SOC 2 Type 1 vs Type 2 Audit Testing Explained

Factors to Consider When Deciding Between SOC 2 Type 1 and Type 2

Comparing a SOC 2 Type 1 vs SOC 2 Type 2 audit largely depends on an organization’s specific circumstances, maturity, and the demands of its clients. Here are some factors to consider to help decide which audit is most suitable for your needs: 

1. Basic Requirements. Find out what type of audit your clients or stakeholders require. Some clients may only require a snapshot of your control environment (Type 1), while others may need the assurance of the operational effectiveness of controls over time (Type 2). 
2. Timeline. If you need to demonstrate compliance urgently due to a client contract or bid, then SOC 2 Type 1 may be more appropriate due to its shorter timeframe. If you have more time and need to show the operational effectiveness of your controls, then SOC 2 Type 2 would be the better choice. 
3. Security Maturity Level. If you’re starting your security journey, a Type I audit will provide a point-in-time assessment of your controls as they currently stand. However, if your organization already has mature, established security controls that have been in place for a while, a Type II audit may be more beneficial to test the controls’ operational effectiveness over time. 
4. Resource Availability. Consider the resources you have available. A Type II audit is more comprehensive; thus, it’s more time-consuming and requires more resources. If your business has limitations, a Type I audit may initially fit better. 
5. Future Growth and Client Demand. If you foresee your organization scaling up, dealing with larger clients, or those from sensitive sectors like finance or healthcare, preparing for SOC 2 Type 2 would be useful. 

Determining which type of SOC 2 assessment fits your needs can be easier and more accurate with the help of expert auditors. Employ the guidance of I.S. Partners and get expert analysis from industry professionals. Allow our certified auditors to evaluate your resources, needs, and timeframe to determine which type of SOC 2 report you need.

SOC 2 Type 2 vs Type 1: Major Differences

SOC 2 Type I essentially serves as a snapshot of your control systems at a given point in time, proving advantageous when you need immediate compliance validation. However, given that potential clients increasingly reject Type I reports, favoring the more comprehensive Type II, the latter may be the best long-term solution, saving time and money incurred from multiple audits. 

However, organizations generally choose SOC 2 Type II over Type I when stakeholders, including customers, prospects, partners, and investors, demand a more comprehensive, ongoing evaluation of security controls beyond a point-in-time snapshot. 

The example below shows the difference in controls between the two audit types, using the same example—a background check on recently hired employees.

Regarding SOC 2 Type I and Type II audits, testing differs in scope and the level of assurance they provide. In the example below, we’re testing background checks for new employees.

Here are the key similarities and differences:

• The same controls are conducted in both audits – background checks are done prior to hiring for all new employees.
• For Type I evidence, an example of a background check completed for a recent new hire is provided to auditors.
• For Type II evidence, the population of ALL new hires throughout the audit period will be sampled, and additional evidence of completed background checks for the selected samples will be provided to auditors.

Type I testing looks at an example or single instance, while Type II testing is more comprehensive, looking at evidence across the entire audit period by sampling from the complete populations, where applicable. Use our SOC 2 compliance checklist to prepare for your audit.

Below is a summary of the major differences between SOC 2 Type 1 and SOC 2 Type 2.

What Is a SOC 2 Type 1 Audit? 

A SOC 2 Type 1 audit is an assessment that provides a snapshot of an organization’s internal controls and their design at a specific point in time. Additionally, it determines the system’s description being designed and implemented “as of” a specific date.SOC 2 Type I centers on examining an organization’s internal controls, whether preventative, detective, or corrective. This evaluation helps confirm whether the present controls align with the SOC 2 framework’s requirements.

The controls evaluated throughout the engagement  can be of various forms, such as preventative, detective, or corrective, all playing a crucial role in managing and protecting sensitive information. 

What Is the Purpose of a SOC 2 Type 1 Audit? 

The purpose of a SOC 2 Type I audit, distinct from SOC 2 Type II and differing from SOC 1 and SOC 3, is to evaluate the design and implementation of the system description and whether controls were suitably designed at a specific moment in time to achieve the service commitments and system requirements. 

Its is used to assess whether the system description is fairly presented following the description criteria and currently implemented controls align with the requirements of the SOC 2 compliance framework for meeting service commitments and system requirements.. 

The key intent here is to assure existing and potential clients that your organization adheres to security best practices in managing sensitive data.

The importance of SOC 2 Type I attestation lies in its ability to assure current and prospective clients about your adherence to security best practices. While obtaining SOC 2 audits is not mandatory, it is highly encouraged. Big organizations often prioritize information security and prefer collaborating with entities that demonstrate a robust security-first approach.

What Are the Requirements for a SOC 2 Type 1?

SOC 2 Type I is an initial step towards identifying areas requiring improvements, assessing security maturity, and endorsing ongoing efforts to fortify client data security.

Unlike other audits, SOC audits do not provide a risk score or grading system. Instead, auditors deliver an opinion on your organization’s adherence level to the five trust service principles, providing insights into the effectiveness of your control environment.

To gain an attestation for a SOC 2 Type 1 audit, service organizations must undergo the proper audit process by an independent CPA firm. The auditor will then subject your organization to the following steps:

1. Help determine audit scope and applicable Trust Services Criteria.
2. Perform a readiness assessment to identify gaps.
3. Review controls designed and implemented by the organization to meet the criteria.
4. Provide auditors evidence of control design and implementation.
5. Work with auditors to ensure achievement of service commitments and systems requirements, as well as all descriptive criteria for reporting on the system description.
6. Auditors evaluate the above areas and issue a Type 1 report with supporting opinions.

The SOC 2 Type 1 plays a critical part in setting the groundwork for the SOC 2 Type 2 audit, which examines the effectiveness of these procedures/controls over a period of time (best practice is an audit period should not be shorter than 6 months, but it can be.), ensuring proactive maintenance to meet emerging threats and future requirements in the fluctuating landscape of information security. 

When Is a SOC 2 Type 1 Report Required?

A SOC 2 Type 1 report is typically required by businesses as part of their vendor risk management procedures. Because of the limited scope of a Type 1 report, it offers a limited preview of how a business handles risks and threats. As such, it is mostly used to get a summary of an organization’s controls.

Below are some scenarios of when a SOC 2 Type 1 report would come in handy:

• Often used by companies that are just starting their SOC 2 compliance journey or need to provide a report to customers quickly.
• When larger businesses request to see a SOC 2 report before doing business with a service provider, having a Type 1 report ready can speed up sales cycles and contracting.
• For newer companies or those that recently made major changes to their security systems, a Type 1 report offers a faster and cheaper path to demonstrate basic SOC 2 compliance compared to a more comprehensive Type 2

Fast-growing companies pursue Type 1 to meet the partner company’s demands and enable sales, even if they aren’t legally obligated to. However, a Type 1 report has limitations, so the goal is usually to mature into a Type 2 over time as the business scales.

How Long Is a SOC 2 Type 1 Report Valid? 

A SOC 1 report is technically valid forever if no controls change and no change in any service commitments, scope, system requirements, etc. However, how much assurance can a current or prospective client put on a more than 1-year-old report? 

A SOC 2 Type 1 report is generally acceptable for 6 to 12 months after its issue date. After this period, the report is considered as “stale.” While the AICPA does not necessarily have a prescribed deadline for the validity of a Type 1 report, customers usually require a regularly updated version. Controls need to be tested at least annually to determine whether they are suitably designed.

If a major change in your security controls occurs within the suggested validity period, a SOC 2 Type 1 report can be rendered invalid. In this case, a new Type 1 report is required, or a Type 2 audit can be used.

Who Should Consider a SOC 2 Type 1 Audit? 

A SOC 2 Type I audit benefits various organizations looking to establish and display a solid security posture. This audit can prove particularly valuable if you: 

• Operate as a SaaS vendor involved in processing, gathering, or managing sensitive data. Your ability to handle such information securely is paramount, and SOC 2 Type I can manifest your commitment to security. 
• Require showing security compliance urgently. A SOC 2 Type I audit has a significantly shorter timeline than Type II, providing you with a swift way to showcase compliance, especially for IT-managed service providers. 
• Are on your initial journey toward security compliance and wish to assess your capability to meet SOC 2 Type II objectives. A Type I audit is a perfect starting point to evaluate your current mechanisms and identify areas for potential improvements. 
• Maintain a tight budget. When your financial resources are limited, but you need a compliance report to attract sales deals, a SOC 2 Type I audit could serve as a cost-effective solution. 

It’s essential to remember that both types of SOC reports require an audit performed by a certified service auditor or CPA firm. The decision generally hinges on factors like timelines, your systems’ readiness, and prospective clients’ specific requirements. 

A SOC 2 Type 1 audit is ideal for organizations new to compliance or those needing to demonstrate their security controls design quickly. However, they may consider moving to a SOC 2 Type 2 audit for longer-term, comprehensive security assurance. 

What Are the Benefits and Limitations of SOC 2 Type 1 Audit? 

Benefits of a SOC 2 Type 1 Audit 

1. Immediate Verification: A SOC 2 Type I report provides an organization with instant verification of its control environment as it assesses the business’s security controls at a specific time. 
2. Good for New Organization: It serves as an excellent starting SOC 2 for startups and organizations new to the compliance journey, allowing them to develop an understanding of their current security posture. 
3. Demonstrates a Commitment to Security: It signifies to clients and stakeholders that an organization is serious about protecting its data, which helps establish trust. 
4. Shorter Timeline: The Type I audit has a shorter timeline compared to Type II, enabling companies to demonstrate compliance rapidly, which is beneficial for urgent client requirements. 

Limitations of a SOC 2 Type 1 Audit 

• Absence of Operational Effectiveness Verification: A Type I Audit does not provide insight into the operational effectiveness of controls over time. It is a snapshot view and does not assess whether controls function consistently over a period. 

• Limited Client Acceptance: Some clients and stakeholders may not accept a Type I audit as they prefer the more comprehensive SOC 2 Type II report, which evaluates the effectiveness of controls over an extended period. 
• Potentially more expenses: For organizations planning to pursue Type II compliance eventually, starting with Type I might add to costs in the long run due to double auditing. 

What Is a SOC 2 Type 2 Audit? 

A SOC 2 Type 2 Audit is a third-party assessment that focuses on how service organizations  protect sensitive data. It reviews the appropriateness and operational effectiveness of a company’s internal controls. 

The SOC 2 Type 2 report examines the five Trust Services Criteria over a period of time.. Continuous monitoring under Type II offers more robust assurance of a provider’s long-term capacity to keep information secure. To maintain their SOC 2 Type 2 compliance, companies are required to undergo these audits annually. 

Ultimately, the SOC 2 Type 2 designation is more rigorous as it requires controls and system descriptions to be evaluated over a period of time, ensuring a comprehensive assessment of controls, policies, and procedures over a set period.

What Is the Purpose of a SOC 2 Type 2 Audit? 

The purpose of SOC 2 Type 2 audit is to evaluate the design and implementation of the system description, whether controls were implemented, suitably designed, and operating effectively over a period of time to achieve the service commitments and system requirements.

A SOC 2 Type II audit aims to evaluate the design and operational effectiveness of an organization’s internal controls, particularly those of service organizations. The audit, performed by an independent CPA firm, tests how well an organization safeguards sensitive data over a set period. 

The audit covers five primary trust service principles: security, availability, processing integrity, confidentiality, and privacy. Unlike a Type I audit, which focuses on a specific point in time, it inspects these controls over several months or longer. 

By fulfilling the requirements of the SOC 2 Type 2 audit, an organization demonstrates that its internal controls maintain operational effectiveness over an extended period. It reassures clients and stakeholders regarding the consistent protection of sensitive information. This makes it a vital audit for companies, helping to build trust and confidence in their security measures. It’s important to note that organizations should  go through this audit annually to maintain their SOC 2 Type 2 compliance. 

What Are the Requirements for a SOC 2 Type 2?

The purpose of SOC 2 Type 2 attestation is to assure the operational effectiveness of an organization’s internal controls. This type of attestation assesses controls over a defined period, typically at least six months, demonstrating that the measures in place have been consistently effective.  

A SOC 2 Type 2 certification typically requires an organization to undergo a structured assessment. This involves the following steps:

1. Identification of audit scope and applicable criteria.
2. Implementation of controls.
3. Evidence collection and documentation.
4. Undergo a systematic audit process.
5. Establish ongoing compliance protocols.

By obtaining a SOC 2 Type 2 attestation, an organization can exhibit a long-term commitment to data security and privacy, presenting a strong case to clients and potential customers about the effectiveness of its control systems. 

When Is a SOC 2 Type 2 Report Required?

A SOC 2 Type 2 report is given to an organization that voluntarily underwent a Type 2 audit, often driven by client requirements, regulatory compliance, or industry standards.

Specifically, the following scenarios would require a SOC 2 Type 2 report:

• Companies, including SaaS, cloud computing, and IT providers, require a SOC 2 Type 2 report to demonstrate a strong control over data security.
• Large enterprises typically require a SOC 2 Type 2 report before doing business with a service provider.
• Companies handling sensitive customer data are expected to maintain consistent compliance with a SOC 2 Type 2 audit.
• Client organizations that entrust private data to service providers like cloud platforms or SaaS applications often require a SOC 2 Type 2 report as a precondition of doing business.

SOC 2 Type 2 reports are frequently requested by B2B customers as part of their vendor risk management process, especially for services that handle sensitive data. Fast-growing technology companies pursue Type 2 to meet those demands, enable enterprise sales, and demonstrate a robust security posture, even if they aren’t legally obligated to.

How Long Is a Soc 2 Type 2 Report Valid?  

Similar to a SOC 2 Type 1, a Type 2 report has technically no definite validity period. Although in practice, SOC 2 Type 2 reports are only acceptable to customers for 12 months following the date it was issued. 

When the coverage period of the report passes, it is rendered insignificant. A SOC 2 Type II report requires annual reevaluation to remain significant.

In case your organization has not scheduled another 2 audits, and an attestation is required by a partnering company, a SOC 2 Bridge Letter can be provided. This letter is a written statement provided by your organization to show customers that your controls did not undergo major changes and are still compliant pursuant to the previous report.

Who Should Consider a SOC 2 Type 2 Audit? 

A SOC 2 Type 2 audit is a valuable consideration for various types of businesses, especially those handling sensitive customer data. This might be particularly beneficial if you: 

• Operate as a Cloud-based Vendor: If you’re pursuing enterprise accounts, achieving SOC 2 Type II compliance can be a competitive advantage as it is often a requirement for businesses handling sensitive data. 
• Have Past Data Breaches: For companies that have previously suffered data breaches, a SOC 2 Type II Audit demonstrates a reinforced commitment to robust security practices, reassuring partners that past security lapses have been addressed. 
• Have Uncertified Competitors: If your competition lacks certification, SOC 2 Type II Audit can prove your commitment to security, distinguishing your business in terms of anticipating client needs for transparent processes. 
• Are a Provider of Managed IT services or Software-as-a-Service (SaaS): Entities such as cloud computing vendors, managed IT services providers, SaaS providers, and data centers can significantly benefit from a SOC 2 Type II audit. 

Businesses that have just recently started gaining ground on their compliance task can gradually transition from a Type I to a Type II report. When asked for the best strategy on how to complete this, Dave Zuk, I.S. Partner’s Director of SOC Operations, had this to say,

“Hire a competent audit firm to review your previous SOC 2 Type I report and ensure your system design, controls, and report follow the AICPA guidance. Once an initial review is complete, your audit firm should help identify an “audit period” for Type II. 

Once all details are confirmed, the audit firm should provide a “Request List” so the organization knows what the audit firm will be requesting in terms of evidence collection. This gives the organization time before the end of the audit period to work with the firm and address any requests that might stand out to the organization. 

At this point, all controls are confirmed and requests updated, and the organization is ready to kick off and begin a successful SOC 2 Type II audit.” 

Dave Zuk, Director of SOC Operations,

Entrust your SOC 2 audit needs with I.S. Partners. Our capable and experienced experts will help you create a seamless transition between your existing and target security posture. 

What Are the Benefits and Limitations of SOC 2 Type 2 Audit? 

Benefits of SOC 2 Type 2 Audit 

• Long-term Assurance: A SOC 2 Type II audit, unlike Type I, assesses the operational effectiveness of controls over a significant period, providing a thorough, long-term view of an organization’s security posture. 
• Increased Credibility: By successfully passing this audit, a company demonstrates to its customers and stakeholders that its control systems are reliable and effective over time. This boosts customer trust and confidence. 
• Competitive Advantage: A SOC 2 Type II report can provide a competitive advantage, particularly when bidding for large enterprise contracts. It often serves as a differentiator, incubating trust and assurance among potential clients. 
• Identification of Weaknesses and Improvements: The audit process gives organizations valuable insights into any potential weaknesses or areas of improvement, enabling them to enhance their security controls continuously. 

Limitations of SOC 2 Type 2 Audit 

• Resource Intensive: This comprehensive audit demands substantial resources, including time, workforce, and potential costs. Smaller organizations may find it challenging to allocate these resources. 
• Regular Reassessment Requirement: To maintain compliance, businesses must go through the audit annually.

Trust SOC 2 Auditing to I.S. Partners

While SOC 2 Type 2 audits are generally more preferred by organizations over Type 1, some companies and situations can be satisfied with the latter report. The key to determining which type of SOC report you need is to employ the help of expert auditors.

I.S. Partners has been in the auditing industry for over 20 years. Our US-based team has experience auditing major industries and is well-versed in conducting SOC 2 analyses. We conduct assessments and audits first-hand, with no outsourcing needed. With our help, you get a one-stop shop for all your SOC 2 needs.

With informed guidance and expertise, I.S. Partners can help. Our specialized services in SOC 2 audits provide a systematic and efficient approach to compliance, enabling you to focus on what you do best—growing your business. Contact I.S. Partners today.

About The Author

Joe Ciancimino

Joe is a Director in the I.S. Partners SOC practice. He is a Certified Information Systems Auditor (CISA) and Certified in Risk and Information Systems Controls (CRISC) practitioner and a member of the ISACA Philadelphia Chapter. Joe has been performing IT audit and attestation services for the last 6 years and continues to assist clients in performing a variety of engagements. These include System & Organization Controls (SOC) Reports (SOC 1/SOC 2), Information Technology and Information Systems Audits, IT General Controls / IT Application Controls Testing, ISO/IEC 27001:2013 Internal Audit/Compliance, Internal Audits on a outsourced/co-sourced basis