SOC Reports – Why your company needs them?


Key Points:

  • SOC reports are a compliance standard for service providers who handle sensitive customer data. E.g. healthcare, banking, SaaS companies.
  • There are three types of SOC reports: SOC 1  for financial reporting, SOC 2 for design and operational effectiveness of internal controls, SOC 3  for presenting SOC 2 report information to the general public.


SaaS adoption has increased across the board, especially in large enterprises. Accelerated digital adoption is a result of the COVID-19 pandemic. It has added to the growing cybersecurity risks of today’s cloud-based environments.

Cloud services provide large enterprises the opportunity to save costs and increase efficiencies. But, it requires them to share sensitive data with service providers.

SOC reports assure customers that their data can be safely handled by SaaS vendors. So, it drives greater transparency and builds trust. It also gives vendors a competitive edge. This article will explain what is a SOC report, the SOC report meaning, and the different SOC report types.

What is a SOC Report?

Introduced in 2011, SOC report stands for system and organizational controls reports. A SOC report definition is a set of compliance standards that analyzes the internal controls of an organization. 

SOC audits cover one or all the trust service criteria or the trust services principles:

  • Security
  • Availability
  • Processing integrity
  • Confidentiality
  • Privacy
  • Controls related to cybersecurity
  • Controls related to financial reporting

Thus, SOC reports detail the vendor lifecycle and offer actionable feedback on vulnerabilities. This helps the organization remove inconsistencies if any.

Having a SOC report sends a strong signal to customers that your organization upholds its policies and procedures. Independent third-party auditors create and confirm these SOC reports. The American Institute of CPAs oversees these auditors, specifically SSAE 18 standard compliance.

SOC examinations are not formally required. But they’re often requested by large enterprises for assurance that vendors are operating in a compliant and ethical manner. You can help prospects make easy hiring decisions by presenting your platform as completely risk-free.

Also check out: SOC 2 Compliance Guide  

Why do you need a SOC Report?

soc reports

SOC reports apply to organizations that provide services or software. E.g., financial services, payroll, healthcare, and data centers. It also applies to third-party service providers like web hosting, cloud storage, and software-as-a-service (SaaS) companies. 

Such organizations store, process, or impact the financial or sensitive data of their user entities or clients. 

SOC reports help customers to understand a vendor’s security and legitimacy of data and systems. It also enables vendors to fix flaws and identify vulnerabilities before customers do.

Most large enterprises need a SOC 2 report before they onboard a service provider. It can be difficult to determine which type of SOC report fits your specific business needs. Hence, let’s understand what each type of report entails. 

Different Types of SOC Reports

types of SOC Report

There are three types of SOC reports: SOC 1, SOC 2, and SOC 3  reports. 

Let’s look at each report in detail:

What is a SOC 1  Report?

SOC 1  reports focus on financial reporting and it is based on the SSAE 16 (Standards for Attestation Engagements) reporting standard. It checks controls that directly affect or have the potential to affect the financial statements of customers.

SOC 1  compliance proves you can ensure that the design and operation of your service are effective and predictable.

Your clients will need a SOC 1  report if you provide a service that may impact your client’s internal controls over financial reporting (ICFR). A SOC 1  attestation demonstrates that you have:

  • General IT controls
  • Business process-related controls e.g. transaction authorizations, reconciliations 

These controls help achieve the objective statements determined by your industry and level of risk.   

There are two types of SOC 1  reports – Type I and Type II:

SOC 1  Type I

It focuses on the description of a service provider’s controls and suitability of their design to achieve control objectives on a specified date. Also, it covers controls relevant to an audit of a user entity’s (customer’s) financial statements. 

It does not check for the operational effectiveness of the control set.

SOC 1  Type 2

It contains the same opinions as a SOC 1  Type I report but adds an opinion on operating effectiveness. 

Designed to reduce the risk of financial inaccuracy, it checks the operational effectiveness of controls over a period of time.

SOC 1  audit reports are restricted to the management of the service provider, its customer, and the customer’s auditors. These reports help customers who need to comply with the Sarbanes-Oxley Act (SOX) of 2002. Other benefits to customers are:

  • Combats corporate and accounting fraud
  • Improves adherence to corporate responsibilities
  • Ensures compliance with financial rules and regulations.

What is a SOC 2 Report?

SOC 2 reports outline five trust services criteria (TSC). They are security, availability, processing integrity, confidentiality, and privacy. These criteria address internal controls unrelated to ICFR.

The TSC is closely aligned with frameworks like the PCI-DSS and the HIPAA security standards. But, unlike PCI-DSS which has explicit requirements, SOC 2 requirements allow more flexibility to decide how to meet the TSC.

Security controls testing is also called common criteria and is mandatory for SOC audits. Whereas the others are optional. You can choose one or more of the criteria that apply to your business practices. Thus, SOC 2 reports are unique to each service provider.

SOC 2 reports are issued under the Attestation Standards 101. They are general provisions that provide a broad-based framework for auditing organizations.

A SOC 2 report includes the following:

  • An opinion letter
  • Management assertion
  • Detailed description of the system or service
  • Details of the chosen trust services categories
  • Testing of controls and its results 
  • Additional information (optional)

The use of SOC 2 reports is restricted to existing and prospective clients.

The reputation and experience of the auditor are important to SOC 2 reporting. The SOC 2 audit is simply the auditor’s opinion of whether the service provider’s controls meet the TSC. 

There are two types of SOC 2 reports – Type I and Type II. 

SOC 2 Type I reports 

It checks the organization’s systems at a specific date or point in time. It does not test operational effectiveness. Organizations usually run a Type I report first to quickly check the level of compliance. 

SOC 2 Type II reports

It tests how an organization’s systems have complied over time. The operational effectiveness of the systems is checked with a sampling methodology.

It could take between 2 months and 12 months but 6 months is most common. It is easier to run a SOC 2 Type 2 report if you’ve run a Type I report before.

What is a SOC 3 Report?

It contains the same information as SOC 2 reports. But it is presented for a general audience rather than an informed one so it is shorter. 

A SOC 2 report contains sensitive information about specific systems and network controls, which should be protected from malicious entities. A SOC 3  report is public-facing, excludes all sensitive information, and does not compromise or disclose internal control details. 

It provides a high-level summary without disclosing details of internal controls so it can be freely distributed. Typically, it contains a short auditor’s opinion, management assertion, and system description. 

SOC 3  reports are used as front-facing reports such as marketing materials. Often, service providers make SOC 3  available on their websites while customers have to request a copy of the SOC 2 report. 

Take a look at this sample SOC 3  report:

The following table provides a quick overview of the three types of SOC reports. Click here to download a free PDF version to help you prepare for your SOC audit. 


Enterprises form alliances with service providers to put in place and manage areas such as IT and accounting. But, they need assurance that their chosen partner is trustworthy, secure, and operating according to industry standards.

A SOC report is the “seal of trust” between enterprises and service providers. But it isn’t that easy, especially if you have never got a SOC audit done. It requires advanced planning, teamwork, and coordination.

Use Sprinto to get your SOC 2 certificate with a hassle-free process. Book Personalized Demo with Sprinto

FAQ: SOC Reports

When are SOC reports required?

SOC reports establishing trust and confidence in the design and operational efficiency of a service provider’s internal controls. 

What are SOC reports?

A SOC report is a common compliance standard. It aims to create more transparency, value, and awareness within service organization reporting. There are three types of SOC reports – SOC 1 , 2, and 3 . 

How often are SOC 2 reports required?

Annual SOC 2 audits are required for service providers.

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