What is SOC 1?
Service organizations that impact customer financial reporting—such as payroll processors, accounting platforms, and benefits administrators—carry a special kind of responsibility.
When their systems affect the integrity of financial statements, auditors and stakeholders need assurance those systems are well controlled. That’s where SOC 1 comes in.
SOC 1 is an attestation examination governed by the AICPA. It evaluates the fairness of a service organization’s system description and the suitability and effectiveness of their controls over financial reporting. It’s not about IT security alone—it’s about financial statement accuracy. If your services affect how customers record transactions, calculate balances, or determine financial results, then SOC 1 directly supports your value and trustworthiness.
Why it matters: SOC 1 helps your customers’ auditors assess whether they can rely on your controls. Without this level of assurance, customers may face extra procedures, or even risk qualified opinions on their financials. For many service organizations, a SOC 1 report isn’t just preferred—it’s expected.
How SOC 1 evolved
SOC 1 reporting traces its roots to SAS 70, a pre-2011 standard that was often misunderstood as a certification rather than an examination. In response, the AICPA created the Service Organization Control (SOC) reporting suite, clarifying standards and explicitly tying SOC 1 to internal control over financial reporting (ICFR).
Today, SOC 1 falls under attestation standard AT-C 320. It supports a more rigorous, transparent process that differentiates between the types of assurance provided:
Type 1 vs. Type 2: A SOC 1 Type 1 report examines the controls in place as of a specific date—suitable for early-stage readiness or customer onboarding. A Type 2 report tests those controls over a defined review period (commonly 6 to 12 months), providing stronger evidence of operational reliability. Most mature organizations pursue Type 2 to meet customer and auditor expectations.
Global considerations: Outside the U.S., the ISAE 3402 standard provides a similar structure. Many multinational organizations choose to align with both SOC 1 and ISAE 3402 in a combined engagement to satisfy international customers and auditors.
What the SOC 1 process looks like
Executing a SOC 1 examination encompasses multiple steps, each requiring careful planning and coordination between auditors and the service organization’s management team.
Scoping and planning: The first step is defining the scope. This includes identifying in-scope services, documenting control objectives tied to ICFR, selecting which subservice organizations are relevant (and whether to apply inclusive or carve-out methods), and choosing either a Type 1 or Type 2 report based on timing and stakeholder needs.
System description and management assertion: Management is responsible for preparing a comprehensive system description. This document explains the services provided, the control environment, the roles of subservice organizations, and the specific internal controls in place. Alongside it, management provides a written assertion regarding the fairness of the description and suitability of the controls.
Evidence gathering and testing: The audit team evaluates whether controls are designed appropriately (for both Type 1 and Type 2) and operating effectively (for Type 2 only). Evidence may include system logs, policy documents, configuration reports, and even samples of actual processed transactions. The auditor applies professional skepticism, particularly with automated data or screenshots lacking sufficient context.
Timeline overview: A Type 1 audit can often be completed in a few weeks to two months. A Type 2 process requires a longer runway—a 6- to 12-month review period, followed by testing and report development.
Common SOC 1 challenges and how to avoid them
Despite clear frameworks, organizations frequently encounter pitfalls that complicate the SOC 1 process or undermine the report’s usefulness.
Choosing the wrong report type: Some organizations default to SOC 2—focused on trust services criteria—when ICFR is what's actually in scope. Alternatively, selecting a Type 1 report may leave stakeholders unsatisfied if they expect assurance over a period.
Incomplete control objectives: ICFR control objectives must directly link to how your services affect customer financials. Vague or overly technical controls miss the point and can reduce audit reliability.
Not clarifying complementary controls: Your controls may assume customers perform certain actions or rely on subservice providers (like a cloud host) to meet certain requirements. These assumptions must be clearly documented as complementary user entity controls (CUECs) or complementary subservice organization controls (CSOCs). Omission leads to gaps in reliance.
Mismanaging subservice organizations: Some companies forget to address their dependency on third parties—leaving customers and their auditors uncertain about who controls what. Define whether the SOC 1 includes these parties (inclusive method) or carves them out explicitly.
Insufficient evidence quality: Screenshots, exported dashboards, or loosely linked data may not withstand audit scrutiny. Without provenance and context, evidence may be rejected, leading to delays or control exceptions.
Independence conflicts: Asking the same firm to support your readiness, implement controls, and then perform the examination can create unacceptable conflicts. Auditors must maintain strict independence under attestation standards.
Treating the report as a certification: SOC 1 isn’t a certification—it’s a point-in-time or period-reviewed attestation, and it expires. Stakeholders expect updated reporting annually at minimum to maintain trust.
Looking ahead: The future of SOC 1 in 2026
The SOC 1 landscape is evolving in response to automation, globalization, and increasingly complex service ecosystems.
Expect deeper automation—but with scrutiny: As more companies leverage compliance platforms and integrations for evidence collection, auditors are adjusting their procedures. Automation streamlines processes, but auditors remain responsible for verifying completeness and reliability. Expect greater emphasis on evidentiary integrity and audit trails for digital sources.
Convergence of global reporting expectations: As businesses grow more international, expect increased demand for dual-standard reporting under both AICPA (SOC 1) and IAASB (ISAE 3402). The differences are small, but the global appetite for harmonized assurance is growing.
Continuous monitoring rises: Static, annual audits are losing ground to models that embrace continuous monitoring. Ongoing visibility improves audit readiness and reduces the time between discovery and remediation. In the near future, SOC reporting may trend toward shorter cycles and “evergreen” compliance maturity.
Technology-driven internal controls: Increasing reliance on SaaS platforms, AI tooling, and third-party services will push organizations to invest in more transparent, technology-enabled controls. Internal audit and risk management teams will need to collaborate more closely with compliance functions to maintain robust ICFR environments.
How Thoropass simplifies SOC 1 and gives you the advantage
Compliance shouldn’t slow you down. Thoropass is built by auditors, for today’s service organizations—with a focus on eliminating inefficiencies and delivering audit-ready SOC 1 reports.
Seamless scoping and evidence collection: We map your financial-impacting services to control objectives, identify dependencies, and flag where Type 1 or Type 2 fits your business needs. With 100+ integrations, your evidence is collected in real time, with provenance intact.
Continuous readiness: Our AICPA-reviewed monitors track your compliance posture continuously. Exceptions and ongoing risks are visible year-round—not just before the audit window closes.
Audit expertise without conflict: Thoropass is a licensed CPA firm, bound by attestation standards and external peer review. We never grade our own work—ensuring independence is preserved. Whether we’re your readiness partner or your auditor, the lines are clearly and ethically defined.
End-to-end audit service: Unlike fragmented tooling or paper checklists, Thoropass allows you to execute the entire SOC 1 engagement in-platform. That means fewer duplicative requests, one source of truth, and a faster route to a clean report.
The bottom line: SOC 1 doesn’t need to be a burden. With the right partner and platform, you can reduce prep time, improve control clarity, and deliver the assurance your customers demand—without burning cycles chasing evidence or re-explaining your system architecture. Schedule a discovery session and get started with a smarter approach to SOC 1.
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