SOC 1 vs SOC 2

When it comes to SaaS security, especially in industries that touch sensitive data, two terms show up often: SOC 1 and SOC 2.

They’re both formal audits.
They’re both issued by the AICPA (American Institute of CPAs).
And they’re both focused on trust.

But they’re not interchangeable — and they serve very different purposes.

This article breaks down their differences in simple terms and helps you understand which one matters more for your business or your vendor.

---

What Is SOC 1?

➡ Focus: Financial Reporting Controls

SOC 1 reports are intended for companies that provide services impacting their clients’ financial statements.

These audits evaluate how well a service provider maintains controls related to financial transactions and reporting accuracy.

Typical SOC 1 applicable industries:

• Payroll processing bureaus
• Accounting and tax automation platforms
• Investment and fund management tools
• Insurance or loan claims processors

The purpose is to reassure internal auditors, CFOs, and financial compliance teams that the data being generated or handled will not distort official financial reports.

---

What Is SOC 2?

➡ Focus: Data Security and Trust Criteria

SOC 2 is designed for technology service providers — especially those storing or processing client data in the cloud.

It evaluates a company’s adherence to five Trust Service Criteria:

1. Security
2. Availability
3. Processing Integrity
4. Confidentiality
5. Privacy

SOC 2 is the gold standard for SaaS companies, HR platforms, CRMs, and any digital system that manages sensitive information — like employee records, user activity, or personal details.

It’s less about financial systems, and more about how securely and ethically client data is managed.

---

📊 SOC 1 vs SOC 2: A Quick Comparison

Feature	SOC 1	SOC 2
Primary Focus	Internal controls over financial reporting	Trust, security, and data governance
Used By	Payroll bureaus, accounting platforms	SaaS platforms, HRMS, CRMs, cloud services
Applicable To	Financial auditors, internal controls	IT, compliance, legal, and data teams
Framework Based On	ICFR (Internal Control over Financial Reporting)	Trust Services Criteria (TSC)
End Audience	Auditors, CFOs	Clients, vendors, regulators
Typical Report Types	SOC 1 Type I and Type II	SOC 2 Type I and Type II
Audit Validity	6–12 months (usually internal)	12-month operational review (Type II)

Why This Matters When Choosing SaaS Vendors

If you’re evaluating a SaaS provider — whether for HR, accounting, sales, or operations — it’s critical to ask the right questions about their compliance.

• If the service impacts your financial reporting, ask for a SOC 1 report.
• If the service involves handling your team’s or clients’ data, SOC 2 is non-negotiable.

In today's data-driven world, SOC 2 compliance is one of the clearest signs of operational discipline and client commitment.

---

Trust Is Earned. SOC Audits Prove It.

SOC 1 and SOC 2 aren’t about buzzwords.
They’re about whether a vendor can back up their claims of reliability and responsibility.

As a client, you don’t need to remember every audit clause.
But you should always look for SOC 2 Type II if you’re trusting someone with your data.

That’s why platforms like HRStop proudly renew their SOC 2 Type II certification — year after year.

---

🔗 Explore More from HRStop

• Why SOC 2 Type II Matters
• SOC 2 Type I vs Type II – What’s the Difference?
• How HRStop Maintains SOC 2 Type II Year After Year
• What Makes an HRMS Truly Secure