About Us | Contact Us
View Cart

SOC What? SOC1 v SOC2

By Dan Hadaway | Tuesday, January 21, 2014 - One Comment

The difference between SOC1 and SOC2 reports.

One of the key concepts we will go over in our discussion about vendor management at the IBA Workshop on March 26th will be “third party assurance.”   


Clients often ask me what the difference between a SOC1 and SOC2 report is, and my answer USED TO BE:

“who cares, you need a SOC2.”

However, I’m having to change that response, now that many bank providers are submitting SOC1 reports with the hope that you’ll accept them as third party assurance.

So instead of who cares, my answer is now:

“Who is ordering the audit reports?”

Here’s why:

The reason we’re seeing SOC1s acquired instead of SOC2s, is probably because Sarbanes Oxley wants a SOC1 report and we IT people want the SOC2 report, and they’re very expensive to get. Thus, since SOC1 reports are required by accountants and we information technology people are still scratching our heads, and because let’s face it, the beancounters are often more powerful in these organizations than the IT folk, we get to learn why a SOC1 is not really what we want.

See, the SOC1 report is meant to test internal controls over financial reporting. This covers a great deal of typical IT risks, but the focus is on internal fraud related to the INTEGRITY of information going into the financial statements.

The SOC2 report is designed for entities such as data centers, I.T. managed services, software as a service (SaaS) vendors, and many other technology and cloud-computing based businesses. And within the SOC 2 framework is a comprehensive set of criteria known as the Trust Services Principles TSP) that are composed of the following five (5) sections:

  • The security of a service organization’ system.
  • The availability of a service organization’s system.
  • The processing integrity of a service organization’s system.
  • The confidentiality of the information that the service organization’s system processes or maintains for user entities.
  • The privacy of personal information that the service organization collects, uses, retains, discloses, and disposes of for user entities.

So though it’s obvious why we want the SOC2 report, many organizations required to get the SOC1 are hoping we’ll accept the SOC1 in lieu of a SOC2. Let’s face it, if we accept SOC1’s, our vendors can cut their audit costs in half.

Accountants care that the information going into the financial statements is secure, has integrity, and is available when it’s time to print those statements. But that doesn’t cover many threats to the information that is NOT going into the financial statements. So if you get a SOC1, you might have more questions to ask.  Or do you?

Because when you review a SOC2, the underlying question is “what controls should I expect.”  And then you make sure (assure) the SOC2 covered those controls.  Likewise, when reviewing a SOC1 the same question and assurance should take place.

So the real question isn’t what’s the difference in general, the real question is what is NOT being tested in the SOC1 process for THIS PARTICULAR VENDOR offering THESE PARTICULAR SERVICES requiring us to share THIS PARTICULAR INFORMATION . . . . that we would expect to have tested. Which, incidentally, is the same question you need to ask for the SOC2 process.

So whether or not you get a SOC1 or SOC2 report, you still need to decide what should be tested and look to ensure it is tested. And then risk rank any missing tests as missing controls.

(Clients:  If you do not already have our SSAE-16 review checklist, be sure to e-mail us!)


Dan Hadaway CRISC, CISA, CISM
Founder and Managing Partner, Infotex

“Dan’s New Leaf” is a “fun blog to inspire thought in the area of IT Governance.”

One Response to “SOC What? SOC1 v SOC2”

Comment from Eric W. Ratliff Sr.
Time 03/09/2015 at 10:00 am

Please send me a copy of your SSAE 16 checklist.

Regards,

Latest News
    Today we present a special BONUS awareness poster for YOUR customers (and users).  This update to the April 2022 Awareness Poster takes some cues from the Dan’s New Leaf article: Why Local? Now that we have our own employees aware, maybe it’s time to start posting content for our customers! Check out posters.infotex.com for the […]
    Awareness is 9/11’s of the battle, if we use it! Another one of those Dan’s New Leaf Posts, meant to inspire thought about IT Governance . . . . One of my old college buddies hates banks.  He was turned down for a loan a long time ago and just can’t let go.  I actually […]
    PRESS RELEASE – FOR IMMEDIATE RELEASE SERVICE NEWS Dateline: Dayton, IN, June 22, 2022 We are proud to announce that infotex will now be supporting Endpoint Detection and Response (XDR/MDR)! We can manage/monitor solutions you already have or offer one as part of our service while still maintaining a segregated response posture. In recent years […]
    Over 85 percent of surveyed companies report having no  centralized monitoring of networked industrial devices… An article review. If you are involved in IT within your organization, you’re probably aware of the importance of being able to monitor relevant activity from your networked devices, especially if your organization is involved in healthcare, finance, or government.  […]
    Another awareness poster for YOUR customers (and users).  Now that we have our own employees aware, maybe it’s time to start posting content for our customers! Check out posters.infotex.com for the whole collection! Download the large versions here: Awareness Poster (Portrait) Awareness Poster (Landscape)   You are welcome to print out and distribute this around […]
    We always strive to bring you the best content that we possibly can. Your opinion on any content, presentation, service, or anything else you have received from us is important! Please click the button below to let us know how we are doing!  
    What to Expect in an Annual Information Security Report to the Board Webinar-Movie Information security ranks as a top risk to financial institutions, both in terms of likelihood and overall impact. It is important that boards receive annual comprehensive reporting from management about the information security risks and incidents, and the actions taken to address […]
    The Five Precepts of IT Vendor Management Webinar-Movie We’re going back to basics on Vendor Management. This webinar will give you a training tool to help out that new person that is starting to take on the gargantuan task that is Vendor Management.
    Another awareness poster for YOUR customers (and users).  Now that we have our own employees aware, maybe it’s time to start posting content for our customers! Check out posters.infotex.com for the whole collection! Download the large versions here: Awareness Poster (Portrait) Awareness Poster (Landscape)   You are welcome to print out and distribute this around […]
    The joint cybersecurity advisory includes the 15 most exploited vulnerabilities reported in 2021… An article review.  While a lot of attention is focused on previously undisclosed or “zero day” attacks, some of the most likely attack vectors are vulnerabilities that have been widely known for weeks or even months.  That’s according to a new joint […]