SOC 1 and SOC 2 are both attestation reports issued by a licensed CPA firm under the AICPA’s SSAE 18 standard, but they measure different things. SOC 1 reports on controls relevant to a client’s internal control over financial reporting (ICFR) — it matters if your service can affect your customers’ financial statements, like a payroll or billing processor. SOC 2 reports on controls relevant to data security and the AICPA’s five Trust Services Criteria (Security, Availability, Processing Integrity, Confidentiality, and Privacy) — it matters if customers trust you to handle their data, which is the case for almost every SaaS company. For most software startups, the answer is SOC 2. Here’s the full comparison.
What is the difference between SOC 1 and SOC 2?
The core difference is what each report is about: SOC 1 is about money, and SOC 2 is about data. A SOC 1 report describes how well a service organization controls processes that flow into its customers’ financial reporting. A SOC 2 report describes how well a service organization protects the data it stores and processes on behalf of customers. Both are independent audits performed by a licensed CPA firm, both follow the AICPA’s SSAE 18 attestation standard, and both come in a Type 1 and a Type 2 flavor — but they answer different questions for different audiences.
SOC 1 vs SOC 2 comparison table
| SOC 1 | SOC 2 | |
|---|---|---|
| What it covers | Controls over financial reporting (ICFR) | Controls over data security |
| Based on | Control objectives you define | AICPA Trust Services Criteria (5 categories) |
| Question it answers | ”Could this vendor’s controls affect our financial statements?" | "Can we trust this vendor to protect our data?” |
| Who needs it | Payroll, billing, claims, financial transaction processors | SaaS, cloud, data centers, IT/managed services |
| Who reads it | Your customers’ finance teams and their auditors | Your customers’ security, IT, and procurement teams |
| Standard | SSAE 18 (AT-C 320) | SSAE 18 + Trust Services Criteria (TSP 100) |
| Report use | Restricted use (named parties only) | Restricted use (named parties only) |
| Auditor | Licensed CPA firm | Licensed CPA firm |
| Type 1 / Type 2 | Yes | Yes |
The single most useful filter: if a prospect’s security questionnaire or procurement team is asking, they almost always want SOC 2. If their accounting or finance team is asking — usually because your software touches their books — they want SOC 1.
What is a SOC 1 report?
A SOC 1 report is an independent audit of a service organization’s controls that are relevant to its clients’ internal control over financial reporting. “SOC” stands for System and Organization Controls, a reporting framework created by the AICPA (the American Institute of Certified Public Accountants). SOC 1 exists because when you outsource a process that feeds into your financial statements — payroll, invoicing, loan servicing, transaction processing — your auditor needs assurance that the vendor’s controls are sound, since errors there flow straight into your books.
You need a SOC 1 if your software or service can introduce a material error or misstatement into a customer’s financial reporting. Classic examples:
- Payroll processors (a wrong calculation hits the customer’s payroll expense)
- Billing and invoicing platforms (errors affect recorded revenue)
- Claims processing and benefits administrators
- Loan servicing and financial transaction systems
A SOC 1 report’s scope is built around control objectives that the service organization itself defines — there is no fixed checklist, because the relevant controls depend on how your service touches financial reporting. The report is restricted-use: it’s meant only for the service organization, its customers (“user entities”), and those customers’ auditors — not for public marketing.
What is a SOC 2 report?
A SOC 2 report is an independent audit of a service organization’s controls measured against the AICPA’s Trust Services Criteria — the framework for data security, availability, processing integrity, confidentiality, and privacy. Unlike SOC 1’s customizable control objectives, SOC 2 is anchored to a standardized set of criteria, which is why it has become the default “are you secure?” report for the software industry.
Every SOC 2 report is evaluated against one or more of the five Trust Services Criteria (TSC):
- Security (the “Common Criteria”) — protection against unauthorized access. This category is mandatory in every SOC 2 report.
- Availability — the system is available for operation and use as committed.
- Processing Integrity — system processing is complete, valid, accurate, and timely.
- Confidentiality — information designated as confidential is protected.
- Privacy — personal information is collected, used, retained, and disposed of properly.
Only Security is required; you add the other four based on what you promise customers and what data you handle. The core criteria have been stable since the 2017 revision of the Trust Services Criteria. SOC 2 is the report SaaS companies, cloud providers, data centers, and IT/managed-service firms are asked for, because the people doing vendor reviews care about how their data is protected — not your internal accounting.
A large part of a SOC 2 audit is the Security category, which leans heavily on operational evidence like access control, change management, monitoring, and vulnerability management. If you want the auditor’s-eye view of one of those controls, see How to Prove Vulnerability Management for SOC 2 (Evidence Guide).
SOC 1 vs SOC 2: which one do you need?
Choose SOC 1 if your service affects your customers’ financial statements; choose SOC 2 if your customers are trusting you with their data. For the overwhelming majority of SaaS startups, the answer is SOC 2. Use this quick decision guide:
| If you are a… | You most likely need… | Why |
|---|---|---|
| SaaS app storing customer data | SOC 2 | Security questionnaires and procurement gate on data protection |
| Cloud hosting / data center | SOC 2 | Customers care about uptime, access control, confidentiality |
| Payroll or HR-payroll platform | SOC 1 (often + SOC 2) | Output flows into customers’ financial statements |
| Billing / invoicing / revenue system | SOC 1 (often + SOC 2) | Errors affect recorded revenue |
| Fintech / payments / lending | SOC 1 and SOC 2 | Touches both financial reporting and sensitive data |
| Managed IT / DevOps services | SOC 2 | Access to client systems and data |
A practical tell: read the request. When a prospect’s security team sends a vendor security questionnaire, they want SOC 2. When a prospect’s finance team or external auditor asks (frequently around year-end audits), they want SOC 1. If you’ve just received that first enterprise ask and aren’t sure how to respond, read An Enterprise Customer Asked for SOC 2. What Should You Do?.
What about SOC 3? Where does it fit?
SOC 3 is a SOC 2 report rewritten for a public audience. It’s based on the exact same Trust Services Criteria as SOC 2, but it omits the detailed description of controls and the auditor’s test results, leaving a short, general-use summary you can post on your website or hand to anyone. SOC 1 and SOC 2 are restricted-use reports (only for you, your customers, and their auditors); SOC 3 is general-use, which is why companies use it as a public trust seal. You typically pursue SOC 3 in addition to a SOC 2, not instead of it.
Do SOC 1 and SOC 2 each have a Type 1 and a Type 2?
Yes — both SOC 1 and SOC 2 come in a Type 1 and a Type 2 version, and the distinction is the same for both: Type 1 tests control design at a single point in time, while Type 2 tests whether controls operated effectively over a period of time.
| Type 1 | Type 2 | |
|---|---|---|
| What it tests | Are the controls suitably designed on a given date? | Did the controls operate effectively over a period? |
| Time covered | A single point in time | An observation window, typically 3–12 months (commonly 6–12) |
| Effort | Faster, lower cost | Longer, more evidence-intensive |
| Strength of assurance | A snapshot | Proof the controls actually work over time |
| Common use | Quick first proof to unblock a deal | The report enterprises ultimately want |
Type 1 is often used as a faster first step to show controls exist; Type 2 is the stronger report because it proves those controls ran continuously across months. That “across months” requirement is exactly why continuous monitoring beats point-in-time scanning for compliance evidence — a once-a-quarter scan leaves gaps in your observation window. See Security Monitoring vs. Security Audits: What’s the Difference?.
How much do SOC 1 and SOC 2 cost, and how long do they take?
SOC 1 and SOC 2 costs are broadly comparable because both are CPA-firm attestations under the same SSAE 18 standard; the bigger cost driver is Type 1 vs Type 2 and the size of your scope, not which report you pick. Realistic ranges for a small SaaS company:
| Item | Typical range | Notes |
|---|---|---|
| Audit fee (Type 1) | ~$5,000–$15,000 | Single point-in-time; faster |
| Audit fee (Type 2) | ~$10,000–$40,000+ | Scales with scope and TSC categories included |
| Compliance automation platform | ~$2,000–$15,000/yr | Vanta, Drata, Secureframe, etc. (optional but common) |
| Timeline (Type 1) | ~6–12 weeks once ready | Mostly readiness work |
| Timeline (Type 2) | Readiness + a 3–12 month observation window | Type 2 requires time to pass |
The dominant variable is the observation window on a Type 2: you cannot rush it, because the auditor needs to see controls operating over the whole period. That makes early, continuous evidence collection the highest-leverage thing you can do. For a deeper cost-and-timeline breakdown aimed at founders, see An Enterprise Customer Asked for SOC 2. What Should You Do?.
Figures are typical market ranges at time of publication and vary by auditor, scope, and region. Get quotes from a licensed CPA firm for your specific situation.
Can you have both SOC 1 and SOC 2?
Yes, and many companies do — they answer different questions, so they are not mutually exclusive. A fintech, payments, or payroll platform commonly needs both: SOC 1 because its output affects customers’ financial reporting, and SOC 2 because it also stores sensitive customer data that security teams will scrutinize. The two audits can share underlying controls and evidence (access management, change management, monitoring), so doing them together is more efficient than running them years apart.
How Warin helps with the security side of SOC 2
Warin doesn’t issue SOC 1 or SOC 2 reports — only a licensed CPA firm can do that. What Warin does is generate the continuous security evidence the Security criteria of SOC 2 depend on, without a security hire:
- Continuous monitoring across your full external attack surface, so your Type 2 observation window has unbroken coverage instead of quarterly gaps.
- Web application scanning and network scanning that produce dated, exportable reports auditors accept as vulnerability-management evidence.
- Subdomain discovery and asset inventory so the scope you scanned reconciles with the assets you actually run — a question every auditor asks.
- Risk prioritization and fix guides that map findings to remediation SLAs and close the finding-to-fix loop on the record.
For the auditor-ready version of this, read How to Prove Vulnerability Management for SOC 2 (Evidence Guide).
FAQs
Is SOC 1 or SOC 2 better? Neither is “better” — they measure different things. SOC 1 measures controls over financial reporting; SOC 2 measures data security against the Trust Services Criteria. The right one depends on what your service does. For most SaaS companies, SOC 2 is the relevant report; for vendors whose output affects customers’ financial statements, SOC 1 is the relevant one.
Does a SaaS company need SOC 1 or SOC 2? Almost always SOC 2. SaaS companies store and process customer data, so the people reviewing them — security and procurement teams — care about data protection, which is what SOC 2 measures. A SaaS company only needs SOC 1 if its software directly affects customers’ financial reporting (for example, billing or payroll functionality).
What does SOC stand for? SOC stands for System and Organization Controls. It’s a suite of reporting frameworks from the AICPA (American Institute of Certified Public Accountants) for evaluating a service organization’s controls, performed by licensed CPA firms under the SSAE 18 attestation standard.
Are SOC 1 and SOC 2 audited under the same standard? Yes. Both SOC 1 and SOC 2 are performed by licensed CPA firms under the AICPA’s SSAE 18 attestation standard. The difference is the subject matter: SOC 1 uses control objectives the organization defines around financial reporting, while SOC 2 uses the standardized Trust Services Criteria.
What is the difference between SOC 2 and SOC 3? SOC 2 and SOC 3 are based on the same Trust Services Criteria, but SOC 2 is a detailed, restricted-use report (shared only with named parties under NDA), while SOC 3 is a short, general-use summary you can publish publicly. SOC 3 omits the detailed control descriptions and auditor test results found in a SOC 2.
How many Trust Services Criteria are in SOC 2? There are five Trust Services Criteria: Security, Availability, Processing Integrity, Confidentiality, and Privacy. Only Security is mandatory in every SOC 2 report; the other four are included based on the nature of the service and the data involved.
Can one audit produce both SOC 1 and SOC 2? They are two separate reports, but they can be performed together by the same CPA firm and share common underlying controls and evidence (such as access control and change management). Companies like fintech and payroll platforms often pursue both because their service touches both financial reporting and sensitive data.
Final Thoughts
SOC 1 vs SOC 2 comes down to one question: does your service affect your customers’ money, or their data? SOC 1 is the financial-reporting report — relevant to payroll, billing, and transaction processors. SOC 2 is the data-security report, built on the AICPA’s five Trust Services Criteria, and it’s the one almost every SaaS company will eventually be asked for. Both are CPA-issued attestations under SSAE 18, both come in Type 1 (point-in-time) and Type 2 (over a period), and some companies need both.
Whichever you pursue, the part you control today is the underlying security: the Type 2 observation window rewards teams that have continuous evidence, not a last-minute scan. That’s the gap Warin fills.
Building toward SOC 2 without a security team? Warin runs continuous external attack surface monitoring — web app scanning, network scanning, subdomain discovery, SSL/TLS checks, and breach monitoring — and produces the dated evidence auditors expect. Start your 14-day free trial.