How to Choose the Right SOC Report to Build Trust and Support Compliance

May 8, 2026May 7, 2026

PYA Insights

Executive Contacts

Erika Walker

Mike Shamblin

Additional Contributors

Kristen Slone

Many companies rely on outside service organizations to support their day‑to‑day operations. Some use a third party to process payroll, administer employee benefit plans, or manage healthcare claims. Others might use hosted software for their general ledger or electronic medical records. Regardless of the service, the common thread is that companies often depend on other organizations to help them achieve important financial, operational, or compliance goals.

While outsourcing these functions can increase efficiency and expertise, it also raises an important question: How do you know the information and services provided by a service organization are reliable? A System and Organization Controls (SOC) report provides the answer.

What is a SOC report?

SOC reports are independent audit reports issued under the Statement on Standards for Attestation Engagements (SSAE) No. 16/18 and were developed by the American Institute of Certified Public Accountants (AICPA). The purpose of a SOC report is to help service organizations clearly document how their internal controls are designed and whether those controls are operating effectively.

Because SOC reports are issued by independent, third‑party auditors, they also provide users of the report with an added level of confidence in the reliability of the information and services being provided by service organizations.

What are the main types of SOC reports?

SOC reports are designed to address different needs. This article focuses on the three most common SOC reports: SOC 1^®, SOC 2^®, and SOC 3^®, as well as the two report types: Type I and Type II.

What is a SOC 1^® report?

For companies seeking assurance for controls that are relevant to internal control over financial reporting (ICFR), a SOC 1 report is typically the right choice. SOC 1 reports are prepared in accordance with SSAE standards and are intended for situations where a service organization processes or maintains information that could impact a company’s financial statements. Because of this focus, SOC 1 reports are often the preferred report for financial statement auditors and are commonly used during audit planning and risk assessment.

What is a SOC 2^® report?

On the other hand, if a company’s concern centers on the IT environment, such as data security, system availability, processing integrity, confidentiality, or privacy, a SOC 2 report is more appropriate. SOC 2 reports are performed using the AICPA’s Trust Services Criteria and are frequently requested by customers, business partners, and other stakeholders who want assurance over how sensitive data is protected and managed. Due to the level of detail included, SOC 2 reports are typically restricted to authorized users only.

What is a SOC 3^® report?

For organizations that want to demonstrate similar assurances but need a report that can be shared more broadly, they may want to consider the addition of a SOC 3, which requires the organization to first get a SOC 2. SOC 3 reports are based on the same Trust Services Criteria as SOC 2 but provide a high‑level summary rather than detailed descriptions and testing results. Because of their general‑use nature, SOC 3 reports are sometimes used as a marketing or transparency tool to help build trust with customers and the public.

What are Type I vs. Type II reports?

Another key distinction to understand is the difference between Type I and Type II SOC reports. Both SOC 1 and SOC 2 reports are available as either Type I or Type II. The primary differences relate to the scope of testing and the time period covered by the examination:

- Type I report: Focuses on the design and implementation of controls at a specific point in time, evaluating whether controls are suitably designed and placed in operation.
- Type II report: Assesses both the design and operating effectiveness of controls over a period of time, typically 6-12 months, to determine whether controls are functioning as intended.

Because Type II reports demonstrate that controls were operating consistently over time, they are generally preferred by auditors and users who plan to place reliance on the controls.

How can an organization get the most out of a SOC report?

To gain meaningful assurance, it is not enough to simply obtain a SOC report from your service organization. Companies using a report must also review the reports carefully and understand any complementary user entity controls that are their responsibility to implement. When used properly, SOC reports are a powerful tool that supports confidence in financial reporting, operational integrity, and data protection.

Ultimately, choosing the right SOC report helps build trust, supports compliance efforts, and strengthens relationships with auditors, customers, and business partners. Importantly, it also provides peace of mind—both for the organization providing the report and for those who rely on it.

As part of our Audit and Assurance Services, PYA’s experts issue all types of SOC reports and help clients understand and implement the recommendations to improve controls and operational integrity.

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