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What are the differences between a SOC 1 audit and a SOC 2 audit?

SOC audits are essential for ensuring the reliability and security of an organization’s systems and processes. The two main types, SOC 1 and SOC 2, have distinct purposes and focus on different aspects of operations. Understanding these differences is crucial for businesses aiming to maintain compliance and build stakeholder trust.

SOC audits are essential for ensuring the reliability and security of an organization’s systems and processes. The two main types, SOC 1 and SOC 2, have distinct purposes and focus on different aspects of operations. Understanding these differences is crucial for businesses aiming to maintain compliance and build stakeholder trust.

Main differences between SOC 1 and SOC 2

SOC 1 and SOC 2 audits may appear similar, but they have significant distinctions. SOC 1 audits concentrate on financial reporting controls, providing assurance to clients and their auditors that the service provider’s controls support accurate financial reporting. Conversely, a soc 2 audit examines information security practices, data privacy, and operational integrity.

Purpose and scope

SOC 1 audits have a specific purpose: to evaluate controls directly impacting a client’s financial statements. These audits are particularly relevant for organizations handling financial transactions or processing data affecting their clients’ financial reporting.

SOC 2 audits have a broader scope, assessing a service organization’s ability to meet five trust service criteria: security, availability, processing integrity, confidentiality, and privacy. These audits are crucial for technology and cloud computing companies that manage sensitive customer data.

Criteria and framework

SOC 1 audits follow the Statement on Standards for Attestation Engagements (SSAE) 18 framework, which guides the evaluation of internal controls over financial reporting. The service organization typically defines the specific criteria based on what’s relevant to its users’ internal control over financial reporting.

For SOC 2 audits, the American Institute of Certified Public Accountants (AICPA) pre-defines the criteria based on the five trust service criteria mentioned earlier. This standardized approach ensures consistency across different SOC 2 audits and facilitates easier comparison between service organizations.

Conclusion

SOC 1 and SOC 2 audits serve distinct purposes in the business sector. SOC 1 audits focus on financial reporting controls, making them vital for organizations directly impacting their clients’ financial statements. SOC 2 audits, with their comprehensive scope covering security, availability, processing integrity, confidentiality, and privacy, are crucial for organizations handling sensitive customer data.

Recognizing these differences is essential for businesses selecting the appropriate audit type and for stakeholders interpreting audit results. Both SOC 1 and SOC 2 audits play a critical role in maintaining trust and compliance, providing assurance and building confidence in an organization’s systems and controls.

This article was prepared in cooperation with partner ITGRC Advisory Ltd.

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