SOC 1 vs. SOC 2 vs SOC 3: Key differences & 2025 guide

Enterprise buyers increasingly require SOC reports as a prerequisite for vendor partnerships. A KPMG 2024 report shows a 23% increase in SOC 2 reports issued in 2023, reflecting the rising pressure vendors face to prove their compliance.

If you're running a service organization, it’s important to understand the differences between SOC 1, SOC 2, and SOC 3 reports. Each one serves a specific purpose and addresses distinct scopes of controls related to data handling and compliance.

The wrong choice can exclude you from major contract conversations before they even begin. On the other hand, having the right SOC report can differentiate you from competitors and accelerate deal closures with security-conscious enterprises.

This guide breaks down what each SOC report covers, who it’s for, and how to determine which one best supports your business and your clients.

What are the different SOC report types?

SOC reports are standardized audits that evaluate how well a company manages data and processes that could affect their clients' operations. These reports provide independent verification that your security controls and business processes are working properly.

The American Institute of Certified Public Accountants (AICPA) developed the System and Organization Controls (SOC) framework to address the growing need for standardized reporting on service organizations' controls. These audits must be conducted by independent, licensed CPAs who evaluate and attest to the effectiveness of your controls.

Each type of SOC report serves a different purpose and audience, examining different aspects of your operations and controls:

What is SOC 1?

SOC 1 reports focus specifically on controls that could impact your clients' financial reporting. If you're a payroll processor, cloud hosting provider, or any service that handles data affecting financial statements, this is likely what your clients' auditors will want to see.

These reports examine whether your internal controls prevent errors or fraud that could mess up your clients' financial records. For example, if you process payroll data, a SOC 1 audit would verify that your controls prevent unauthorized changes to salary information or ensure that payroll calculations are accurate and complete.

There are two types of SOC 1 reports:

• SOC 1 Type I: Evaluates the design of controls at a specific point in time

• SOC 1 Type II: Tests both the design and operating effectiveness of controls over a period (typically 6-12 months)

What is SOC 2?

SOC 2 reports take a broader view, examining controls related to security, availability, processing integrity, confidentiality, and privacy. These five areas are known as the Trust Services Criteria (TSC). This type of audit is what most technology companies pursue.

A SOC 2 audit looks at how you protect customer data, ensure your systems stay online, maintain data accuracy, keep confidential information secure, and handle personal information responsibly. It's become the gold standard for demonstrating cybersecurity practices in the technology industry.

Automate SOC 2 compliance with Rippling's unified platform

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What is SOC 3?

SOC 3 reports cover the same ground as SOC 2 but are designed for public sharing. SOC 3 provides a summary of your security practices without revealing sensitive details about your specific controls.

Companies often use SOC 3 reports on their websites or in sales materials to show prospects they take security seriously, while reserving the detailed SOC 2 report for clients who need deeper technical information. The key advantage of SOC 3 is that it can be freely distributed without confidentiality restrictions. For example, Rippling’s SOC 3 report is publicly available for viewing.

SOC 3 reports are typically shorter and less detailed than SOC 2 reports. They provide a high-level overview of the auditor's opinion without including detailed descriptions of controls or test results. This makes them suitable for marketing purposes while still providing meaningful assurance.

Additional SOC report types include SOC for Cybersecurity, which focuses specifically on cybersecurity risk management programs, and SOC for Supply Chain, addressing supply chain risks.

SOC 1 vs. SOC 2 vs. SOC 3 reports

This comparison below helps you see which report aligns with your business needs and stakeholder expectations:

What is the difference between SOC 1, SOC 2, and SOC 3 reports?

The main distinction comes down to what each report examines and who needs to see it. 

SOC 1 reports zero in on financial controls. These are the processes that could affect whether your clients' financial statements are accurate. If you handle payroll, transaction processing, or accounting data, SOC 1 is probably what matters most to your clients' auditors.

SOC 2 reports cast a wider net, looking at overall security and operational controls. These audits examine whether you can protect data, keep systems running, process information accurately, maintain confidentiality, and handle personal information properly. Most technology companies find SOC 2 more relevant to their operations.

SOC 3 reports use the same criteria as SOC 2 but present findings in a format suitable for public sharing. While SOC 2 reports contain detailed descriptions of your controls (which you probably don't want competitors seeing), SOC 3 reports provide a high-level summary that's safe to share broadly.

Who receives & reviews SOC reports?

User entities (your clients) and their auditors typically review SOC reports as part of their vendor risk assessment process. They use them to evaluate whether working with your organization introduces unacceptable risks to their own operations.

Auditors and compliance teams also rely on these reports to verify that your controls are effective and meet regulatory or contractual requirements. For many companies, having the appropriate SOC report is a prerequisite for doing business with enterprise clients.

Internal stakeholders benefit as well. SOC reports provide an independent assessment of your risk management practices and process controls, often identifying gaps or weaknesses that may have gone unnoticed.

How long does it take to get SOC 1 vs. SOC 2 reports?

The time it takes to complete a SOC report depends on the type of report, your level of readiness, and whether your controls are already in place. In general, SOC 1 reports tend to be quicker, while SOC 2 audits take longer due to their broader scope and more stringent requirements.

A SOC 1 Type I report can usually be completed in one to three months if the necessary controls already exist. A SOC 1 Type II report typically takes six to twelve months, especially if you’re starting from scratch or need time to implement new controls. SOC 2 reports often require more time, particularly for Type II. A SOC 2 Type I report might take up to six months, while a SOC 2 Type II usually spans six months to a year or more, since it involves reviewing how systems perform over a defined period.

When do you need both a SOC 1 and a SOC 2 report?

Some organizations pursue both SOC 1 and SOC 2 reports, especially when they serve clients with different risk concerns or operate in regulated industries. Here are the most common scenarios where both reports are needed:

You offer services that impact financial reporting and handle sensitive data

This need arises in companies that deliver systems or platforms used in financial processes while simultaneously handling large volumes of sensitive customer data. In such cases, SOC 1 provides assurance over transaction-level controls, while SOC 2 demonstrates that security and reliability expectations are met across the broader environment.

You need to meet varying client or regulatory expectations

Clients in different industries often ask for different reports. A financial services client might require a SOC 1 report to satisfy regulatory or audit requirements, while a tech client may be more concerned with security practices and request a SOC 2. Having both reports means you can serve diverse markets.

You want broader risk coverage and a stronger market position

Pursuing both audits demonstrates a comprehensive approach to risk management. It shows you take both financial accuracy and data security seriously, which can be a competitive advantage in deals where clients need extensive due diligence or operate in heavily regulated sectors. 

What are SOC controls?

SOC controls are the specific policies, procedures, and safeguards your organization implements to meet the requirements of your chosen SOC report type. The controls you need depend entirely on whether you're pursuing SOC 1, SOC 2, or SOC 3 compliance.

For SOC 1 reports, your controls focus on financial reporting accuracy. For instance, if you're a payroll processor, you might implement dual approval processes for salary changes and automated reconciliation procedures to ensure payroll calculations are accurate and complete.

For SOC 2 reports, your controls must address the applicable Trust Services Criteria for your organization. If you're pursuing SOC 2 compliance with security and availability criteria, you might implement multi-factor authentication (security) and disaster recovery procedures (availability).

For SOC 3 reports, you use the same SOC 2 controls but present them in a format suitable for public sharing.

The key difference is that SOC 1 controls prevent financial reporting errors, while SOC 2 controls prevent security and operational failures. SOC auditors evaluate whether these controls are properly designed and operating effectively to prevent gaps in your compliance posture.

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SOC 1 vs SOC 2 vs. SOC 3: Which should you choose for your business?

Selecting the appropriate report depends on several key factors:

Business type and industry

Financial services companies, payroll processors, data centers, and organizations handling accounting data typically need SOC 1 reports. Technology companies, cloud providers, and SaaS businesses usually pursue SOC 2. Companies wanting to publicly demonstrate their security practices consider SOC 3.

Client expectations

Your clients often dictate which report you need. Enterprise customers frequently have specific SOC requirements in their vendor contracts. Engaging with key clients or prospects early on can clarify which report aligns best with their expectations.

Regulatory requirements

Some industries have regulations that effectively require certain SOC reports. Healthcare organizations might need SOC 2 for HIPAA compliance, while financial services companies might need SOC 1 for regulatory audits.

Control scope and focus

Consider what aspects of your business pose the greatest risks. If financial accuracy is paramount, SOC 1 makes sense. If data security and system availability are bigger concerns, SOC 2 is probably the better choice.

Reach SOC compliance with Rippling's tools

SOC 2 compliance can be a complex and time-consuming process, but Rippling's comprehensive IT management platform simplifies it by automating many of the necessary controls and streamlining evidence collection. When Rippling pursued its own SOC 2 Type II certification, the company used this opportunity to test how their platform could simplify the compliance process for other organizations.

Rippling acts as an always-up-to-date system of record for employee data, helping companies easily demonstrate compliance with SOC standards around access management, device security, and audit documentation. 

The platform's unified approach means that onboarding, offboarding, app provisioning, and employee device management can all be automated through Rippling to ensure compliance with multiple standards. This automation eliminates the manual processes that often create compliance gaps and provides the consistent, auditable compliance posture that auditors expect to see.

SOC 1 vs. SOC 2 vs. SOC 3 reports FAQs

What's the difference between SOC 1 and SOC 2?

SOC 1 focuses on controls affecting financial reporting, while SOC 2 examines broader security and operational controls. SOC 1 is primarily for clients whose financial statements could be affected by your services, while SOC 2 is for clients concerned about data security and system reliability.

How often should my organization undergo a SOC audit?

Most organizations pursue SOC audits annually, though some choose to update their reports more frequently if their business changes significantly. The key is maintaining current reports that reflect your actual operations and controls.

Is a type I or type II report better?

Type II reports are generally more valuable because they test whether controls operated effectively over time (usually 12 months), not just whether they were properly designed. Type I reports only verify that controls were designed correctly at a specific point in time.

How long does it take to prepare a SOC 1 report?

Preparing a SOC 1 report typically takes between one and three months for a Type I report, assuming your controls are already in place and well-documented. If you’re pursuing a Type II report, which assesses control effectiveness over time, the process usually spans six to twelve months.