What Is SOC 2 and When Is It Relevant to Accounting?

From an accounting perspective, the core question SOC 2 helps answer is simple:

When we use this system: is the data secure, available when needed, and processed reliably?

SOC 2 helps organizations demonstrate that the answer is yes.

Key SOC 2 Learnings

SOC 2 is not a financial audit, but it plays a critical role in accounting risk and compliance.

• SOC 2 evaluates how service organizations keep data secure and accurate and ensure system reliability.
• Accounting teams rely on SOC 2 reports when they depend on third-party systems for key processes.
• SOC 2 is often customer-driven rather than auditor-mandated.
• Understanding SOC 2 helps accountants evaluate vendor risk and support audit readiness.

When We Say “Audit,” Are We Talking About a Financial Audit?

This is one of the most common points of confusion, especially for accountants. When “audit” is used in relation to SOC 2, this is not a traditional financial statement audit.

A SOC 2 audit is an independent assurance report issued by certified public accountants. It evaluates whether a service organization’s controls are designed and operating effectively to protect data and ensure reliable system performance.

Financial auditors may review SOC reports as part of a broader audit, but the SOC 2 report itself focuses on controls, not financial balances.

The Five Trust Services Criteria Explained Simply

SOC 2 reports are based on the AICPA’s Trust Services Criteria, which include:

Security

Are access controls, network security, and protection measures in place to prevent unauthorized access or data breaches?

Availability

Will the system be available when users need it, in line with service level agreements?

Processing Integrity

Does the system process data completely, accurately, and on time?

Confidentiality

Is sensitive or confidential data protected appropriately?

Privacy

Are personal data collection and handling practices aligned with stated policies?

Most SOC 2 reports focus primarily on security and availability, with other criteria included based on relevance. Accounting systems typically also include processing integrity. 

When Does SOC 2 Become Relevant to Accounting Teams?

SOC 2 becomes relevant when accounting teams depend on service organizations for systems that impact financial workflows.

Common examples include:

• Close management software
• Reconciliation tools
• Financial reporting platforms
• Payroll and billing systems
• Cloud infrastructure supporting accounting applications

Even though SOC 2 is not a financial audit, it supports accounting teams by helping them assess third-party risk and the reliability of systems feeding financial data.

SOC 2 vs. SOC 1: Why the Distinction Matters

SOC 2 and SOC 1 are often grouped together, but they serve different purposes and apply to different types of systems.

SOC 2: Security and System Reliability

SOC 2 focuses on how a service organization protects data and ensures systems operate reliably. It applies broadly to cloud-based software and service providers across industries.

SOC 2 is commonly used to:

• Demonstrate strong security and availability practices
• Support vendor risk management programs
• Meet customer and stakeholder expectations around data protection

SOC 1: Financial Reporting Integrity

SOC 1 applies only to systems that directly impact financial reporting. It evaluates whether a service organization’s controls support the completeness and accuracy of financial data used in a customer’s financial statements.

SOC 1 is critical when:

• Financial systems generate reports used in audited financial statements
• External auditors rely on system-generated data
• Accounting teams want to reduce manual validation and testing

How They’re Typically Used in Practice

While SOC 2 and SOC 1 are related, they are often driven by different requirements:

• SOC 2 is usually driven by customer expectations and organizational maturity
• SOC 1 is often a baseline requirement driven by audit and compliance needs

Key Differences at a Glance

• SOC 2 answers: Is the data secure, protected, and available when needed?
• SOC 1 answers: Can accountants rely on the system’s outputs for financial reporting?
  

For accounting teams, understanding this distinction helps streamline audits, reduce redundant testing, and evaluate vendors with confidence. SOC 2 signals a mature security posture, while SOC 1 shifts responsibility for key financial controls to the service organization, making the accountant’s job significantly easier.

How Financial Auditors Actually Use SOC Reports

Financial auditors do not perform SOC audits themselves, but they rely on SOC reports during audits.

What auditors typically ask accounting teams to show:

• That SOC reports for in-scope systems were obtained
• That findings were reviewed and addressed
• That Complementary User Entity Controls (CUECs) were identified and followed
• That any subservice organizations were identified and their SOC reports were obtained and reviewed
• That any exceptions were evaluated through risk management processes
  

This applies most directly to SOC 1, but SOC 2 often supports broader vendor risk and control environment assessments.

Why SOC 2 Still Matters Even When SOC 1 Exists

SOC 1 includes some security considerations, but it is not a substitute for SOC 2.

SOC 2 becomes important as organizations grow, handle more sensitive data, or face increased scrutiny from customers, investors, or regulators.

In practice:

• Smaller or early-stage companies may operate without SOC 2
• As organizations scale, SOC 2 becomes a baseline expectation
• SOC 2 signals a mature security posture and responsible data stewardship

For accounting teams, this means greater confidence in the systems they rely on every day.

What Accountants Should Look for in a SOC 2 Report

When reviewing a SOC 2 report, accounting teams should focus on:

• Which Trust Services Criteria are included
• Whether controls are designed and operating effectively
• Any control exceptions or security incidents
• Relevant complementary user responsibilities
• Any subservice organizations and whether their SOC reports have been obtained
• The audit period covered (Type I vs. Type II)

A SOC 2 Type II report generally provides stronger assurance because it evaluates operating effectiveness over time.

SOC 2 as Part of a Strong Control Environment

SOC 2 does not replace SOX, ICFR, or financial audits. Instead, it complements them.

Together, these frameworks support:

• Strong internal controls
• Effective risk management
• Vendor governance
• Audit readiness
• Protection of sensitive and financial data

Accounting teams play a key role in ensuring SOC reports are reviewed, understood, and integrated into the broader control environment.

Why SOC 2 Matters to Accounting

SOC 2 may be rooted in security, but its impact reaches directly into accounting operations. It helps teams evaluate vendor risk, protect financial data, and support confidence in the systems used for reporting.

By understanding when SOC 2 is relevant and how it fits alongside SOC 1 and SOX, accounting leaders can make smarter decisions about technology, controls, and compliance.

Take the next step toward stronger controls and clearer compliance. Get a Demo and see how FloQast helps accounting teams manage controls, streamline the close, and stay audit-ready in an evolving risk landscape.