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Learn the main differences between SOC 2 Type 1 and Type 2 so you can make the right choice for your organization.
SOC 2 Type 1 vs. Type 2: How They Differ
Learn the main differences between SOC 2 Type 1 and Type 2 so you can make the right choice for your organization.
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You’ve just received a request from a customer to provide a SOC 2 report.
If you’ve never gone through the SOC 2 compliance journey, you likely have questions —what exactly is a SOC 2 report? What does it entail? Are there different kinds of SOC 2 reports? Which is right for my company?
There are two kinds of SOC 2 reports: Type 1 and Type 2. While there are similarities between the two reports, there are important differences in the amount of time they take, how much they cost, and what the auditor reviews.
In this guide, we break down SOC 2 Type 1 vs. Type 2 to answer your questions and help you pick the right report for your company.
Created by the AICPA, SOC 2 provides criteria for handling customer data based on the five Trust Services Criteria (TSC).
Service organizations determine which of the five Trust Service Principles apply to their organization and then design and implement SOC 2 security controls to comply with the trust services criteria. Auditors will then provide a report that can be shared with customers, attesting to the fact that you've met those criteria.
The Trust Services Criteria provide the foundation for evaluating an organization's controls in a SOC 2 audit. The criteria focus on five key areas (security, availability, processing integrity, confidentiality, and privacy) that determine the scope of the audit and which controls the auditors will assess.
Here is what the auditors will be looking for with each of the criteria:
Security: Your systems and the data stored by your company are protected against unauthorized access and unauthorized disclosure.
Availability: Your systems and the information your clients need are available for operation and use.
Confidentiality: All sensitive information within your systems is protected.
Processing integrity: System processing is complete, valid, accurate, timely, and authorized. Customer data remains correct throughout data processing.
Privacy: Your organization collects, uses, retains, discloses, and disposes of personal information per your pre-stated policies. Although the Confidentiality category applies to any sensitive information, the Privacy category applies only to personal information.
All organizations undergoing a SOC 2 audit are required to include security, but the other four are optional. Your company can choose to include or exclude the remaining criteria based on your specific business model (for example, a SaaS billing platform would likely include processing integrity in its scope to prove that its system processes payments accurately and on time).
SOC 2 attestation provides tangible proof to stakeholders that your organization takes security seriously—so seriously you are willing to take proactive steps to verify that your controls meet industry standards.
In addition to building trust with your customers and prospects, SOC 2 compliance is also important for organizations that collect, store, or process customer data, especially if it’s confidential or highly sensitive, like account numbers or personal health data. If you are a SaaS or a platform as a service company, SOC 2 compliance can assure customers that the data that flows through your system is secure at all stages of transmission.
Large enterprise or even mid-market customers often require SOC 2 compliance before they agree to work with a vendor. Enterprise organizations, especially those with shareholders, could face significant financial or reputational risks if their vendors mishandle data or suffer data breaches. If your organization is interested in bringing on a client of this magnitude, SOC 2 compliance is non-negotiable.
SOC 2 Type 1 is a point-in-time audit report, and it only covers a specific day. This report answers the question: Are you secure today?
In addition, it only covers the design of controls at your organization. This means an auditor only needs to confirm that controls are suitably designed — not the operating effectiveness of those controls. So auditors are essentially validating that if this control were working properly, it would fulfill its purpose.
If you need proof of controls quickly, start with a Type 1 report. Most customers requesting a SOC 2 report expect a Type 2, but a Type 1 shows you are making strides toward SOC 2 compliance.
For example, an early-stage startup might need SOC 2 compliance to win its first client. However, an organization of this size might not have the budget or history of controls in place to undergo a Type 2 audit. So, for a smaller price tag and to get proof quickly, it can opt for a Type 1 report.
Type 1 reports can also be valuable when your organization has recently made significant changes to its controls. A Type 2 report requires three to 12 months of historical evidence showing your controls are operating effectively. Rather than waiting this entire period without any SOC 2 documentation, you can obtain a Type 1 report immediately to demonstrate your new controls are properly designed, then transition to a Type 2 once you've built up the required history.
Small organizations selling to mid-market and below or companies that expect to be acquired but need to show basic security controls are in place may never need a Type 2 report. However, most organizations that get a SOC 2 Type 1 report eventually get a Type 2 as well.
A SOC 2 Type 2 audit examines compliance over a period of time, often covering a period of no more than a year. There’s no minimum or maximum SOC 2 Type 2 audit period. Technically, you could choose to do a five-day audit period, but that wouldn’t provide much value to you or your customers. Each auditor will generally set their own minimum requirements for an observation period.
For a first-time SOC 2 Type 2 report, it’s best practice to consider at least a six-month audit period. However, if you need the report to help you win deals currently in motion, you may want to get a Type 2 done faster and opt for an audit period between three and six months.
A Type 2 report covers both the design of your controls and their operating effectiveness. Because of this, an auditor has much more work to do in a Type 2 audit compared to just auditing the design of the controls required for a Type 1.
While a SOC 2 Type 1 report only provides a snapshot of controls at a single point in time, a Type 2 report demonstrates the effectiveness of your controls over a sustained period.
This extended observation period makes Type 2 reports significantly more valuable to potential customers, especially enterprise and mid-market organizations that require strong evidence of a vendor or service provider’s security posture before entering into business relationships.
The Type 2 report is what most customers expect when they ask to see your SOC 2 report.
When we think of requirements for a SOC 2 report, we think of the TSC. Whether you’re doing a SOC 2 Type 1 or SOC 2 Type 2, the TSC are the same. Both SOC 2 types will also require an independent auditor to dig into your controls and provide you with a report.
But that’s where the similarities end. Below, we cover the main differences you'll need to know.
A SOC 2 Type 1 only needs to cover the design of your controls, whereas a SOC 2 Type 2 must cover the design and operating effectiveness of your controls.
For a Type 1, the auditor only needs to look at the design. They might look at policies, interview you, or do walkthroughs. However, for a Type 2 audit, they have to gather evidence to support the operating effectiveness of all controls for an audit period.
Historically, they validate the operating effectiveness of your controls by performing random sampling. If your organization says they perform daily backups, the auditor may ask for proof that a backup was performed on five specific days within your audit period, such as June 3, June 25, July 1, July 15, and August 4.
A Type 1 report can be done much faster than a Type 2. As soon as you have your controls implemented, you can have an auditor start a Type 1 audit.
Because there needs to be an audit period for a Type 2, you can’t start the audit immediately after implementing your controls. You need to wait until the audit period has passed before you can start the audit. This means your customer or prospect won’t receive the report until the audit period is over and the auditor has completed their review.
The cost of a SOC 2 audit varies based on the audit type you choose. Because a SOC 2 Type 1 report requires less effort and time than a Type 2, a Type 1 audit costs less. Mid-size companies can expect to pay $7,500 to $15,000 for a Type 1 audit, whereas larger companies can expect to pay up to $60,000.
The cost of a SOC 2 Type 2 audit increases significantly. Mid-size companies can expect to pay $12,000 to $20,000 for a Type 2 audit. The total cost for large companies may reach up to $100,000.
If you opt to undergo a Type 1 report first, it’s important to note that customers will likely expect a Type 2 report six to 12 months after the Type 1 is completed. A Type 1 is a one-time report, whereas a SOC 2 Type 2 report is a process you’ll renew annually.
SOC 2 reports do not expire; however, the information may be less relevant over time. This is why an annual report is the industry standard. A SOC 2 Type 2 report from three years ago may no longer contain the most relevant information on your company, specifically your data security and cybersecurity policies and controls.
The time and effort required to complete a SOC 2 Type 2 report makes it a more valuable report compared to a Type 1. A Type 2 report also provides more detail into the effectiveness of your security controls, helping to assure customers that proper safeguards are in place to protect their data.
For an organization undergoing SOC 2 compliance for the first time, the report type you need will depend on how quickly you need to have the report in your hands.
If time is of the essence in proving SOC 2 compliance for customers or prospects, a Type 1 report can be an effective place to start. These reports take considerably less time compared to a Type 2 report because there is no audit period and the auditor only has to verify the design of your controls.
However, if time isn’t a factor, you can start with a Type 1 audit and work toward Type 2 or go directly into the Type 2 compliance process.
The SOC 2 audit process follows a structured path from initial preparation through final report delivery. Below, we help break down the main stages to help you plan effectively and minimize surprises during your audit journey.
For a comprehensive resource, make sure you download our complete SOC 2 compliance checklist below.
The first step in the SOC 2 audit process is deciding whether you need a Type 1 or Type 2. Most organizations will ultimately need a SOC 2 Type 2 report, but if you need proof of SOC 2 compliance quickly, you can start with Type 1.
Once you decide on the type of audit, you need to determine which system components are in scope: infrastructure, data, procedures, software, or people. You’ll also need to consider which of the TSC you need to include in your audit.
For example, you’ll want to include availability if you are a SaaS organization and your customers expect 24/7 access to your software.
Your gap assessment, also called a readiness assessment, enables you to find any issues with your existing procedures, policies, and internal controls.
The assessment will give you a clear picture of your current security posture and if you have any controls that need to be updated or added to meet the applicable TSC.
Plan to spend some time after your readiness assessment to close any gaps. In addition to making necessary software changes, work with your team to formalize procedures around any new controls. You’ll also need to review and update policies, documentation, and training.
After you’ve selected the Certified Public Accountant to do the audit, gather and present your documentation to your auditor so they can review the evidence for any in-scope control. They will verify information and schedule walkthroughs before providing you with their final report.
Whether you choose to start with a Type 1 report or go directly into a Type 2 report, the SOC compliance journey is paved with challenges and complexity. SOC 2 first-timers are often surprised by the amount of time and documentation that’s required.
Drata can help you get up and running with your compliance efforts by automating evidence collection and providing you with auditor-approved security policies for you to make your own. You’ll also have access to Drata’s team of SOC 2 compliance experts ready to walk you through the framework’s often confusing processes.
Below we answer some of the most common questions about SOC 2 Type 1 and Type 2 reports.
SOC 2 Type 1 and Type 2 differ in time, scope, and cost. For a Type 1 report, the auditor examines the design of your security controls. For a Type 2 report, the auditor examines both the design of your controls and their operating effectiveness.
The Type 2 audit generally needs at least three months of data history and as much as 12 months to verify effectiveness. Because of its thoroughness, the Type 2 report costs significantly more than Type 1.
Any organization that needs quick proof that it has controls in place can start with a SOC 2 Type 1 audit. If it has the time, control history, and budget, it can skip Type 1 and move directly to Type 2.
Software as a service and cloud computing organizations are commonly asked to provide a SOC 2 Type 2 report, especially if they are subject to regulations like HIPAA or handle sensitive data, like financial institutions.
Companies that cater to enterprise-level organizations will also likely need to be compliant, as most enterprise clients typically need a SOC 2 Type 2 report before working with a vendor.
SOC 2 reports are restricted-use documents intended for businesses, auditors, and parties under NDA. They contain comprehensive information about an organization's security controls, test procedures, and results.
SOC 3 reports are simplified, public-facing versions of SOC 2 reports. They provide a high-level overview that confirms whether a company has met the Trust Services Criteria but without revealing sensitive technical details. This type of report can be freely shared on websites and marketing materials.
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