SOC 1, SOC 2 & SOC 3 Compliance 2026 – FedRAMP Authorized GRC + AI Auditor | Continuum GRC

An Overview of Auditing Standards

A System and Organization Controls audit provides a thorough look at an organization’s internal processes and controls. These can range from IT security to financial reporting, privacy, security, and other key elements required for handling sensitive or critical data. For example, a third-party certified public accountant examines a financial firm to ensure that everything is up to current standards. After the audit, a report is issued to reveal compliance or needed improvements.

Service organizations that work with another company where IT compliance audit is needed should undergo regular audits to maintain a competitive advantage, build trust, and demonstrate a commitment to security.

Importance of SOC Audits

SOC audits evaluate service companies to reassure their customers and stakeholders that they’re meeting the most stringent requirements when it comes to laws, compliance, and security. The SOC report also provides insights that can help a firm better understand risk assessment and make necessary changes for efficiency and cost-effectiveness.

Service companies use them to ensure that their internal practices and security measures are up to speed in a fast-changing, at-risk environment. Knowing that their outsourced services can be fully trusted in handling sensitive information gives these companies a competitive advantage, as well as keeping them in compliance with current regulations.

Let’s Talk About Your SOC Audit Needs

Financial institutions, cloud providers, or any kind of service provider that deals with sensitive information should make a regular SOC audit part of their business. For example, an SSAE 18 report gives assurance that a data center has the internal controls needed to protect sensitive information. Impact financial reporting provides a more holistic view of a company, noting the value of non-financial assets and other types of performance metrics.

Continuum GRC offers a variety of professional audit services to keep your organization in compliance and up to speed with the latest security, privacy, and efficiency standards.

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About the Standard

SSAE 18 (Statement on Standards for Attestation Engagements No. 18) is a framework for auditing and reporting on controls at service organizations, primarily in the U.S., and encompasses SOC 1, SOC 2, and SOC 3 audits. Below is a compliance overview of each, focusing on their purpose, scope, and key characteristics:

SOC 1 (Service Organization Control 1)

• Purpose: Focuses on controls at a service organization relevant to a user entity’s internal control over financial reporting (ICFR). It’s designed for organizations that provide services impacting clients’ financial statements.
• Scope: Examines financial reporting controls, such as transaction processing, payroll, or other financial operations outsourced to the service organization.
• Types:
  • Type 1: Evaluates the design and implementation of controls at a specific point in time.
  • Type 2: Assesses the design and operating effectiveness of controls over a period (typically 6–12 months).
• Report Audience: Intended for user entities (clients), their auditors, and management of the service organization. Not for public distribution.
• Key Compliance Aspects:
  • Aligns with financial reporting standards (e.g., GAAP, IFRS).
  • Assesses risks related to financial misstatements.
  • Requires management’s written assertion on control effectiveness.
  • Common for organizations like payroll processors, data centers, or financial service providers.
• Use Case: A company outsourcing its accounting functions to a third-party provider would request a SOC 1 report to ensure the provider’s controls support accurate financial reporting.

SOC 2 (Service Organization Control 2)

• Purpose: Evaluates controls relevant to security, availability, processing integrity, confidentiality, and/or privacy of a service organization’s system, based on the Trust Services Criteria (TSC).
• Scope: Focuses on non-financial controls, emphasizing data security and operational integrity. It’s tailored for technology and cloud-based service providers (e.g., SaaS, data hosting).
• Types:
  • Type 1: Assesses the design of controls at a specific point in time.
  • Type 2: Tests the operating effectiveness of controls over a period (typically 6–12 months).
• Report Audience: Restricted to specific parties with sufficient knowledge (e.g., clients, prospective clients, auditors) under a non-disclosure agreement. Not for public distribution.
• Key Compliance Aspects:
  • Based on AICPA’s Trust Services Criteria, covering:
    • Security: Protection against unauthorized access.
    • Availability: System accessibility as agreed.
    • Processing Integrity: Complete, accurate, and timely processing.
    • Confidentiality: Protection of sensitive data.
    • Privacy: Handling of personal information per privacy policies.
  • Organizations can choose which criteria to include (Security is mandatory).
  • Requires detailed documentation and testing of controls.
  • Common for tech companies, cloud providers, or data centers.
• Use Case: A SaaS provider undergoes a SOC 2 audit to demonstrate to clients that its platform securely handles customer data.

SOC 3 (Service Organization Control 3)

• Purpose: Provides a high-level, general-use report summarizing the results of a SOC 2 audit, intended for public distribution.
• Scope: Covers the same Trust Services Criteria as SOC 2 (security, availability, processing integrity, confidentiality, privacy) but in a less detailed, simplified format.
• Types: Only one type—based on a SOC 2 Type 2 audit, focusing on control effectiveness over a period.
• Report Audience: Publicly available, often used for marketing or to provide assurance to a broad audience (e.g., posted on a company’s website).
• Key Compliance Aspects:
  • Less detailed than SOC 2, omitting sensitive operational details.
  • Includes a seal of attestation (e.g., AICPA SOC seal) if controls meet criteria.
  • Does not include a detailed description of tests or results, unlike SOC 2.
  • Often used by organizations to demonstrate compliance without sharing proprietary information.
• Use Case: A cloud provider publishes a SOC 3 report on its website to assure potential customers of its security and reliability without disclosing detailed control information.

Key Differences

Compliance Considerations

• Standards: All SOC audits are conducted under SSAE 18, issued by the AICPA, ensuring consistency in auditing practices.
• Auditor Requirements: Must be performed by a licensed CPA firm with expertise in attestation engagements.
• Frequency: Typically annual, with Type 2 reports covering a 6–12-month period to demonstrate ongoing compliance.
• Complementary Controls: SOC reports often require user entities to have complementary controls in place (e.g., client-side security measures).
• Global Relevance: While SSAE 18 is U.S.-centric, SOC reports are often mapped to international standards like ISO 27001 or GDPR for broader applicability.

Practical Implications

• Choosing the Right SOC: Organizations select SOC 1 for financial reporting impacts, SOC 2 for data security and operational controls, and SOC 3 for public-facing assurance.
• Cost and Effort: SOC 2 Type 2 is typically the most resource-intensive due to its comprehensive testing over time. SOC 3 is less costly as it leverages SOC 2 results.
• Stakeholder Trust: SOC reports enhance trust with clients, partners, and regulators by demonstrating robust control environments.