What Is the Difference Between SOC 2 Type 1 and Type 2?

The SOC 2 attestation waters can be a bit murky, so let's clear up a common source of confusion. SOC 2 Type 1 and SOC 2 Type 2 are both audits that assess the controls and processes of service organizations, but they focus on different points in time.

This is not to be mistaken with SOC 1 and SOC 2. SOC 1 focuses on financial reporting controls, while SOC 2 evaluates security, availability, processing integrity, confidentiality, and privacy of data for service organizations. 

Although we’ll cover the difference between SOC 1 and SOC 2 briefly, the main goal is to help you understand what sets SOC 2 Type 1 and Type 2 apart. 

If you’re asked for an SOC report concerning security and data, it’s safe to assume what they’re looking for is SOC 2, of which there are two types. 

SOC 2 Type 1 assesses security controls at a single point in time, while SOC 2 Type 2 evaluates their effectiveness over a period (usually three to twelve months).

So, what’s the difference between SOC 2 Type 1 and Type 2? Keep reading to find out more! 

In this article, we will cover: 

• What Is SOC? 
• Key Differences Between SOC 1 and SOC 2 
• What Is SOC 2 Type 1?
• What Is SOC 2 Type 2?
• What is the Difference Between SOC 2 Type 1 and Type 2? 
• SOC 2 Type 1 or SOC 2 Type 2: Which Should You Choose?
• Checklist for SOC 2 Compliance Preparation
• How to Transition from SOC Type 1 to SOC Type 2
• SOC 2 Type 1 vs. Type 2: Frequently Asked Questions

Key Takeaways

• SOC 2 Type 1 gives you a snapshot of your security controls at a single point in time.
• SOC 2 Type 2 evaluates how well your controls operate over time.
• SOC 2 compliance builds trust with customers, partners, and investors.
• You should choose the right audit based on your goals, budget, and security maturity.
• Achieving SOC 2 compliance strengthens your security and gives you a competitive advantage.

What Is SOC? 

SOC stands for System and Organization Controls, a set of auditing standards developed by the American Institute of Certified Public Accountants (AICPA). These reports evaluate how well an organization protects sensitive data and ensures security, availability, processing integrity, confidentiality, and privacy.

If your company provides services that involve handling customer data,. such as cloud computing, IT security, or financial processing, SOC compliance can be crucial. 

Businesses in industries like finance, healthcare, technology, and government contracting often require SOC audits to prove they have strong security controls in place. 

Whether you're looking to build trust with clients, meet regulatory requirements, or gain a competitive edge, a SOC report helps demonstrate your commitment to data security and compliance. There are both SOC 1 and SOC 2, and within SOC 2, there is both Type 1 and Type 2. Before we discuss SOC 2 Type 1 and 2, let’s quickly differentiate SOC 1 and SOC 

Key Differences Between SOC 1 and SOC 2 

The primary difference between SOC 1 and SOC 2 lies in their focus and purpose:

• SOC 1 evaluates controls related to financial reporting, ensuring that your organization's systems do not negatively impact the accuracy of financial statements. This is essential for businesses whose clients rely on their financial data integrity.
• SOC 2 assesses security, availability, processing integrity, confidentiality, and privacy controls, making it relevant for organizations handling sensitive customer data and looking to demonstrate strong cybersecurity practices.

If your business affects clients' financial reporting, SOC 1 is key. If protecting customer data and system security is your priority, SOC 2 is the better fit.

BEMO is actually a verified SOC 2 Compliant Company, because we like to lead by example, so who better to explain the topic to you! 

Now that we know what SOC 1 and SOC 2 are, let’s differentiate between SOC 2 Type 1 and SOC 2 Type 2. 

What Is SOC 2 Type 1?

SOC 2 Type 1 serves as your organization's security control validation at a specific moment. Think of SOC 2 Type 1 as your security program's first big photo opportunity. 

It's the auditor taking a snapshot of your controls on a specific day, checking if you've set things up right. 

You're essentially showing that you've created the proper security blueprint. This means your policies look good, you've implemented the right measures, and your security design fits the Trust Services Criteria you're aiming for. 

If you're just getting your compliance program off the ground or need to show clients you're serious about security without waiting months, Type 1 is your go-to option. You get to prove you've done your homework without the long-term commitment.

What Is SOC 2 Type 2?

When you're ready to prove you're not just talking the talk but walking the walk, SOC 2 Type 2 is your path forward. SOC 2 Type 2 goes beyond design to evaluate the operating effectiveness of your security controls over an extended period, typically between three and twelve months. 

It's like having someone check your security habits repeatedly to make sure you're sticking to your promises. 

Your auditor will regularly peek at your operations to verify you're consistently following your own rules. 

If you're dealing with clients who need serious reassurance about their data, Type 2 tells them, "Hey, we've been doing this right consistently, not just on our best day." Yes, it takes more of your time and resources, but the trust you build is absolutely worth it.

Enlist the help of BEMO to get SOC 2 certified today! 

Below is a perfect summary of what sets SOC 2 Type 1 and Type 2 apart. 

What Is the Difference Between SOC 2 Type 1 and Type 2? 

The main difference between SOC 2 Type 1 and Type 2 is the time period that your organization is assessed over. 

• SOC 2 Type 1: This report evaluates the design of your security controls at a specific point in time. Think of it as a snapshot that answers the question: Are your controls properly designed to meet the required Trust Services Criteria?
• SOC 2 Type 2: This report assesses both the design and operating effectiveness of your controls over a period of time, typically between three and twelve months. It answers: Are your controls not only well-designed, but also consistently functioning as intended over time?

Simply put, an SOC Type 1 and Type 2 report are two types of audits that service organizations can undergo to demonstrate their compliance with certain standards and controls. 

SOC 2 Type 1 vs. SOC 2 Type 2: An Easy Analogy

A simple analogy can help us understand the difference between SOC 2 Type 1 and Type 2: Imagine you are hiring a contractor to build a house for you. You want to make sure they follow the best practices and meet your expectations.

An SOC 2 Type 1 report is like asking the contractor to show you their blueprint and explain how they plan to build the house. It provides an overview of their design and objectives, but it does not tell you if they actually followed them or not. 

An SOC 2 Type 2 report is like visiting the construction site and inspecting the work done by the contractor. It provides evidence of how they implemented their design and objectives, and whether they met them or not. It also covers a longer period of time, usually six months or a year, so you can see how consistent and reliable they are. 

So, an SOC 2 Type 1 report tells you what the service organization says they do, while an SOC 2 Type 2 report tells you what they actually do. Both reports are useful and important, but they serve different purposes and audiences. You can see why the Type 2 report holds more weight and why it takes longer to produce.  

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SOC 2 Type 1 or SOC 2 Type 2: Which Should You Choose? 

Deciding between SOC 2 Type 1 and Type 2 involves considering several critical factors:

• Goals: Determine if you need a quick validation of your system design (SOC 2 Type 1) or a long-term assessment of control effectiveness (SOC 2 Type 2).
• Budget and Cost: SOC 2 Type 1 audits are typically less expensive and faster to complete than Type 2, which requires ongoing monitoring.
• Timeline Constraints: Type 1 audits can be completed in weeks, making them ideal for businesses needing immediate compliance proof. Type 2 audits require months of testing.
• Customer and Partner Requirements: Some clients or partners specifically request SOC 2 Type 2, as it demonstrates consistent security practices over time.
• Security Maturity: If your security controls are newly implemented, SOC 2 Type 1 might be a better starting point. If your security processes are well-established, SOC 2 Type 2 offers stronger validation.
• Competitive Advantage: A SOC 2 Type 2 report adds credibility and can differentiate your business when competing for security-conscious clients.

Before going any deeper, would you be up for a fun quiz? Take our interactive quiz to learn more about which audit is best for your business

Factors to Consider For SOC 2 Type 1 or Type 2

When choosing between SOC 2 Type 1 and Type 2, you must consider several factors like the maturity of your business, the expectations of your customers and stakeholders, the complexity of your services, and the cost. 

Here’s how to make an informed choice. 

The Maturity of Your Business

If you are a new or emerging business, you may want to start with a SOC 2 Type 1 audit to establish a baseline for your controls and identify any gaps or weaknesses that need improvement. 

A SOC 2 Type 1 audit can also help you prepare for a future SOC 2 Type 2 audit by giving you feedback on your control design and implementation. 

If you are an SMB that has recently undergone significant changes in your systems, processes or personnel, an SOC 2 Type 1 report may be sufficient to help you document the impact of these changes on your controls and show that you have updated them accordingly.

The Expectations of Your Customers or Stakeholders

If your customers or stakeholders require evidence of your control effectiveness over a period of time, you may need to opt for a SOC 2 Type 2 audit. A SOC 2 Type 2 report can provide more assurance and credibility to your customers or stakeholders than a SOC 2 Type 1 report, as it demonstrates that your controls are not only designed well, but also operate consistently and reliably. 

The Complexity and Scope of Your Services

If your services are complex or involve multiple processes, systems, locations, or third parties, you may benefit from a SOC 2 Type 2 audit. A SOC 2 Type 2 audit can capture the variability and changes that may occur in your service delivery over time and show how your controls adapt and respond to those changes.  

The Cost and Effort Involved

A SOC 2 Type 2 audit is more costly and time-consuming than a SOC 2 Type 1 audit, as it requires more testing and documentation. 

You may need to allocate more resources and personnel to support the audit process and ensure that your controls are maintained and monitored throughout the audit period. You may also need to engage with an external auditor more frequently and extensively than for a SOC 2 Type 1.  

The Timeframe to Achieve

If you are an SMB that has a contractual or regulatory requirement to obtain a SOC 2 report, but do not have enough time or resources to prepare for a Type 2 report, a SOC 2 Type 1 report can help you meet the minimum requirement and buy you some time to plan for a Type 2 report in the future.  

To help you with the process, below is a checklist that will help you prepare for SOC 2 compliance. 

Checklist for SOC 2 Compliance Preparation

Ready to get started with SOC 2 certification, but not sure where to begin? We've got you covered! Preparing for a SOC 2 audit doesn't have to be overwhelming when you break it down into manageable steps. 

Whether you're pursuing a Type 1 or Type 2 report, this practical checklist will help you navigate the compliance process:

• Define Your Objectives: Understand why SOC 2 compliance is important for your organization. Identify the benefits, such as boosting your security posture and meeting customer demands.
• Select Relevant Trust Services Criteria Determine which of the five Trust Service Criteria (Security, Availability, Processing Integrity, Confidentiality, Privacy) apply to your services based on the type of report needed (Type 1 or Type 2).
• Perform a Readiness Assessment: Evaluate your current controls to identify gaps against SOC 2 criteria. This can involve self-assessments and may be streamlined using automated tools.
• Implement Necessary Controls: Address any identified gaps by putting appropriate controls in place, including developing policies, modifying workflows, and implementing security measures like access controls.
• Document Policies and Procedures: Ensure all security policies and procedures are well-documented to provide clarity and consistency in implementing controls and facilitate audits.
• Train Your Team: Educate employees about their roles in maintaining compliance, focusing on new or updated controls to ensure understanding of responsibilities.
• Monitor and Maintain Controls: Establish processes for ongoing monitoring of controls to ensure they remain effective over time, including regular assessments and updates.
• Engage a Qualified Auditor: Choose an experienced auditor from an AICPA-accredited firm to conduct your SOC 2 examination, who will review evidence and provide findings on the effectiveness of your controls.

Remember, good preparation not only makes the audit smoother but also strengthens your overall security posture! 

Depending on your organization, it may be recommended or required to transition from SOC 2 Type 1 to Type 2, and below we provide tips on how to do just that. 

How to Transition from SOC 2 Type 1 to SOC Type 2

Ready to take your compliance to the next level? At BEMO, we've helped dozens of companies successfully transition from SOC 2 Type 1 to the more comprehensive Type 2 certification. This upgrade represents a significant milestone in your security maturity journey and sends a powerful message to your clients about your ongoing commitment to data protection.

Most organizations naturally evolve from Type 1 to Type 2 as their security program matures. While Type 1 validates your security design, Type 2 proves you're consistently practicing what you preach. Our BEMO experts will guide you through this transition with our proven methodology:

• Gap Analysis: We'll review your existing Type 1 controls and identify what needs strengthening for the more rigorous Type 2 examination.
• Control Enhancement: Our team will help you implement continuous monitoring tools and processes that generate the ongoing evidence required for Type 2.
• Documentation Upgrade: We'll assist in expanding your documentation to demonstrate consistent control operation throughout the observation period.
• Evidence Collection Strategy: We'll establish efficient workflows to capture and organize the evidence your auditor will need during the extended assessment.
• Staff Training & Awareness: We'll ensure your team understands their expanded responsibilities in maintaining and demonstrating compliance over time.
• Audit Preparation: Our compliance experts will conduct mock assessments to identify any potential issues before your official Type 2 audit begins.

Remember, while the leap to Type 2 requires more effort, the payoff in customer trust and competitive advantage is substantial. BEMO's clients who make this transition report winning more security-conscious customers and facing fewer security questionnaires.

Need Help Deciding Between SOC 2 Type 1 and 2? 

Our Compliance Experts at BEMO can assist you with the decision of what compliance level fits your needs, as well as assistance with a compliance roadmap that is customized to your business needs. 

Speak With a Compliance Expert

BEMO deploys and monitors the same comprehensive Microsoft 365 security controls, whether you select Type 1 or 2, so your business will benefit from a strengthened security posture, no matter what you choose.  

Get more details on what you'll get with our SOC 2 Compliance Solutions.

Final Thoughts on SOC 2 Type 1 vs. Type 2

Choosing between SOC 2 Type 1 and Type 2 depends on your business needs, security goals, and customer expectations. 

If you need quick validation of your security controls, SOC 2 Type 1 is the way to go. But if you want to demonstrate long-term security effectiveness, SOC 2 Type 2 provides a more in-depth evaluation.

By achieving SOC 2 compliance, you show your customers and partners that you take data protection seriously. It also helps you meet industry regulations and gives you a competitive edge. 

Whether you're just getting started or looking to transition from Type 1 to Type 2, BEMO can guide you through the process. Ready to secure your organization’s future? Speak with a BEMO expert today and take the next step toward stronger security and compliance.

Frequently Asked Questions

How Long Does It Take To Complete a Soc 2 Type 1 Audit?

A SOC 2 Type 1 audit typically takes between a few weeks to a couple of months, as it involves assessing controls at a single point in time. The duration can vary based on the organization's readiness and the scope of the audit.

Can We Skip Soc 2 Type 1 and Go Directly to Soc 2 Type 2?

Yes, you can proceed directly to a SOC 2 Type 2 audit if your controls are well-established. However, starting with a Type 1 audit can help identify any gaps before moving to the more extensive Type 2 audit.

What Are the Main Benefits of Achieving Soc 2 Compliance?

Achieving SOC 2 compliance enhances your organization's reputation, meets contractual obligations, and offers a competitive advantage by demonstrating your commitment to data protection.

What Is the Difference Between Soc 2 Type 1 and Soc 2 Type 2 Audits?

SOC 2 Type 1 audits evaluate controls at one point in time, whereas Type 2 audits assess their effectiveness over a period, usually ranging from 3 to 12 months.

How Often Should a Soc 2 Audit Be Performed?

SOC 2 audits should be performed annually to maintain compliance, as reports are generally valid for 12 months. This annual process ensures that organizations can renew their compliance status and continue to demonstrate their commitment to security and operational best practices.

What Happens if I Fail a Soc 2 Audit?

While you can't technically "fail" a SOC 2 audit, the auditor will issue an opinion on your compliance. An adverse opinion indicates significant issues and non-compliance, requiring substantial remediation efforts. A qualified opinion points out areas of concern that need addressing to achieve full compliance.

What Are Some Common Myths About SOC 2?

A common myth about SOC 2 is that it is a certification, when in reality, it is an attestation report. Another misconception is that you can rely solely on your vendor's SOC 2 report instead of obtaining your own. Finally, many believe SOC 2 is a rigid, one-size-fits-all checklist, but it's actually a flexible framework that should be tailored to each organization.