January 16, 2026
Understanding what a SOC report really means can help your business avoid costly mistakes. Whether you're preparing for a SOC 2 or SOC 1 audit, knowing the facts can improve your compliance and security posture. In this blog, we’ll break down the different types of SOC reports, explain how they impact your organization's controls, and clear up common misconceptions. You’ll also learn how to prepare for an audit and what to expect from a SOC examination.
A SOC report, short for System and Organization Controls report, is an independent attestation that evaluates how well a service organization manages data and system security. These reports are issued by a certified public accountant (CPA) or firm and follow standards set by the American Institute of Certified Public Accountants (AICPA).
There are different types of SOC reports, each serving a specific purpose. SOC 1 focuses on financial reporting controls, while SOC 2 evaluates controls related to security, availability, processing integrity, confidentiality, and privacy. SOC 3 is a simplified version of SOC 2 for public distribution. These reports help your clients and partners trust that your internal control systems are effective and meet industry standards.
Many businesses misunderstand or misuse SOC reports, leading to compliance issues and failed audits. Here are six common mistakes to avoid:
SOC 1 reports are designed for financial reporting, while SOC 2 reports focus on IT and data security. Using the wrong report type can lead to audit gaps and client mistrust.
SOC compliance isn’t a checkbox. It requires ongoing monitoring and updates to your controls. Waiting until audit time to prepare often results in delays and findings.
SOC 2 reports are based on trust services criteria like security and confidentiality. If you don’t align your controls with these criteria, your report may be incomplete or inaccurate.
SOC audits require input from IT, legal, HR, and operations. Leaving key teams out of the process can lead to gaps in documentation or control failures.
If you use vendors or cloud services, their controls affect your SOC report. Failing to assess third-party risks can weaken your security posture.
Type 1 reports assess controls at a point in time, while Type 2 evaluates them over a period. Choosing the wrong type can impact your credibility with clients.
A SOC report offers several advantages for growing businesses:
Choosing the right SOC audit type depends on your business goals and client expectations. SOC 1 is ideal for companies that impact their clients’ financial reporting, such as payroll or billing services. SOC 2 is better suited for technology and cloud-based companies that handle sensitive data.
SOC 2 audits are based on five trust services criteria: security, availability, processing integrity, confidentiality, and privacy. You can choose which criteria apply to your business. A Type 1 report evaluates your controls at a single point in time, while a Type 2 report examines how well those controls operate over several months.
Understanding these differences helps you plan your compliance efforts and avoid unnecessary costs. It also ensures your clients receive the right level of assurance for their needs.
Getting ready for a SOC examination takes planning and coordination. These steps can help you stay on track:
Start by identifying what systems, processes, and data the report will cover. This helps avoid surprises during the audit.
Decide whether you need a SOC 1, SOC 2, or SOC 3 report. Consider your industry, client needs, and regulatory requirements.
A pre-audit assessment helps you find gaps in your controls and fix them before the official audit begins.
Create clear, detailed documentation for each control. Include policies, procedures, and evidence of implementation.
Partner with an experienced auditor who understands your industry. They’ll guide you through the process and ensure your report meets AICPA standards.
Staying compliant after your SOC report is issued is just as important. Here are some best practices:
Maintaining compliance is an ongoing effort, but it pays off in client trust and reduced risk.
Are you a business with 10 to 100 employees looking to improve your security and compliance? If you're growing fast and need to show clients that your systems are secure, a SOC report can make a big difference.
At Version 2, we help companies prepare for and pass SOC audits with confidence. Our team works with you to assess your current controls, identify gaps, and guide you through the entire process. Contact us today to get started.
A SOC 1 report focuses on internal control over financial reporting. It's used when your services impact a client's financial statements. A SOC 2 report, on the other hand, evaluates how your systems protect data based on trust services criteria like security and confidentiality.
Both reports are issued by a certified public auditor and follow AICPA standards. Choosing the right report depends on your services and client expectations.
Most companies complete a SOC audit annually to maintain compliance. A Type II report requires a review of controls over a period, usually 6 to 12 months. Regular audits help ensure your controls remain effective and up to date.
This ongoing process assures clients and regulators that your system and organization controls are reliable.
Any service organization that handles sensitive data or affects client operations may need a SOC report. This includes SaaS providers, data centers, and financial service firms.
Clients often request these reports to verify your compliance and risk management practices. Having a SOC report can give you a competitive edge.
A SOC 2 report includes a description of your system, the trust services criteria you meet, and the auditor’s opinion on your controls. It may also include test results and management’s assertion.
This report provides detailed insight into how your organization protects data, making it valuable for clients and partners.
A bridge letter is used to cover the gap between the end of your SOC report period and the start of your next audit. It confirms that no major changes have occurred during that time.
This letter is important for maintaining assurance when your SOC report expires, but a new one isn’t ready yet.
Start by identifying your business needs and client requirements. If you affect financial reporting, a SOC 1 report is appropriate. For data security, choose SOC 2.
You’ll also need to decide between a Type 1 or Type 2 report. Type 1 reviews controls at a point in time; Type 2 examines them over a period. Your auditor can help you decide.
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