Understanding the Differences: SOC 2 Reporting – Type I vs Type II

Everything looks good until the prospect’s legal team sends over their vendor questionnaire with “SOC 2 Type II preferred” buried in the security requirements. Cue the panic googling: “What’s the difference between Type I and Type II“, and “do we really need the more expensive one?“

This confusion isn’t unusual and things can be confusing especially if you are reading things about SOC 1 (controls over financial reporting relevant to user entities), and it’s own Type I and Type 2 Reporting or even what a SOC 3 (general use version of a SOC 2 Report) is. You can find more information on the differences on these reports on the AICPA website.

Many growing companies offering services through the internet hear they need SOC 2 compliance to win enterprise deals, but the distinction between Type I and Type II reports often gets lost in the security and compliance alphabet soup. If you’re trying to figure out which type of report makes sense for your company right now, this guide will help you understand the key differences between the Type I Report and the Type II Report to help you make the right choice for your stage and goals.

The American Institute of Certified Public Accountants (AICPA) introduced the framework used for System and Organization Controls (SOC) Reports. It has evolved over time, formerly known as SAS 70. A SOC 2 Report is an attestation framework designed for service organizations whose services could impact their clients’ operations, compliance, or data security. The framework focuses on criteria that an organization must meet and its applicability against relevant trust service categories: Security (Commonly required for all SOC 2 reports), plus any applicable areas: Availability, Processing Integrity, Confidentiality, and Privacy (applied based on your specific services and commitments to clients). The SOC 2 Report is meant to demonstrate that your system has a compliance posture that was assessed via an independent auditor’s assessment conducted under SSAE 18 professional standards (and subsequent amendment SSAEs applicable to AT-C section 105 and AT-C section 205).

Whether you directly handle customer data, process information without accessing it, provide infrastructure that affects client system availability, or deliver services that impact processing integrity, a SOC 2 Report is a tool that is used by Third Party Risk Management (TPRM) teams and other decision makers to view how a system is managed and it’s a tool to help these stakeholders, like prospective or existing clients, gain trust that internal controls operate effectively based on the framework criteria. Enterprise clients, regulators, and business partners increasingly use TPRM to require compliance reports, such as a SOC 2 Reports before they’ll trust you with their data. Read more on what a SOC 2 is all about.

Think of SOC 2 Type I as a snapshot in time. It’s like having someone inspect your car’s safety features while it’s parked in the driveway, but not actually taking it for a test drive. The report uses an “as of” date. The auditor is looking if your organization has the tools and processes in place by nature of its design.

What Type I covers:

• The suitability of control design at a specific date to provide reasonable assurance that your service commitments and system requirements would be achieved
• Whether those controls are appropriately designed to meet the relevant Trust Services Categories and Criteria
• Documentation that your policies and procedures exist and make sense on paper
• Management’s description of your service organization’s system as of a specified date

Typical use cases:

• Early-stage companies that need to show compliance intent quickly
• Organizations building their compliance foundation for the first time
• Companies with tight timelines who need something faster than a full Type II
• Organizations that have recently implemented new controls and need to demonstrate proper design before building operational history

The upside: Type I reports are faster to complete (often 6-8 weeks), less costly, and still demonstrate to enterprise partners that you’re serious about security. For many early-stage deals, showing you have SOC 2 Type I can be enough to get through vendor security reviews.

The limitation: Type I doesn’t validate that your controls actually operated effectively over time. It’s proof of design adequacy, not proof of operational execution.

SOC 2 Type II is where things feel more “audit-like”. The guidance references the Type II as needing to show operational effectiveness in addition to the design covered in the Type I. Thus we get a report testing both design of your controls and their operating effectiveness throughout the specified period. The auditor will sample and test controls, as appropriate and where applicable, to gain an understanding of how the processes in place are working throughout the report examination period. The AICPA guidance does not prescribe a minimum reporting period—however, the independent service auditor uses professional judgment to determine if sufficient appropriate evidence can be obtained to support an opinion regarding control effectiveness.

What Type II covers:

Aspect	SOC 2 Type I	SOC 2 Type II
Focus	Controls design suitability	Controls design and operating effectiveness
Timeframe	Single point in time (as of date)	Over Specified Period (auditor determines sufficient evidence period)
Service Auditor Opinion	Design suitability only	Design suitability and operating effectiveness
Effort Required	Lower (eg. a test of one)	Higher
Timeline	6-8 weeks	Variable based on period and examination timeframe; Most common is 12 months;
Value to Customers	Early validation, “we’re on the path”	Deeper trust, enterprise-ready
Common Stage	New to compliance journey eg. See funding / Series A round	Series B and beyond; Established service providers obtain the report annually.
Cost	Lower	Higher
Operational Evidence Required	Minimal	Extensive (throughout period)
Operational Maturity Required	Controls implemented and documented	Controls operating effectively throughout period

The decision often comes down to three practical factors:

General guidance: For companies starting their compliance journey, it’s common to see a readiness assessment followed with a SOC 2 Type I engagement. Then the transition to Type II beginning after the successful Type I assessment. Many companies use Type I as a stepping stone, building operational evidence while demonstrating initial compliance commitment following the Type I engagement. Talk with your SOC auditor to determine what period testing would work best for the Type II Report.