SOC 1 vs. SOC 2: A Guide for Your Business

August 11, 2025 By Nick Anderson No Comments 7 minutes

If your business deals with sensitive information, you’ve probably heard about SOC 1 and SOC 2. These two terms get thrown around a lot when companies talk about proving they’re legit to clients or partners. But what’s the real difference between SOC 1 vs. SOC 2, and how do you know which one your business needs? 

Noted: It is important to understand the difference between SOC 1 and SOC 2 to pick the right path. FastestVPN can support both by securing data transfers, which matters for both financial and operational controls.

What Are SOC Reports?

SOC stands for System and Organization Controls. Such reports (reports compiled by independent auditors) are based on regulations established by the American Institute of Certified Public Accountants (AICPA). They are the report card of your business to indicate to the clients that you have good systems in place to guard their information or operations. When you are a service organization like a cloud provider, a payroll processor, or a data center, you can demonstrate that you are not taking shortcuts by reporting on the SOC. 

SOC reports are of three types, which include SOC 1, SOC 2, and SOC 3. We are concentrating on SOC 1 vs. SOC 2, as it is these ones that most businesses are interested in. There is a special purpose in each of them, and the choice is made based on what your firm does and what your customers demand. 

SOC 1: Keeping Financials in Check

What is SOC 1 About?

SOC 1 is all about controls that affect your clients’ financial statements. If your business handles stuff like payroll, loan processing, or hosts financial software, SOC 1 is your pick. It’s based on something called SSAE 18 AT-C 320. It shows that your processes won’t mess up your client’s financial reports.

The people reading SOC 1 reports are usually your clients’ financial auditors or their accounting teams. They want to know your controls are tight enough to keep their books accurate. For example, if you process transactions, SOC 1 proves you’re not introducing errors. 

Types of SOC 1 Reports

There are two types of SOC 1 reports:

• Type I: Looks at whether your controls are set up properly at a single point in time. It’s like a snapshot. 
• Type II: Goes deeper, checking if those controls actually work over a period, like six months or a year. 

What’s the Deal with SOC 1?

• What It Covers: Controls tied to financial reporting, like making sure transactions are recorded correctly. 
• Who Needs It: Auditors and client finance teams. 
• Best For: Businesses whose work impacts clients’ financial statements, like payroll or financial software providers. 
• Goals: You set specific objectives based on what your business does. 

If you’re working with banks or other financial outfits, they’ll often demand a SOC 1 report. Using a reliable tool like FastestVPN to encrypt financial data while it’s moving around can help you meet those standards by keeping things secure. 

SOC 2: Locking Down Data and Trust

What’s SOC 2 About?

SOC 2 is more general. It is about controls that ensure your systems are secure, available, accurate, confidential, and kept private, which is referred to as the Trust Services Criteria. It is a serious issue for tech companies such as cloud providers or SaaS businesses, where data security for the customer is the most important thing. SOC 2 demonstrates to a customer that you are not exposing sensitive information to a hack or downtime.

Clients who care about cybersecurity or system reliability will ask for a SOC 2 report. For instance, if you’re a cloud storage company, SOC 2 proves you’ve got the right safeguards in place.

Types of SOC 2 Reports

Like SOC 1, SOC 2 has two types:

• Type I: Checks if your controls are designed well at a specific moment.
• Type II: Tests if those controls hold up over time, usually six months to a year.

What’s the Deal with SOC 2?

• What It Covers: Security, availability, processing accuracy, confidentiality, and privacy.
• Who Needs It: Clients, partners, or anyone worried about data breaches or system failures.
• Best For: Tech or service companies handling sensitive data, like SaaS or cloud providers.
• Standards: Based on the AICPA’s Trust Services Criteria, but you can tweak them to fit your business.

Getting SOC 2 can make your company look good, especially in tech, where trust is a big selling point. Tools like FastestVPN help by encrypting data, which lines up with SOC 2’s focus on security and confidentiality.

SOC 1 vs. SOC 2: How They Stack Up

To figure out whether SOC 1 or SOC 2 is right for you, let’s compare them head-to-head.

1. What They’re For

• SOC 1: Makes sure your controls don’t screw up clients’ financial reporting.
• SOC 2: Protects data and keeps systems running smoothly, covering security and more.

Say you’re a payroll company, SOC 1 is your focus because you’re handling financial data. But if you’re a SaaS company storing customer info, SOC 2 is what you need to prove you’re secure.

2. What They Look At

• SOC 1: Focuses on financial processes, like getting transactions right or keeping financial systems solid.
• SOC 2: Covers bigger-picture stuff, like cybersecurity, system uptime, and data privacy.

3. Who They’re For

• SOC 1: Written for financial auditors and client accounting teams.
• SOC 2: Meant for clients, partners, or anyone who cares about data security.

4. Who Needs Them

• SOC 1: Companies whose services affect financial reporting, like financial processors or data centers hosting accounting software.
• SOC 2: Tech-heavy businesses, like cloud providers or SaaS companies, where data protection is critical.

5. Rules They Follow

• SOC 1: Uses SSAE 18 AT-C 320 for financial controls.
• SOC 2: Follows the AICPA’s Trust Services Criteria for operational and security standards.

How to Pick Between SOC 1 and SOC 2

Choosing between SOC 1 vs. SOC 2 comes down to a few things:

• What Your Business Does: If you handle financial processes (like payroll or transaction processing), SOC 1 is probably required. If you’re managing sensitive data or system reliability (like cloud services), go for SOC 2.
• What Clients Want: Check your contracts. Financial clients often insist on SOC 1, while tech clients lean toward SOC 2.
• Regulations: Finance industries might mandate SOC 1, while tech or healthcare might push for SOC 2.
• Your Goals: SOC 2 can give you an edge in tech markets by showing you take data security seriously.

Some businesses need both. For example, a data center handling financial software and customer data might go for SOC 1 and SOC 2 to cover all their bases.

Getting Ready for a SOC Audit

Prepping for a SOC 1 or SOC 2 audit takes some effort. Here’s the game plan:

1. Take Stock: Look at your current controls to find any weak spots and make sure they match SOC requirements.
2. Set Your Goals: For SOC 1, figure out your financial control objectives. For SOC 2, pick the Trust Services Criteria that apply.
3. Build Your Controls: Set up policies, processes, and tools like FastestVPN to meet the standards.
4. Bring in an Auditor: Hire a certified CPA firm to do the audit and write the report.
5. Stay on Top of It: Keep checking your controls, especially for Type II reports, to stay compliant.

Doing a dry run before the audit can save you headaches by catching issues early.

FAQs About SOC 1 vs. SOC 2

Wrapping It Up

Figuring out SOC 1 vs. SOC 2 is a big deal if you want to build trust with clients. The controls in SOC 1 are focused on financial reporting, and those of SOC 2 are focused on preventing data loss and system unreliability. The requirement of one or both of the above depends on your business and the expectations of your clients. 

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