SOC, or System and Organization Controls, reports are a compliance standard for service providers handling sensitive customer information. SOC reports are a way for companies or businesses to ensure that the service providers are working in a compliant and ethical manner. These SOC reports establish the integrity and dependability of a service provider. This will give the service providers a glaring advantage against their competitors.

Auditors examine numerous aspects of a company while preparing a SOC report. Some of them are:

  • Security
  • Processing Integrity
  • Availability
  • Confidentiality
  • Controls associated with financial reporting
  • Privacy
  • Controls associated with cybersecurity

SOC reports: The various types

The American Institute of Certified Public Accountants (AICPA) is responsible for regulating the SOC reports. The major focus of these reports is on the assurance of effective safeguarding of the clients’ assets. There are four major kinds of SOC reports:

  1. SOC 1
  2. SOC 2
  3. SOC 3
  4. SOC for cybersecurity


It is mainly focused on the financial reporting of a company and is based on the Standards for Attestation Engagements standard of reporting. SOC 1 reports can be further classified into two:

  • Type I
  • Type II

Type I

The report describes the suitability and controls of the design of a service provider to attain the control objectives on a particular date. It is also responsible for covering the topics or controls relevant to the financial statement audit of a client. It is not responsible for checking operational effectiveness.

Type II

It is similar to type I SOC. The only addition to these reports is their operational effectiveness. These reports are developed to decrease the likelihood of financial miscalculations. The SOC type II offers several advantages to customers, like:

  • compliance with the SOX Act, 2002
  • combating accounting and corporate fraud
  • compliance with economic rules and regulations
  • improves compliance with corporate obligations


This is an attestation report delivered by a Certified Public Accounting (CPA) firm. SOC 2 reports outline the Trust Services Criteria, namely security, processing integrity, availability, privacy, and confidentiality. The SOC 2 compliance allows a lot of flexibility in how to fulfill the TSC. The SOC 2 compliance report includes numerous elements, like:

  • opinion letter
  • explanation of the service or system
  • features of the selected TSC
  • management assertion
  • controls testing and the relevant results
  • any other additional relevant information

Type I

These reports are responsible for checking the systems of an organization at a particular moment. They are not responsible for testing operational effectiveness. It is usually run as a quick compliance check.

Type II

It tests the compliance of the systems of an organization over a period. In this case, a sampling methodology is used to test the systems’ operational effectiveness. This test might take anywhere between 2 and 12 months. If you have already run a type I, then it is easier to execute a type II SOC 2.


The SOC 3 reports were formerly called WebTrust or SysTrust. They are very similar to SOC 2, but they are not as comprehensive as SOC 2. They are very short and concise since they are presented to a general audience. These reports are public-facing and do not contain any sensitive information. Also, information related to the internal controls is not disclosed or compromised. This allows companies to freely distribute the SOC 3 reports. Generally, they contain the auditor’s opinion, system description, and management assertion.

The SOC 3 reports are usually used in marketing materials. Customers can easily access them from the website of the service provider.

SOC for Cybersecurity

Cybersecurity attacks have increased tremendously in recent years. This has compelled the AICPA to publish the System and Organization Controls for cybersecurity. It is also known as the Cybersecurity Risk Management Reporting Framework.

The focus of this report is on the various risk management measures the organization has devised to avoid or manage cybersecurity attacks. It is ideal for all kinds of organizations, like companies, businesses, or non-profits.

SOC bridge letter

A SOC bridge letter is a document issued to a service organization to ensure that the clients are SOC 1 and SOC 2 compliant. This report is an interim report before the next SOC 2 audit.

Why Does Your Company Need a SOC report?

The SOC reports are applicable to companies and businesses responsible for providing software or services. Examples include companies providing healthcare, data, payroll, and financial services. It can also apply to service providers such as SaaS (software-as-a-service), web hosting, and cloud storage companies. These organizations save, process, and influence sensitive, personal, or financial data of the clients or user entities.

The SOC reports will enable clients or consumers to comprehend the legitimacy and security of a vendor. The vendors will also be able to identify the vulnerabilities and flaws in their systems and fix them appropriately even before a consumer finds them. Most huge corporations require a SOC report before they use the features of a service provider.

Thus, the SOC report acts as a means to build trust between the service provider and the client. This will also ensure that the service provider will work ethically and efficiently.

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