary of the SOC 2 results. They’ll be written up without any jargon, allowing the layperson to understand your SOC compliance results.

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About the author

Vidya Menon

Vidya is an online content developer for Justwebworld. She has a BA in English Language and Literature and an MA in Current Linguistics. She is a passionate reader, writer and researcher with a background in academic writing.