Today, more than ever, companies rely on System and Organization controls (SOC) to feel confident about the service providers. These SOC reports are imperative to establish the credibility of the service providers and address third-part risks to the clients, ensuring that the firm has got adequate and efficient internal controls in place. However, before hiring any firm for SOC, it is crucial to understand the difference between SOC 1 and SOC 2. A Street Partners shares some insightful differences on soc1 vs. soc2 that would help companies win clients’ trust and make them feel confident.
Key Difference between SOC 1 and SOC 2
When analyzing SOC 1 vs. SOC 2, it is essential first to educate oneself regarding the following differences:
The purpose of SOC 1 is to help the company examine and conduct the financial operations on the control applicable to the clients’ financial statements. In contrast, SOC 2 seeks to review and audit the companies’ internal controls regarding consumers’ data protection, availability, processing, confidentiality, and privacy.
The SOC 1 audit includes managing and processing, and protecting customers’ private information in business and 1T processes. SOC 2 audit uses five different criteria to set their monitoring which depends on their regulatory specifications.
Users of SOC 1 and SOC 2
SOC 1 fits well for Companies that provide contracted out payrolls and clients who ask for payroll processing and data protection controls audits. SOC 2 works for data centers that offer secure data centers.
The Readers and Users of SOC
The readers and users of the SOC 1 report are the external auditors and customer management. On the other hand, the readers and users of the SOC 2 report include customers’ management, prospective customers, corporate partners, external auditors, etc.
Knowing the reasons for getting SOC 1
One of the primary uses of SOC 1 is that it allows the company to review and do financial reports on the company’s internal controls regarding customers’ financial statements. The service provider companies assess the key control priorities for their services while planning the SOC 1 audits. In SOC 1 audit, the control goals apply solely to the company and personal information management processes.
Knowing the reasons for getting SOC 2
SOC 2 helps the service providers examine and report on internal control related to the customers’ data protection, data availability, and confidentiality. The service providers’ responsibility is to determine the criteria that apply to the services provided to the customers.
Understanding SOC Type 1 and SOC Type 2
Once it is decided which SOC suits better as per the reporting requirements, the service provider can choose between Type 1 SOC and Type 2 SOC. The type 1 audit SOC audit assesses and provides the necessary reports on the nature of the control and procedures at the time of audit. The Type 2 audit goes a step further and allows the service providers to report on the effectiveness of its controls over time and assess the control design and nature.
Understanding more about SOC 1 vs. SOC 2
Sometimes, it becomes a daunting task for service providers to decide which service organization’s control audit and what SOC a customer does require. However, when analyzing SOC 1 vs. SOC 2, what matters the most is to ensure that clients’ data is completely safe and protected, keeping clients at peace and satisfied with the service provider’s services.