A Guide to the Different Types of SOC 2 Reports

What Are the Types of SOC 2 Reports?

The two main types of SOC 2 reports are Type 1 and Type 2. Type 1 attests to an organization’s use of compliant systems and processes at a specific time. Conversely, Type 2 is an attestation of compliance over a period (usually 12 months).

But there are a few more differences. Take a quick glance below:

SOC 2 Type 1 vs Type 2: What Are the Differences? 

A significant difference between SOC 2 Type 1 and SOC 2 Type 2 is that the former is ideal for organizations needing to quickly demonstrate initial compliance, whereas the latter is better suited for organizations looking to demonstrate consistent and ongoing effectiveness of their controls. 

Before starting the audit, you’ll need to decide which report you need. Each type has its own strengths, so it’s about choosing the one that best fits your needs.

Below, we discuss each type of SOC 2 audit in detail.

SOC 2 Type 1 

Focus

The focus of a SOC 2 Type 1 report is to zoom in on how well an organization’s cybersecurity controls are designed at a particular moment. Essentially, it looks at whether these controls are set up to meet the chosen  SOC 2 Trust Services Criteria— like security, availability, processing integrity, confidentiality, and privacy.

Audit Timeframe

Completing a SOC 2 Type 1 report usually takes between five weeks and two months. However, preparing for it can be quite a process, sometimes taking up to six months.

Moreover, the audit timeframe for a SOC 2 Type 1 report is influenced by several factors like  the complexity and scope of the controls being assessed, the organization’s internal readiness and documentation quality, and the volume of evidence required.

Applicability

Organizations that usually choose an SOC 2 Type 1 include SaaS companies, businesses that store sensitive customer data in the cloud, and cloud service providers.

Companies typically go for a SOC 2 Type 1 audit when they’re looking to get an initial assessment of their controls. This usually happens when:

• Starting Fresh –  They’re implementing new internal controls or processes and want to show that they’re designed correctly from the start.
• Preparing for Type 2 – They want to get a baseline check before committing to the more comprehensive Type 2 audit, which looks at how well the controls work over time.
• Client Requests –  They need to provide evidence of their controls to meet client or contractual requirements, but don’t yet have a full year of operational history to show.

Key Components

A SOC 2 Type 1 report dives into the details of an organization’s cybersecurity controls through a few key sections:

• Auditor’s Opinion – This is the heart of the report, showing whether the controls align with the TSC.
• Management’s Assertion – Here, the company’s management takes responsibility for the controls in place.
• Description of the System—This section provides a thorough overview of the controls and explains how they meet the TSC.
• Control Objectives and Activities – This section lays out the specific goals of the controls and the activities designed to achieve them.

Limitations

SOC 2 Type 1 has a very limited scope as it only shows the design of controls at one point in time, not how they perform over an extended or specified period.

Also, it’s not as comprehensive as the Type 2 report as it does not offer insights into the effectiveness of controls over time, which can be a drawback if you’re looking to show ongoing reliability.

SOC 2 Type 2 

Focus

A SOC 2 Type 2 report shows that an organization’s internal controls have been reviewed to ensure they’re well-designed and data protection of users. This report is based on the TSCs, which cover key areas like security, availability, processing integrity, confidentiality, and privacy.

Essentially, it shows that your controls meet these criteria consistently, proving you’re maintaining robust security practices.

Audit Timeframe

A SOC 2 Type 2 audit scope typically lasts at least six months and can extend to a year or even longer. The organization sets the exact length of the audit time period, which is a minimum of three months and a maximum of one year.

The total timeline depends on the size, complexity, and preparedness of the organization.

Applicability

Like SOC 2 Type 1, SOC 2 Type 2 is applicable to various organizations, such as SaaS providers, business intelligence and analytics firms, and financial institutions, such as banks, investment firms, insurance companies, and security firms. 

It is also applicable to any organization that stores customer data in the cloud.

Companies typically go for a SOC 2 Type II report once they’ve had their organization’s controls in place for a while and want to show they’re working effectively over time. This usually happens when:

• Proving Long-Term Reliability – Demonstrate that your controls are consistently effective, not just well-designed, over a period of 6 to 12 months.
• Meeting Client Requirements – Provide evidence to clients or partners that your security measures are reliably maintained and operational.
• Building Trust – Build trust with stakeholders by showing a track record of strong, ongoing security practices.

When asked for scenarios of when a SOC 2 Type 2 would be preferable over Type 1, Kenneth Pun, The Pun Group’s Founder and Managing Partner, has this to share,

“In some circumstances, it may be advisable to begin with a SOC 2 Type 2 audit rather than a SOC 2 Type 1 audit, particularly if the following requirements are satisfied:

• If the business has been operating and implementing its controls for a considerable amount of time (usually six to twelve months), it may be prepared to show how successful the controls have been over time, which is necessary for a Type 2 audit.

• In certain areas, such as banking or healthcare, where ongoing compliance is essential, some businesses may have clients or business partners who need a Type 2 report immediately.

• To save time and money, a company with a mature compliance program that has been successfully managing controls through internal audits or comparable frameworks may choose to proceed with Type 2 auditing instead of a Type 1 audit

Moving straight to a SOC 2 Type 2 can have more benefits when a company is under pressure to achieve compliance requirements rapidly, such as when a company needs to win a significant contract.”

Key Components

A SOC 2 Type 2 report looks at how well a company’s internal controls protect customer data, especially for cloud service providers. It’s essentially a third-party audit that evaluates the safety and effectiveness of security protocols.

The report is quite thorough and includes the following:

• The auditor’s opinion of each control and their results.
• Documented deviations or issues.
• The services the company offers and the details on the company’s systems, including infrastructure, personnel, procedures, and data.
• How the company’s systems track and handle significant events and conditions.
• The methods used to prepare and present the reports.
• Any areas where the company’s controls fall short of the Trust Service Criteria and why.

Limitation

Compared to the Type 1 report, the SOC 2 Type 2 report is time-consuming to attain.  The audit process takes longer and involves more extensive preparation and documentation, making it unfit for immediate proof of compliance requirements.

More than that, it requires a more significant investment of time and resources to maintain and demonstrate the operating effectiveness of your organization’s controls over the entire audit period. Also, due to the longer timeframe and increased complexity, it can be more expensive to obtain.

How to Choose The Right SOC 2 Type For Me?

Go for a SOC 2 Type 1 report if you need to prove compliance quickly, like when you’re onboarding a new customer. It gives a snapshot of your security controls at a specific point in time. 

On the other hand, a SOC 2 Type 2 report is better if you want to show how well your controls perform over an extended period. It gives customers more assurance by demonstrating consistent effectiveness over time.  

The process of choosing the right type of SOC 2 audit to venture into can be significantly simplified with the help of experienced auditors. 

“The Pun Group provides strategic consultancy and readiness assessments adapted to the changing regulatory landscape to assist firms in staying ahead of these developments. We help businesses realize how crucial Type 2 compliance is to fostering resilience and trust, and we support them in putting in place controls that are both up to date with current standards and expandable to accommodate new ones. 

Moreover, The Pun Group offers ongoing assistance during the audit process, guaranteeing that companies can modify their compliance initiatives to satisfy evolving customer and regulatory requirements.”

• Kenneth Pun, Managing Partner, The Pun Group

Further understand The Pun Group’s strategy in determining the right type of SOC 2 audit for your organization.

Here is a step-by-step guide on how to choose the right SOC 2 audit type:

Assess Your Long-Term Objectives

If you want to demonstrate ongoing control effectiveness, choose SOC 2 Type 2. This report covers a period of time (usually 6-12 months), showing how well your controls perform over an extended period, which offers more assurance to customers.

Evaluate Your Current Security Practices

• Are your controls well-established and consistent? If yes, a SOC 2 Type 2 may be more appropriate.
• Are your controls still evolving or new? Start with a SOC 2 Type 1 to get initial feedback and build a foundation for future Type 2 compliance.

Consider Resource Availability

• If you have limited resources or time, start with SOC 2 Type 1. It typically requires less time and effort compared to a Type 2 report.
• Ready for a comprehensive assessment? Opt for SOC 2 Type 2 if you have the resources to commit to a longer audit process.

Plan for the Future

• Many companies begin with SOC 2 Type 1 to establish compliance quickly and then move to Type 2 as their security practices mature.
• If your goal is to build trust and show long-term effectiveness, plan to transition to SOC 2 Type 2.

How Do You Become SOC 2 Type 2 Compliant?

To become SOC 2 Type 2 compliant, you must start defining your SOC 2 scope and conducting a gap assessment. Here are the steps you need to follow to get the SOC 2 Type 2 report in no time:

Define Your Scope

Identify which of the 5 TSCs—Security, Availability, Processing Integrity, Confidentiality, and Privacy—apply to your business. Security is mandatory. If you’re unsure, consult The Pun Group for guidance. Keep in mind that more criteria will increase costs and require more evidence and audit steps, but they need to be done nonetheless.

Define Your Controls

Implement controls that align with your chosen TSCs. You can find control templates online or contact  The Pun Group for help. Controls fall into two categories:

• Administrative – Policies and procedures for managing people and physical security.
• Technical Security – Safeguards for your technical infrastructure and data.

Conduct a Gap Analysis

Review your control environment to identify gaps between your current setup and SOC 2 criteria. This helps prepare for the external audit.

Address Gaps

Fix identified issues such as missing policies or inadequate security measures. Many organizations start with a SOC 2 Type 1 report for quicker feedback, then aim for the SOC 2 Type 2 report covering an audit period.

Conduct Readiness Assessment

A SOC 2 readiness assessment is similar to a dress rehearsal for your SOC 2 audit. A service auditor will dive into your documents, policies, and processes to see how ready you are. 

They’ll help you spot any weaknesses and make sure everything’s in order before the official audit takes place. It’s basically your chance to get everything squared away and see that you’re set up for success.

Contact a Certified Auditing Firm – The Pun Group Is Ready!

We simplify the process by helping you define your scope, identify and address compliance gaps, and implement necessary controls. Expect a customized audit plan, expert advice, and step-by-step support.

Receive Your Attestation

The wait is over. You’ll receive a SOC 2 Type 2 report, which may be favorable or highlight deficiencies. If it’s the latter, address the issues and re-audit to achieve compliance.

If you’re ready to take the next step toward SOC 2 Type 2 compliance, we’re here to help. Reach out to us today, and let’s get started!

Establish Continuous Monitoring

Set up automated tools and processes to track and assess key controls related to security, availability, processing integrity, confidentiality, and privacy. Continuous monitoring helps identify vulnerabilities, anomalies, or non-compliance in real-time, allowing for immediate remediation. 

It also ensures ongoing adherence to SOC 2 requirements, reducing the risk of control failures between audits.

How Much Does It Cost to Get a SOC 2 Type 1 and 2 Report?

For a Type 1 audit, you’re looking at costs starting around $5,000 and potentially going up to $25,000. Type 2 audits generally range from $7,000 to $50,000. 

Overall, if you’re aiming for full SOC 2 compliance in 2024, you can expect to spend between $30,000 and $50,000. The exact amount will depend on how big and complex your organization is, what type of audit you need, and which auditor you choose.

Find Out How the Pun Group Can Help You Become SOC 2 Compliant

Without a readily available SOC 2 report, you’ll likely be inundated with lengthy security questionnaires from enterprise customers. These inquiries can be exceedingly complex, demanding meticulous attention to detail, and challenging to address without established processes and documentation. 

Herein lies the value of a SOC 2 report; it is a vital tool that instills confidence in your customers and facilitates smoother business transactions.

Now, you definitely need help arriving at the destination, and  The Pun Group is your best bet!

We specialize in SOC audits for various industries, making the process smoother with automation and expert oversight. We help set up security controls according to the trust principles, provide thorough risk assessments, and deliver detailed audit reports.

Interested? Get on a call with us to know more.