Service Organization Control (SOC)
What is SOC Report?
A SOC report is a document that verifies your business is following a specific framework of best practices for a particular operation. Depending on the industries you do business with and what products and services you provide, prospects may request to see your organization's SOC report(s).
The purpose of a SOC report
While SOC 1, SOC 2, and SOC 3 reports all provide a different view into your business practices, their primary purpose is the same: to attest to your organization’s ability to protect your clients’ resources and needs.
SOC 1 vs. SOC 2 vs. SOC 3: What’s the difference?
- A SOC 1 report is all about finances. This is for organizations that provide services that may impact their customers’ financial reporting. If you don’t conduct your financial operations responsibly, you put your customers' financial statements, reporting, and integrity at risk. A SOC 1 is a detailed report that examines the controls your organization has in place for its financial reporting and operations to ensure you’re mitigating customer risk.
- A SOC 2 report covers information security. It’s relevant to organizations who manage their customer’s data. A SOC 2 audit reviews your information security practices to ensure that your customer’s data will be safe under your care. Your SOC 2 report will detail your security posture and the controls you have in place to protect your organizational and customer data.
- A SOC 3 report also covers information security, but is less complex. This is for organizations that want to demonstrate their security controls and best practices to a broader audience. It looks at the same controls as a SOC 2 report, but in far less detail. You might produce a SOC 3 report to showcase the effectiveness of your security practices to public audiences, such as in marketing efforts.
Benefits of a SOC 1 report
- Unlocking deals with clients who only do business with vendors that have a SOC 1.
- Proving you’re doing your due diligence to provide accurate financial data.
- Lowering the risk of skewing your own financial data or making it unreliable.
- Reducing the likelihood of providing untrustworthy financial data to your clients and reducing your risk of being sued.
Benefits of a SOC 2 report
- Establishing a strong data security posture.
- Unlocking deals with clients who will only work with vendors that have a SOC 2.
- Lowering your risk of a data breach and avoiding the costly consequences that come with a breach.
- Building and maintaining customer trust.
There are two types of SOC 2 reports:
SOC 2 Type 1 describes your data security controls at a specific point in time.
SOC 2 Type 2 observes your security controls over a period of time to ensure you’re following information security best practices continuously.
Benefits of SOC 3 reports
- SOC 3 audits are beneficial when you want to demonstrate your security practices to a wider and more public audience. SOC 3 is broader and less detailed than a SOC 2, though it covers the same controls.
- While it can be requested by customers or partners, it’s generally used for marketing purposes to improve consumer trust and boost profitability. A SOC 3 can help assure the general public that you follow adequate security protocols so more customers feel safe engaging with your business.
Who needs a SOC 1 report?
SOC 1 reports are about financial reporting and auditing your processes to ensure you’re managing your financial data reliably.
They’re commonly expected from the following kinds of organizations:
- Publicly traded companies
- Payroll processors
- Investment advisors
- Loan servicers
- Medical claims processors
- Data centers
- Business intelligence analysts
A SOC 1 may be needed if your organization’s services could affect your clients’ ability to accurately report their financial data.
Who needs a SOC 2 report?
Data security is important for most modern organizations to some degree, but if your security practices could impact your customer’s data, you may need a SOC 2 report.
Organizations that often need a SOC 2 include:
- SaaS companies
- Data centers and cloud storage providers
- Organizations offering data hosting and processing
- Managed IT service providers
If you handle customer data and present any level of risk to them in the case of a data breach, you may need a SOC 2 report.
Who needs a SOC 3 report?
Many organizations who get a SOC 3 report also have a SOC 2. This is because these reports are similar and can often be prepared in the same audit. However, not every organization who needs SOC 2 will benefit from a SOC 3 report.
SOC 3 reports are common among:
- Publicly traded companies that need to maintain data integrity and security
- SaaS companies and cloud service providers
- Organizations that intake sensitive data from the public
- IT systems management organizations
Organizations that benefit most from SOC 3 are those needing to demonstrate their data security practices more broadly to shareholders or customers.
