Defined by the AICPA as the first part of the Service Organization Control series, SOC 1 addresses internal controls around financial reporting. SOC 1, 2, and 3 all follow the Statement on Standards for Attestation Engagements (SSAE 18).
While less applicable than its second and third counterparts, SOC 1 applies to businesses (known as a service organizations) that directly interact with financial information for customers or partners.
SOC 1 compliance secures a service organization’s interaction, transmission, or storage of users’ financial statements. SOC 1 reports help service organizations build customer trust and reduce the risk of fraud or financial misstatements. Specifically, a SOC 1 report helps management, investors, auditors, and customers evaluate internal controls over financial reporting within guidelines laid out by the AICPA.
As with most information security frameworks, SOC 1 compliance becomes important to your business when a prospect or customer asks to see your report. This will likely happen if you manage financial data or handle financial reporting for users, like payroll, stock options, retirement plans, and more.
Often, larger enterprises require their vendors to be compliant for the enterprise to pass their own audits. Similarly, you may need to ensure that your vendors are compliant if they are exposed to any user financial reports.
SOC 2 reports are more relevant for organizations that process sensitive or confidential data, such as HealthTech companies or financial institutions. SOC 2 reports can also help organizations demonstrate compliance with HIPAA, GDPR, or PCI DSS regulations.
