TL;DR

SOC 2 Type I reports check if your security controls are designed properly at one point in time (think of it as a snapshot), while Type II reports test whether those controls actually work over 6-12 months of real operation. Type I is faster and cheaper ($10-50K) but Type II carries more weight with customers since it proves your controls work consistently. Most SaaS companies eventually need Type II, but Type I can be a smart stepping stone to get there.

SOC 2 Type I vs Type II: Which Report Does Your Business Actually Need?

If you’re running a SaaS company, handling customer data, or trying to win enterprise deals, you’ve probably heard someone mention SOC 2 reports. But here’s the thing—there are actually two different types, and picking the wrong one can cost you time, money, and potentially some big deals.

Let’s cut through the jargon and figure out which SOC 2 report actually makes sense for your business.

What’s the Real Difference Between Type I and Type II?

Think of it this way: if your security controls were a new car, a SOC 2 Type I report would be like having a mechanic look under the hood and say “Yep, this engine is built correctly and should work great.” A SOC 2 Type II report is like that same mechanic driving your car for six months and then telling you “Not only is the engine built right, but it’s been running perfectly this whole time.”

SOC 2 Type I evaluates whether your security controls are designed and implemented correctly at a specific moment in time. It’s basically asking: “Do you have the right controls in place, and are they set up properly?”

SOC 2 Type II does everything Type I does, but then goes further by testing whether those controls actually worked effectively over a period of 6-12 months. It’s asking: “Not only do you have the right controls, but have they been working consistently?”

Understanding the Trust Services Criteria (The Foundation of SOC 2)

Before we dive deeper, you need to understand what SOC 2 reports are actually measuring. The American Institute of CPAs (AICPA) created something called the Trust Services Criteria (TSC)—basically a checklist of what good security and privacy practices look like.

There are five categories, but here’s the catch: only one is mandatory.

Security (Required for every SOC 2 report): Your systems are protected from unauthorized access. This covers everything from password policies to network security to employee background checks.

The Optional Four (you pick based on what matters to your business):

• Availability: Your system stays up and running when it’s supposed to
• Processing Integrity: Your system processes data completely, accurately, and on time
• Confidentiality: You protect information that’s supposed to stay secret
• Privacy: You handle personal information according to your privacy policy

Most companies start with just Security for their first SOC 2, then add others as needed. If you’re a payment processor, you’d probably want Processing Integrity. If you’re handling health data, Confidentiality and Privacy become crucial.

Breaking Down the Security Criteria (The Must-Have)

Since Security is required for every SOC 2 report, let’s talk about what it actually covers. There are nine “Common Criteria” (that’s why you’ll see CC1, CC2, etc. in reports):

CC1: Control Environment - This is about your company’s overall attitude toward security. Do your executives actually care about security, or do they just talk about it? Do you have clear policies, and does everyone know what they are?

CC2: Communication and Information - How do you share security information? This covers everything from security training to incident response communication to keeping your security policies up to date.

CC3: Risk Assessment - Do you actually know what could go wrong with your systems? This means identifying threats, assessing how likely they are, and figuring out what the impact would be.

CC4: Monitoring Activities - Are you watching what’s happening in your systems? This includes things like log monitoring, security reviews, and having someone actually pay attention to your security alerts.

CC5: Control Activities - These are the actual security controls you’ve implemented—firewalls, access controls, encryption, backup procedures, and all the technical stuff that keeps bad things from happening.

CC6: Logical and Physical Access Controls - Who can access what, when, and how? This covers user permissions, multi-factor authentication, physical security of your offices and data centers, and making sure people only have access to what they need.

CC7: System Operations - How do you keep your systems running securely? This includes patch management, capacity planning, data backup and recovery, and making sure your infrastructure is configured correctly.

CC8: Change Management - How do you make changes to your systems without breaking security? This covers code deployment processes, configuration changes, and making sure someone reviews and approves changes before they go live.

CC9: Risk Mitigation - When you find security issues, how do you fix them? This includes incident response, vulnerability management, and having a plan for when things go wrong.

The Other Trust Services Criteria (Optional but Important)

Availability focuses on keeping your systems up and running. If you promise 99.9% uptime in your SLA, this is where you’d prove it. The auditor looks at your monitoring systems, disaster recovery plans, and how you handle outages.

Processing Integrity is all about making sure your system does what it’s supposed to do with data. If you’re processing financial transactions, you need to prove every transaction is complete, accurate, and authorized. This includes data validation, error handling, and audit trails.

Confidentiality goes beyond basic security to focus specifically on protecting sensitive information. This might include customer data, trade secrets, or any information you’ve committed to keep confidential. It covers encryption, data classification, and access controls for sensitive data.

Privacy is about personal information—how you collect it, use it, store it, and eventually delete it. With regulations like GDPR and CCPA, this has become increasingly important. The auditor will check that you’re actually doing what your privacy policy says you’re doing.

SOC 2 Type I: The Snapshot Approach

A Type I audit is like getting a really thorough security assessment done by an independent third party. The auditor comes in, looks at all your controls, tests whether they’re set up correctly, and gives you a report that says “Yes, this company has their security controls designed and implemented properly as of [specific date].”

What to Expect with Type I

Timeline: Usually takes 4-8 weeks from start to finish once you kick off with the auditor. But don’t forget the months you’ll probably spend getting ready beforehand.

Cost: For smaller companies (under 50 employees), expect $10,000-$25,000. Larger organizations might spend $25,000-$50,000 or more, depending on complexity.

Preparation Time: Most companies need 3-6 months to get their controls in place before they’re audit-ready. If you’re starting from scratch, it could take longer.

What You’ll Need:

• Someone internally to own the project (usually takes 25-50% of their time during prep)
• Documentation of all your security policies and procedures
• Evidence that your controls are actually implemented
• Access to systems and personnel for the auditor

The Type I Audit Process

Planning Phase: You’ll work with your auditor to define exactly what’s being audited. Which systems? Which Trust Services Criteria? What’s the testing date? This is also when you’ll get a detailed list of everything you need to provide.

Preparation: This is where most of the work happens. You’ll need to gather documentation, take screenshots of system configurations, and make sure everything is properly implemented and documented.

Fieldwork: The auditor comes in (virtually or in-person) and starts testing. They’ll interview key people, review your documentation, and test your controls to make sure they’re working as designed.

Reporting: A few weeks later, you get your report. If everything went well, you’ll have a clean opinion. If not, you’ll have some exceptions to remediate.

When Type I Makes Sense

Type I reports work well when you’re:

• Just starting your SOC 2 journey and want to prove you have basic controls in place
• Dealing with customers who need some assurance but aren’t requiring the full Type II treatment
• Using it as a stepping stone to Type II (many companies do a Type I first to work out the kinks)
• Working with a limited budget or tight timeline
• In an industry where Type I provides sufficient assurance

SOC 2 Type II: The Long Game

Type II is where things get serious. The auditor doesn’t just check that your controls are designed correctly—they stick around (figuratively) for 6-12 months to make sure those controls actually work consistently over time.

What to Expect with Type II

Timeline: The audit period itself is 6-12 months, but the actual audit work happens at the end and takes 6-12 weeks.

Cost: Generally 50-100% more than Type I. So if Type I would cost you $20,000, expect Type II to run $30,000-$40,000.

Ongoing Effort: Unlike Type I, you can’t just “get ready” for Type II and then relax. You need to maintain evidence of your controls working throughout the entire audit period.

What You’ll Need:

• Everything from Type I, plus…
• Ongoing documentation throughout the audit period
• Regular evidence collection (monthly or quarterly)
• Someone to monitor and maintain controls consistently
• Incident tracking and resolution documentation

The Type II Audit Process

Planning and Kickoff: Similar to Type I, but with more emphasis on the ongoing audit period and evidence collection requirements.

Audit Period Begin: This is when the clock starts ticking. From this point forward, you need to be collecting evidence that your controls are working. Miss a month of log reviews? That could be a problem.

Interim Reviews: Many auditors will do check-ins during the audit period to make sure you’re collecting the right evidence and your controls are operating effectively.

Final Fieldwork: At the end of the audit period, the auditor reviews all your evidence, conducts final testing, and interviews personnel.

Reporting: You get a report that covers both the design of your controls (like Type I) and their operating effectiveness over the entire audit period.

When Type II Is Worth the Investment

Type II becomes necessary when you’re:

• Dealing with enterprise customers who require it (and many do)
• In highly regulated industries like healthcare or finance
• Handling large volumes of sensitive customer data
• Trying to differentiate yourself from competitors on security
• Planning to go public or get acquired (buyers often want to see Type II)
• Ready to make the ongoing commitment to maintaining strong controls

Making the Choice: Type I or Type II?

Here’s the honest truth: most companies that get SOC 2 reports eventually end up with Type II. Type I can be a great stepping stone, but it often doesn’t satisfy the security requirements of larger customers.

Start with Type I if:

• You’re new to SOC 2 and want to test your readiness
• You’re working with smaller customers who just need some assurance
• Budget is a major constraint
• You need something quickly
• You want to identify and fix issues before committing to the longer Type II process

Go straight to Type II if:

• Your customers are asking specifically for Type II
• You’re confident in your security controls and can maintain them consistently
• You want the strongest possible report
• You’re willing to make the ongoing investment in compliance

Consider this progression: Many successful companies do a Type I first, use the feedback to improve their controls, then move to Type II the following year. This lets you work out the kinks without the pressure of maintaining evidence for 6-12 months.

What Actually Happens During the Audit?

Regardless of which type you choose, here’s what you can expect:

Document Reviews: The auditor will want to see everything—your security policies, employee handbook, vendor management procedures, incident response plans, and more.

System Testing: They’ll poke around your actual systems to verify that security controls are configured correctly. This isn’t a penetration test, but they will check things like user access permissions, firewall rules, and encryption settings.

Interviews: Key personnel will be interviewed about their roles and responsibilities. This usually includes IT leadership, security personnel, HR for employee-related controls, and sometimes executives.

Evidence Sampling: For Type II, the auditor will select samples throughout the audit period to test. If you’re supposed to review user access quarterly, they’ll want to see evidence from each quarter.

Common Pitfalls and How to Avoid Them

Starting Too Late: Most companies underestimate how long it takes to get ready. Start planning at least 6 months before you need the report.

Inadequate Documentation: “We do security stuff” isn’t enough. You need documented policies, procedures, and evidence that you’re following them.

Inconsistent Evidence Collection: For Type II, you can’t have gaps in your evidence. Set up systems to collect and organize evidence consistently throughout the audit period.

Choosing the Wrong Auditor: Not all auditors are created equal. Look for firms with specific SOC 2 experience in your industry and get references from similar companies.

Scope Creep: Be clear about what systems and processes are included in your audit. Adding things mid-stream gets expensive fast.

The Real Costs (Beyond the Auditor)

The auditor fee is just part of the equation. Here are the other costs to consider:

Internal Resources: Someone needs to manage this project, and it’s usually 25-50% of their time during preparation and audit periods.

Tool Costs: You might need new security tools, monitoring systems, or documentation platforms.

Remediation: If the auditor finds issues, you’ll need to fix them, which might require additional tools or consulting.

Ongoing Compliance: For Type II, you need to maintain controls year-round, not just during audit season.

After You Get Your Report

Getting your SOC 2 report isn’t the finish line—it’s the starting line for ongoing compliance. Here’s what comes next:

Share Strategically: SOC 2 reports contain sensitive information about your security controls. Have a process for sharing them securely with customers and prospects.

Plan for Next Year: Most companies get SOC 2 reports annually. Start planning for next year’s audit shortly after this year’s is complete.

Monitor Continuously: Don’t let your controls slide after the audit. Set up ongoing monitoring to ensure you’re ready for next year.

Leverage for Sales: A clean SOC 2 report is a powerful sales tool. Make sure your sales team knows how to talk about it effectively.

The Bottom Line

SOC 2 reports have become table stakes for many B2B companies, especially in SaaS. The question isn’t really whether you need one—it’s which type makes sense for your business right now.

If you’re just getting started, Type I can be a great way to prove your controls are properly designed without the ongoing commitment of Type II. But if your customers demand the highest level of assurance, or if you’re ready to make compliance a core part of your business operations, Type II is the gold standard.

Either way, start planning early, budget appropriately, and remember that SOC 2 compliance is a journey, not a destination. The companies that succeed are the ones that build security and compliance into their DNA, not just their audit reports.