Do you need both SOC 1 and SOC 2?

If you're fielding compliance requests from clients, you've probably encountered both SOC 1 and SOC 2. They sound similar, but they serve entirely different purposes. Understanding which one you need can save you time, money, and audit fatigue.

SOC 1 reports focus on internal controls over financial reporting (ICFR). They're designed for service organisations whose services could materially impact a client's financial statements. Think payroll processors, billing platforms, or loan servicers. Your client's auditors rely on SOC 1 to ensure your controls won't introduce errors into their financial reporting.

SOC 2 reports, on the other hand, address controls relevant to the Trust Services Criteria: Security (required), Availability, Processing Integrity, Confidentiality, and Privacy. According to the AICPA, SOC 2 is ideal for technology and cloud service providers who need to demonstrate how they protect customer data. Studies show that SaaS companies are increasingly asked for SOC 2 reports during vendor onboarding.

So which do you need? Let's break it down.

You need a SOC 1 report if your services directly affect your clients' financial statements. This typically applies if you:

• Process payroll, tax withholdings, or employee compensation
• Handle billing, invoicing, or accounts receivable/payable
• Manage loan servicing, payment processing, or transaction reconciliation
• Provide revenue recognition or financial close software

SOC 1 follows the Statement on Standards for Attestation Engagements No. 18 (SSAE 18). Under SSAE 18, you're required to document risk assessments, monitor subservice organisations, and provide a written assertion from management about your control environment. The report is intended for a restricted audience: your client's auditors and their management teams.

There are two types:

SOC 1 Type 1: Reports on the design of controls at a specific point in time. It answers: "Are your controls designed properly?"

SOC 1 Type 2: Reports on the design and operating effectiveness of controls over a period (typically 6–12 months). It answers: "Do your controls work as intended over time?"

Most publicly traded companies and regulated entities will request a SOC 1 Type 2 because it provides stronger assurance and covers operational effectiveness.

You need a SOC 2 report if you store, process, or transmit customer data and your clients want assurance about your information security practices. SOC 2 is the compliance standard of choice for:

• SaaS and cloud service providers
• Data centres and hosting platforms
• Managed service providers (MSPs)
• HR, CRM, or marketing automation platforms
• API providers and integration tools

SOC 2 compliance is based on five Trust Services Criteria. Security is mandatory, the others are optional depending on what your service does:

1. Security: Protects against unauthorised access. In 2026, this includes expectations for multi-factor authentication (MFA), least-privilege access, and device inventory management.
2. Availability: Ensures system uptime, disaster recovery planning, and performance monitoring.
3. Processing Integrity: Confirms that data processing is accurate, timely, and authorised.
4. Confidentiality: Protects sensitive data (e.g., PII, intellectual property) through encryption and data classification.
5. Privacy: Addresses how personal data is collected, used, retained, and disclosed.

Like SOC 1, SOC 2 comes in Type 1 and Type 2 variants. Type 2 reports are far more valuable because they assess how your controls perform over a period, not just at a single point in time.

Some organisations need both reports because their services impact client financials and handle sensitive data. You're most likely to need both if you operate in:

Fintech and payment processing: If you process transactions or manage billing that affects client revenue or expenses, you need SOC 1. If you also store cardholder data, merchant information, or PII, you need SOC 2.

Payroll and HR platforms: Payroll affects financial statements (SOC 1 territory), but you're also handling employee Social Security numbers, bank details, and health information (SOC 2 territory).

SaaS financial platforms: Cloud-based accounting, invoicing, or spend management tools often need SOC 1 to satisfy client auditors and SOC 2 to satisfy IT security teams evaluating vendor risk.

Banking-as-a-Service (BaaS) providers: If you're bridging traditional banks with user-facing apps, you need SOC 1 for transaction accuracy and SOC 2 for platform integrity and data security.

The good news? Many controls overlap. Access management, change management, system monitoring, and incident response often satisfy requirements for both frameworks. Running the audits in parallel can reduce redundancy and audit fatigue.

SOC 3 is essentially a public-facing summary of a SOC 2 report. It confirms that you passed a SOC 2 audit but doesn't disclose the details of your controls or the auditor's testing. You can share SOC 3 reports freely on your website or in marketing materials, whereas SOC 1 and SOC 2 are restricted-use documents.

SOC 3 is useful for top-of-funnel credibility, but it won't satisfy procurement teams or auditors who need to evaluate your specific control environment.

Start by asking your clients. If you're regularly asked for SOC 1, SOC 2, or both during sales cycles or vendor assessments, that's your clearest signal.

If client demand isn't clear yet, consider:

• What services do you provide? If they touch client financials, lean towards SOC 1. If they involve data storage, processing, or transmission, lean towards SOC 2.
• Who are your typical clients? Enterprise and publicly traded companies often require SOC 1 for financial service providers. B2B SaaS buyers almost universally request SOC 2.
• What do your competitors have? If every competitor in your space has SOC 2 Type 2, not having one puts you at a competitive disadvantage.

You can also compare SOC 2 to other frameworks like ISO 27001. While SOC 2 is US-centric and attestation-based, ISO 27001 is an international certification with a broader scope for information security management. Many European SaaS companies pursue ISO 27001 instead of or in addition to SOC 2, depending on their target markets.

Neither SOC 1 nor SOC 2 is mandated by law. They're voluntary frameworks. But that doesn't mean they're optional in practice.

If your service impacts a client's financial audit, their auditors may refuse to sign off without a SOC 1 report. If you're a SaaS provider selling to enterprises, procurement teams will expect SOC 2 (or ISO 27001) as part of their vendor risk assessment.

In other words, these reports have become table stakes in B2B environments. Not having one can block deals, delay onboarding, and force you into lengthy security questionnaires that take months to resolve.

At Securance, we specialise in helping SaaS and tech companies streamline compliance through our Single Audit, Multiple Standards approach. Whether you need SOC 1, SOC 2, or both, we integrate advisory, assurance, and cybersecurity services to simplify the audit process and reduce the burden on your team.

Our clients appreciate that we don't just tick boxes—we help you build controls that improve your security posture, satisfy auditors, and support business growth. If you're navigating compliance for the first time or looking to consolidate frameworks, we're here to guide you through it.

Ready to move forward? Get in touch to discuss which compliance path makes sense for your organisation.