SOC 3 report: what is it, and when is it useful?

Service organizations that have completed their SOC 2 engagement sometimes get a question from their auditor: would you like a SOC 3 as well? And customers regularly encounter a SOC 3 report on a vendor's trust or security page. What exactly is it, how does it relate to SOC 2, and when does it make sense? In this article we lay it out, both for service organizations considering a SOC 3 and for customers who are handed one.

What is a SOC 3 report?

SOC 3 is a report type from the same family as SOC 1 and SOC 2, developed by the AICPA. Like SOC 2, a SOC 3 covers a service organization's controls against the Trust Services Criteria: Security and optionally Availability, Processing Integrity, Confidentiality and Privacy. The big difference is not in what is examined, but in what is reported and to whom.

A SOC 2 report is a restricted use report: it is intended for a limited group of users, such as customers and their auditors, and in practice is almost always shared under NDA. It contains the full system description, the individual controls, the tests performed and their results, including any exceptions. A SOC 3 report, by contrast, is a general use report: it may be freely distributed, published on your website and used in sales material. To make that possible, the content is heavily condensed. A SOC 3 contains the auditor's opinion, the management assertion and a brief description of the system and scope, but no control matrix, no test procedures and no test results per control.

Not a lighter audit, but a lighter report

A persistent misconception is that SOC 3 is a kind of SOC 2 light: a cheaper, faster audit for those who find the real thing too heavy. That is not correct. A SOC 3 report is based on the same audit as a SOC 2 Type II. The auditor performs exactly the same procedures, over the same observation period, against the same criteria. Without a completed SOC 2 Type II audit there is no SOC 3. The difference is purely in the reporting: for SOC 3, the detailed inner workings are left out so the report can be shared publicly.

A practical point follows from this: a SOC 3 is usually a limited additional fee on top of the SOC 2 engagement. The audit has already been done; the extra cost lies in preparing and issuing the separate report. If you already have a SOC 2 Type II, you do not need to go through a second engagement for a SOC 3.

There is another subtle but important difference. Because a SOC 3 contains no test results, there is also no room to present exceptions with context and a management response. The report relies almost entirely on the auditor's opinion. In practice, a SOC 3 is therefore mainly issued when that opinion carries no significant reservations. With a modified opinion, a public report has little appeal, and the nuance a SOC 2 report can provide is missing.

When is a SOC 3 useful for a service organization?

The value of a SOC 3 lies in marketing and sales efficiency. Consider the following situations. You have many smaller prospects or self-service customers who want assurance, but for whom an NDA process and an eighty-page report is too heavy. You want to demonstrate publicly, on your website and trust page, that an independent auditor has examined your controls, without exposing your full control landscape. Or your sales team wants something concrete to share early in conversations, with the full SOC 2 report following under NDA once interest is serious.

For organizations with a small number of large, professional customers, a SOC 3 usually adds little: those customers will ask for the full SOC 2 report anyway, because they need the details for their own risk assessment and their accountants. For SaaS companies with a broad customer base and a public security page, it is often a useful addition.

What is it worth to you as a customer?

Here a warning we consider important as auditors: a SOC 3 report is not a full basis for vendor assessment. You see the opinion and the scope, but not which controls exist, how they were tested and whether there were exceptions. That is exactly the information you need to determine whether the vendor's controls match your risks. The complementary user entity controls, the things you as a customer must arrange yourself, are also only detailed in the SOC 2 report.

So use a SOC 3 for what it is meant for: a first signal that a vendor takes its controls seriously and has them independently examined. For actual due diligence, certainly for critical vendors, always request the full SOC 2 Type II report under NDA and assess it substantively: scope, period, exceptions, management responses, subservice organizations and CUECs. A vendor that shows a SOC 3 but refuses to share the underlying SOC 2 report with a customer under confidentiality raises more questions than it answers.

SOC 3 and European practice

In Europe, and certainly in the Netherlands, we see SOC 3 less often than in the United States. Dutch service organizations often work with ISAE 3402 (for financial reporting processes) or SOC 2 based on the international variant. Within the ISAE family there is no direct counterpart to SOC 3: a publicly shareable summary is not standardized there. Organizations solve this with a certificate page, a summary statement from the auditor, or simply a note that a report is available on request. For companies operating internationally and serving US customers, the combination of SOC 2 Type II plus SOC 3 is a common and recognizable package.

In summary

SOC 3 is the public shop window of a SOC 2 Type II audit: same examination, same period, same criteria, but a report without confidential details that you may share freely. For service organizations with a broad customer base it is a relatively inexpensive way to make assurance visible. For customers it is a first indication, never the endpoint of a vendor assessment. Considering a SOC 2 engagement and wondering whether a SOC 3 adds value in your situation? Feel free to contact us.