SOC 1 Report (SSAE 18) Explained: What It Is & Why It Matters

What is a SOC 1 Report?

A SOC 1 (System and Organization Controls 1) report is an audit report that assesses a service organization's internal controls over financial reporting (ICFR). It is governed by SSAE 18 (Statement on Standards for Attestation Engagements No. 18), the American Institute of CPAs (AICPA) standard that replaced the older SAS 70 standard in 2017.

SOC 1 reports are used by service organizations — companies that provide outsourced services that could affect their customers' financial statements — to demonstrate to customers and their auditors that adequate internal controls are in place.

Who Needs a SOC 1?

SOC 1 is relevant for companies whose services impact how their customers account for financial transactions. Common examples:

Payroll processors — affect how customers record payroll liabilities
Loan servicers — affect customers' loan receivable balances
Benefits administrators — affect employee benefit expense accounting
SaaS billing and ERP platforms — affect revenue recognition
Data centers and cloud providers — where financial systems are hosted
Transfer agents and fund administrators — for financial services firms

If your product processes, stores, or transmits data that feeds into a customer's financial statements, you likely need a SOC 1.

Type I vs. Type II

SOC 1 Type I

What it covers: Whether the service organization's controls are suitably designed at a specific point in time
Timeframe: A single date (e.g., December 31, 2025)
Use case: Initial compliance, fast-to-market proof for early enterprise sales
Cost/timeline: Lower cost, 2–4 months

SOC 1 Type II

What it covers: Whether the controls are suitably designed AND operating effectively over a period
Timeframe: Typically 6–12 months
Use case: Required for most enterprise customers and regulated industries
Cost/timeline: Higher cost, 6–12+ months (including observation period)

What SSAE 18 Requires

Under SSAE 18, a SOC 1 engagement includes:

Management's description of the service organization's system
Management's assertion that controls are suitably designed (and operating effectively, for Type II)
Auditor's opinion — a CPA firm performs the attestation
Control objectives and related controls — the specific internal controls being assessed
Tests of controls (Type II only) — evidence that controls operated effectively during the period

Why It Matters for Startups

Enterprise Sales Unlock

B2B startups selling to banks, insurers, healthcare systems, or publicly traded companies are almost always asked for a SOC 1 report in procurement. Without it, deals stall or die.

Investor Due Diligence

PE and VC investors with portfolio companies in regulated industries expect their SaaS vendors to have SOC 1 documentation.

Audit Efficiency

Your customers' external auditors use your SOC 1 report to assess their reliance on your controls. A clean SOC 1 reduces friction in their audit process — and yours.

Competitive Differentiation

Having SOC 1 Type II when competitors don't can be a decisive factor in enterprise RFPs.

How 100x Helps

100x Engineering builds the technical infrastructure that supports SOC 1 compliance in 3 weeks:

Control implementation — access controls, change management, monitoring systems, backup/recovery
Evidence collection automation — automated log aggregation and control evidence pipelines
Policy documentation systems — structured policy management tools your auditor can review
Continuous monitoring dashboards — real-time control status visibility

We help you get audit-ready faster, reducing the time and cost of your SOC 1 engagement.