SOC 2 Type 1 vs Type 2: A Detailed Comparison

Now, you may say— ‘If there is only one similarity between SOC 2 type 1 and type 2, then why is there still so much confusion? Why is it so difficult to figure out which report to generate?’

Adherence to the same guidelines is not the only similarity SOC 2 type 1 and type 2 share—there’s more to it! For example, both SOC 2 type 1 and type 2 audit reports provide insights into an organization’s internal controls system. In fact, to generate either SOC 2 type 1 or type 2 reports, an organization needs to hire an external AICPA-accredited auditor to perform an audit—no matter what.

Because of these similarities, organizations often get stuck in a confused state—they struggle to determine which report will actually help them demonstrate their SOC 2 compliance effort.

But don’t worry! By exploring SOC 2 type 1 vs type 2 key differences, you will clearly understand which audit report is right for your organization.

SOC 2 Type 1 vs Type 2: Comparison Based On 4 Distinct Parameters

Below, we’ve differentiated SOC 2 type 1 vs type 2 based on 4 different criteria in a detailed manner.

1: Difference Between SOC 2 Type 1 vs Type 2 Evaluation Scope

Generally, AICPA-accredited auditors evaluate an organization's internal system to determine whether they can fulfill the requirements set forth by SOC 2 regulatory compliance. After that, based on the findings, the auditors will prepare either a SOC 2 type 1 or type 2 report. However, you need to note the scope of evaluation varies between SOC 2 type 1 vs type 2 reports. Here's how.

• SOC 2 Type 1 report is an attestation of controls (formal declaration) provided by AICPA-accredited auditors after evaluating an organization's security setup design (design of control framework) at a 'specific point in time.'

Auditors perform a test of design (ToD), in which they first examine whether the organization's documents are up-to-date or not (like their operational license). After that, they evaluate the organization's internal control framework to find out —

• Which administrative control (policies, work infrastructure, and record format) do they have?
• Which technical control (firewall, anti-virus, and security patches) they have set up?
• What logical controls (single-sign on, multi-factor authentication, 2 factor authentication, and identity and access management) do they use to authenticate and authorize users?
• Lastly, it checks if the controls the organizations have implemented are correctly structured to satisfy the Trust Services Criteria (security, availability, integrity, confidentiality, and privacy of data)

Once reviewed, the auditor mentions all the findings in the SOC 2 type 1 report (these reports provide only a snapshot of the security control systems without delving into extensive detail).

However, keep in mind that the auditors conduct the evaluation on an "as-of-date" basis. They will only reflect what they found on the day of the audit in the SOC 2 Type 1 report, and nothing after that will be considered.

For example, if you have installed a new firewall in your control system post-audit, the independent auditor won't consider it. However, if the auditor suggests you make this new change, it will be valid and included in your SOC 2 Type 1 report after the round 2 audit.

• On the other hand, a SOC 2 Type 2 report is an attestation of controls provided by AICPA-accredited auditors after evaluating the organization's control design and effectiveness over a minimum six–month period.

Basically, during the audit process, the auditors perform a test of effectiveness (ToE) in which they first examine — whether the organization's practices align with Trust Services Criteria (TSC) or not, their documents, and control design in place (just like SOC 2 type 1). 

Then, the auditors take a step further and evaluate the effectiveness of controls that have been in place for an extended period by checking whether the security policies, measures, and practices they have implemented can prevent security breaches.

For example, the auditor assesses how the identity access management solution that the organization has implemented is performing in different scenarios for a specific period. The results determine whether the IAM solution is functioning as intended and whether it's effective and reliable enough for further use. If any inefficiencies are detected during the evaluation period, they provide suggestions/feedback post-audit to make improvements and then set up a round 2 audit again.

If no anomalies are found after the review is completed, the auditors detail all the findings in the SOC 2 type 2 report and share it with the organizations. Further, the organizations can then maintain this report as proof of the effective and diligent use of the controls for future audits and other uses (to show their credibility to partners, clients, and stakeholders).

Also Read: 8-Step SOC 2 Audit Checklist

2: Difference Between SOC 2 Type 1 vs Type 2 Audit Completion Duration

Audit duration refers to the amount of time an auditor takes to complete an audit (from reviewing to generating the final report). When the audit duration is longer, auditors usually perform a thorough evaluation of every aspect of the security setup and generate detailed reports. Meanwhile, when the SOC audit duration is shorter, auditors conduct less extensive evaluations and mention limited insights in the reports.

This is why most organizations prefer to undergo a long-duration audit and attain a detailed report that they present to clients, partners, or stakeholders to gain their trust and interest. So, let’s see which one of SOC 2 type 1 vs type 2 has a shorter audit duration.

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• AICPA-accredited auditors take less than three months to complete a type 1 audit and generate a SOC 2 type 1 report. This is because, during a type 1 audit, they focus solely on evaluating what internal controls the organization has implemented and generating reports that outline necessary details only.
• Meanwhile, AICPA-accredited auditors take around 6 to 12 months to complete a type 2 audit and generate a SOC 2 Type 2 report. This is because, during type 2 audits, they thoroughly observe and evaluate the effectiveness of the internal controls that the organization has put in place and generate a detailed report touching every security aspect. 

3: SOC 2 Type 1 vs Type 2 Audit Cost Comparison

Due to differences in evaluation scope and duration of the audit process, the cost of SOC 2 type 1 vs type 2 audit varies significantly. So, let’s find out which one among SOC 2 type 1 vs type 2 is less costly.  

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• Since SOC 2 type 1 audit emphasizes assessing which control frameworks are enforced, it takes less time and fewer resources to complete the audit process. This is why the SOC 2 Type 1 audit cost is lower compared to the SOC 2 Type 1 audit. For example, if you are a mid-size organization and want to undergo a type 1 audit, then you can expect to incur $7,500 to $15,000. If you are a large organization, you can expect to spend nearly $60,000.
• On the other hand, a SOC 2 type 2 audit involves a thorough evaluation of control framework effectiveness, which is generally more time- and resource-intensive. This is the reason why the SOC 2 Type 2 audit cost is comparatively higher—for a mid-size organization, a type 2 audit costs around $12,000 to $20,000, and for larger enterprises, the audit costs reach up to $100,000. 

4: SOC 2 Type 1 vs Type 2 Applicability Difference

SOC 2 type 1 vs type 2 reports are designed to meet the unique needs of organizations at different stages of their journey, for example:

• Since SOC 2 Type 1 reports can be obtained in a shorter period, startups (with budget constraints) often use them to demonstrate their commitment to data security to potential clients or partners. This demonstration helps gain the initial trust of partners, which further allows them to secure deals faster. That, too, does not require making any major investment in setting up complex security measures or having to undergo a long audit process like SOC 2 type 2.

However, SOC 2 Type 1 is just a 'one-time report' (valid for one-time use), so don't be surprised if your partners request more detailed reports on your control framework, i.e., the SOC 2 Type 2 report, later in the future.

• On the other hand, organizations with a well-established market presence generally tend to obtain SOC 2 Type 2 reports. This is because SOC 2 Type 2 reports provide in-depth insights into an organization's control framework's effectiveness, attracting interest from potential customers or partners and large investment opportunities. In fact, these reports also provide existing stakeholders with great assurance, which helps organizations retain their stakeholders in the long term.

Even after going through the differences, if you are still confused about which report is suitable for demonstrating your compliance effort, you can consider evaluating a few factors. What are these factors? Let's find out.

SOC 2 Type 1 vs Type 2: Which One To Choose?

While deciding between SOC 2 type 1 vs type 2 reports, you can consider evaluating factors such as your budget, your organization's maturity, and your customer requirements.

• For instance, if you are working with a limited budget and need to urgently prove your commitment to data security to secure a deal, then a SOC 2 Type 1 report can be a perfect short-term solution. These reports can be obtained quickly and provide reasonable assurance to your potential clients or partners that the foundational security controls are in place.
• Another scenario is that if your organization is a mature firm, clients expect to see more than just a basic overview of your controls. They want evidence regarding how effectively your controls framework functions (can it prevent and withstand breaches). Basically, they want to check your credibility and reliability. So, in this case, the SOC 2 Type 1 report won't suffice, as it only provides a snapshot of implemented controls.

Instead, you can consider obtaining a SOC 2 Type 2 report because it gives a detailed view of how effectively your controls function in real-time. This way, you can gain your clients' trust (both existing and new ones) and easily convince them to invest in your products/services.

• Also, sometimes clients specify which report they require—it can be either SOC 2 type 1 or SOC 2 type 2. So, in this situation, you will need to align with the client's demands/preferences and provide them with the report they request. There are no ifs and buts!

By evaluating these factors, you can easily determine which SOC 2 type 1 vs type 2 is more suitable for showcasing your data security commitment.

However, there is a suggestion—it's entirely up to you whether you follow it or not! It's not a mandate.

If you are a new company, start by securing SOC 2 Type 1 reports to establish credibility, as it neither takes much of your time nor investment. However, when you have the resource or budget in place, or your business expands, secure the SOC 2 Type 2 report immediately. By having both compliance reports (SOC 2 type 1 vs type 2)ready well in advance, you can avoid the stress of gathering last-minute reports. In fact, by preparing well ahead, you can position your company as someone who plans strategically and takes data security seriously.

Opt For An Access Review Solution To Secure Your Preferred SOC 2 Report Faster

Regardless of the type of report (SOC 2 type 1 vs type 2) you choose, you have to undergo an audit process that needs to be conducted by an independent third-party ACIPA-accredited auditor.

However, these external auditors often request to present reports that show how you ensure only authorized users hold access to sensitive data. So, for that, you can opt for a tool like Zluri.

Zlur offers an access review solution that automatically conducts an in-depth evaluation of user access permission (you need to configure actions beforehand) and auto-remediates when misalignment (e.g., excessive permission held by the user) in user access is detected. It ensures that only authorized users can access apps that store sensitive data and no one else. The best part is it does all the work with the least manual intervention. Also, it automatically generates a detailed UAR report post-review that you can present to the external auditors as proof of evidence — that you have taken all the necessary measures to keep sensitive data safe. This way, you can secure your preferred type of report faster (SOC 2 type 1 vs type 2) without any hassle.

To len more about how Zluri’s access review works, check out its access review tour!

https://www.zluri.com/access-reviews/asana 

Also Read: Preparing for a SOC 2 Audit? All You Need To Know

Frequently Asked Questions (FAQs)

1. Is It Compulsory To Secure SOC 2 Type 1 Before Applying For SOC 2 Type 2 Report?

There is no such obligation that you must first get a SOC 2 type 1 before applying for a SOC 2 type 2 report. If your organization needs a SOC 2 type 2 report, you can directly undergo a type 2 audit and secure a SOC 2 type 2 report.

2. Can An Organization Obtain SOC 2 Type 1 And SOC 2 Type 2 Simultaneously?

Yes, an organization can secure both SOC 2 type 1 and type 2 reports simultaneously and even within the same year. However, you need to mention to your auditor that you want both reports, and accordingly, they will schedule the evaluation process. Generally, they first evaluate your control design and issue a SOC 2 type 1 report. Then, they further observe the effectiveness of controls and provide you with the final SOC 2 type 2 report.

3. Can SOC 2 Type 1 Report Serve As A Substitute For SOC 2 Type 2 Report?

No, it can't because the SOC 2 Type 1 report provides a basic snapshot of the internal control framework, whereas SOC 2 type 2 provides a detailed description of internal control’s effectiveness.

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