SOC 1 vs SOC 2: Key Differences
Every CTO, CFO and CEO Must Know

"Do we need SOC 1 or SOC 2?" — This is one of the most common compliance questions leadership teams ask. The answer matters enormously: choosing the wrong report wastes time and money, while missing a required report can cost you enterprise contracts. This definitive guide explains exactly what each report covers, who needs which, and how to decide the optimal compliance strategy for your organization.

The Fundamental Difference

SOC 1 and SOC 2 answer completely different questions:

This distinction determines which report is required — and understanding it will save your organization significant time and money.

Side-by-Side: SOC 1 vs SOC 2

Factor	SOC 1	SOC 2
Focus	Financial reporting controls (ICFR)	Security, availability, privacy controls
Standard	SSAE 18 AT-C 320 / ISAE 3402	SSAE 18 AT-C 205 / Trust Services Criteria
Criteria Framework	Service-specific control objectives	AICPA Trust Services Criteria (TSC)
Primary Audience	Your clients' financial statement auditors	Your clients' procurement and security teams
Who Requires It	Clients whose financials you affect	Enterprise clients assessing vendor security
Common Industries	Payroll, payment processing, financial SaaS	SaaS, cloud, technology companies
Type 1 Available	✅ Yes (point-in-time)	✅ Yes (point-in-time)
Type 2 Available	✅ Yes (6–12 month period)	✅ Yes (6–12 month period)
Audit by	Registered CPA firm only	Registered CPA firm only
Starting Price (KavachOne)	$2,000+	$2,000+

Who Specifically Needs SOC 1?

The test is simple: Do your operations directly affect your clients' financial statements? If yes, SOC 1 is mandatory. Examples:

• Payroll processors — your data feeds directly into clients' P&L and balance sheets
• Accounts payable/receivable automation — your processing affects financial statement line items
• Financial data centers — you host financial systems that clients' auditors must evaluate
• Loan servicing platforms — your records determine clients' balance sheet positions
• Benefits and 401(k) administration — affects employee financial benefit liabilities

Who Specifically Needs SOC 2?

The test: Do your clients store sensitive data on your platform and need assurance about your security? Almost every B2B SaaS company falls into this category:

• Cloud storage and infrastructure providers
• SaaS applications (CRM, ERP, HRIS, collaboration tools)
• Data analytics and business intelligence platforms
• Any company where enterprise procurement asks: "Do you have a SOC 2?"

Who Needs Both SOC 1 AND SOC 2?

Many organizations — particularly FinTech, healthcare billing, and financial data platforms — need both reports. This is especially common when:

• You process both financial data (triggering SOC 1) and hold sensitive customer data (triggering SOC 2)
• Different clients require different reports — some ask for SOC 1, others for SOC 2
• You serve both internal audit teams (who want SOC 1) and security teams (who want SOC 2)

Decision Matrix: Which Report Do You Need?

Your Situation	Get SOC 1	Get SOC 2	Get Both
Pure SaaS with no financial processing	❌	✅	❌
Payroll or payment processor	✅	⚡ Often	✅ Usually
Financial data center	✅	✅	✅
Cloud infrastructure provider	❌ Usually	✅	⚡ Sometimes
Healthcare billing/RCM	✅	✅	✅
Accounting/ERP SaaS	✅	✅	✅
FinTech lending platform	✅	✅	✅
Analytics/BI platform (no financials)	❌	✅	❌