Understanding the Types of SOC Reports for Service Organizations

In today’s digital economy, third-party risk is a top concern for many organizations. When customers entrust sensitive data to a service provider, they want assurance that the provider has strong controls in place. That assurance comes in the form of SOC reports. The phrase “types of SOC reports” describes a family of attestation engagements offered by the American Institute of CPAs (AICPA) to address different audience needs and risk scenarios. This article explains the main types of SOC reports, how they differ, and how to decide which one best fits your business and your customers’ expectations.

SOC 1: Focus, scope, and typical use

SOC 1 reports evaluate a service organization’s controls relevant to financial reporting. They are primarily used by user entities and their auditors to assess how the provider’s controls could impact financial statements. SOC 1 reports come in two types:

Type I – Assesses the design of controls at a specific point in time. It answers: are the controls well designed to achieve the intended purpose?
Type II – Evaluates both the design and operating effectiveness of controls over a period, typically a minimum of six months. It answers: do the controls operate effectively over time?

When deciding among the types of SOC reports for a financial-audit context, many organizations opt for SOC 1 Type II because it provides a higher level of assurance about ongoing control performance. For customers, a SOC 1 Type II report helps verify that a service provider’s processes around data handling, access, and segregation of duties won’t introduce material misstatements into financial records.

SOC 2: Trust Services Criteria and broader user concerns

Soc 2 is one of the most widely requested types of SOC reports. It focuses on information security and operational controls that protect a system’s data and services. SOC 2 reports are structured around the Trust Services Criteria, which cover five categories:

Security – The system is protected against access by unauthorized parties.
Availability – The system is available for operation and use as committed or agreed.
Processing Integrity – System processing is complete, accurate, timely, and authorized.
Confidentiality – Information designated as confidential is protected as committed.
Privacy – Personal information is collected, used, retained, disclosed, and disposed of in conformity with the entity’s privacy notice and applicable laws.

Like SOC 1, SOC 2 reports offer:

Type I – A point-in-time assessment of the design of controls relevant to the Trust Services Criteria.
Type II – An assessment of the design and operating effectiveness of those controls over a period.

Organizations often choose SOC 2 Type II when customers require ongoing assurance that a service provider’s security and data-handling practices meet recognized standards. The SOC 2 report is particularly valued by tech vendors, SaaS platforms, and cloud providers because it speaks directly to how data is safeguarded in practice.

SOC 3: Public-facing and general-use option

For organizations that want to demonstrate trust without disclosing detailed control testing, SOC 3 provides a high-level, public-facing summary of the same controls evaluated in SOC 2. Key characteristics include:

General-use report – Unlike SOC 2, SOC 3 is intended for broad distribution and does not include detailed testing procedures or results. It’s suitable for marketing materials, prospect conversations, and public websites.
Same criteria – SOC 3 covers the Trust Services Criteria, but presents information in a concise, user-friendly format.

Because SOC 3 does not reveal specific control testing details, it is often used by organizations that want to communicate their commitment to security and privacy to a wide audience without exposing the control environment. If your customers require granular evidence of control effectiveness, a SOC 2 Type II is typically preferred; if a public-facing, high-level assurance suffices, SOC 3 can be an effective option within the broader set of types of SOC reports.

SOC for Cybersecurity: A newer angle on assurance

In recent years, the AICPA introduced SOC for Cybersecurity as a distinct engagement type to address cybersecurity risk beyond traditional financial or privacy controls. This report helps an organization demonstrate its cyber risk management posture to stakeholders, auditors, and regulators. It focuses on an organization’s ability to detect and respond to cybersecurity events, the effectiveness of its governance of cyber risks, and the controls in place to reduce exposure to threats.

Key features of SOC for Cybersecurity include:

A description of the organization’s cybersecurity risk management program.
Assessment of the confidentiality and integrity of information systems and the monitoring and response processes in place.
Independently tested evidence of control design and operation, depending on the service provider’s chosen scope and type (Type I or Type II concepts apply similarly, though the engagement name differs).

SOC for Cybersecurity is particularly relevant for organizations in sectors with high cybersecurity risk or those that serve clients with stringent cyber risk requirements. While still less common than SOC 2 in many industries, it is increasingly requested by customers who want explicit assurance about threat detection, incident response, and ongoing risk mitigation.

SOC for Privacy and other specialized SOC reports

Beyond the core SOC 1, SOC 2, and SOC 3 families, there are specialized reports that address privacy and other data-protection concerns. For example, SOC for Privacy focuses on privacy controls and how personal data is collected, used, disclosed, and protected in alignment with applicable privacy laws and regulations. It can be structured as Type I or Type II, depending on the scope and the amount of testing the practitioner wants to include. These privacy-focused reports are part of the broader ecosystem of SOC reports and are valuable for organizations that must demonstrate compliance with privacy regulations to customers, partners, or regulators.

How to choose the right type of SOC report

Selecting among the types of SOC reports depends on several factors. Consider the following guidance to align your choice with stakeholder needs and risk profile:

– Some industries or customers mandate a specific SOC type (for example, SOC 2 Type II for cloud service providers).

– If the primary concern is data security and privacy, SOC 2 or SOC for Privacy is often most appropriate. For financial reporting controls, SOC 1 is the right fit.

– Public marketing and vendor risk programs may benefit from SOC 3 for broad assurance, while audits tied to financial statements or vendor risk assessments often need SOC 1 or SOC 2 Type II.

– Type II reports provide deeper, time-based testing and are generally more persuasive to customers who need ongoing assurance.

– The scope, complexity, and available control documentation will influence the feasibility and cost of the engagement.

Practical steps to obtain a SOC report

If you decide that a SOC report is right for your organization, here are practical steps to move forward:

– Work with your auditor to determine which systems, processes, and trust criteria to include. Clear scope helps avoid unnecessary testing and cost.

Choose Type I or Type II – For many service providers, Type II offers stronger evidence of ongoing control effectiveness, but it involves a longer audit period.

Prepare documentation – Gather policies, procedures, risk assessments, monitoring results, and change logs. A well-prepared control environment speeds the audit.

Assess readiness – Conduct a readiness assessment or gap analysis before the formal audit to identify and remediate gaps.

Engage independent auditors – Select a qualified CPA firm with experience in the relevant SOC types and your industry.

Plan for remediation – If the audit reveals gaps, develop a remediation plan and establish timelines to address them before issuing the report.

Common pitfalls and best practices

To maximize the value of the engagement and ensure a smooth process, keep these best practices in mind:

– Start with a well-defined, written scope and update only through formal addenda to control costs and timing.

– Ensure the auditor maintains independence and communicates findings clearly and promptly.

– Obtain feedback from key customers about which types of SOC reports they require and what level of detail they expect.

– SOC reports are time-bound. Plan for periodic refreshes or Type II cycles to keep assurance current.

– Treat SOC readiness as part of an ongoing control improvement program rather than a one-off project.

Conclusion: Choosing wisely among the types of SOC reports

Understanding the types of SOC reports is essential for any service organization aiming to reduce risk and build trust with customers. Whether you choose SOC 1 for financial controls, SOC 2 for security and privacy, SOC 3 for broad public assurance, or newer variants like SOC for Cybersecurity or SOC for Privacy, the goal remains the same: provide credible, verifiable evidence that you manage controls effectively. As you navigate the decision, keep in mind your customers’ expectations, regulatory landscape, and your organization’s risk tolerance. With careful scoping, prudent preparation, and a rigorous audit program, you can leverage the right SOC report to reinforce reliability, transparency, and competitive differentiators across your market.”