Corrected October 30, 2026. The original publication date is retained.
SOC 1 addresses controls relevant to customers’ internal control over financial reporting. SOC 2 addresses controls relevant to the applicable Trust Services Criteria for a specified system. Choose based on what the customer needs to rely on, not which label sounds more comprehensive.
When Is SOC 1 the Better Fit?
Ask whether the outsourced service affects the customer’s financial reporting. Payroll processing, transaction processing and loan servicing can be examples, depending on the activities performed. The examination focuses on the relevant control objectives and controls in scope.
Example Scenario: A company outsources payroll calculations. Its financial-statement auditor needs to understand controls over that processing. A SOC 1 report covering the payroll service may address that need. See the AICPA SOC 1 overview.
When Is SOC 2 the Better Fit?
Ask whether the customer needs assurance about controls relevant to security, availability, processing integrity, confidentiality or privacy. The agreed system and applicable criteria determine what the report covers.
Example Scenario: A customer uses a hosted support platform and wants to understand access safeguards and availability commitments. A SOC 2 examination may address those concerns within its defined scope. It does not automatically establish the accuracy of the customer’s financial statements. See the AICPA SOC 2 overview.
Could You Need Both?
Possibly. One service can create both financial-reporting and other system-control concerns. Ask customers which report, service, criteria or control objectives, and period they require. A report with the wrong scope will not become suitable just because its title includes SOC.
Public companies do not universally have to choose suppliers with SOC 1 reports. Their auditors may obtain evidence through other procedures; customer contracts may nevertheless require a report. PCAOB AS 2601 explains alternative approaches.
Choose the Type and Timing Separately
Type 1 addresses the system description and suitability of control design as of a specified date. Type 2 also addresses operating effectiveness over a specified period. Confirm what the intended report users need; Type 1 is not a mandatory prerequisite to Type 2.
Before comparing proposals, write down the service, customer need, requested report type, scope and timing. Use the same list with each prospective CPA firm so you are comparing equivalent work.