Resources SOC 2 Type 1 vs. Type 2: What is the Difference?

Complying with AICPA standards is one of the best ways to improve public trust in your brand and ensure that you’ve implemented the best cybersecurity practices. Traditionally, companies use the AICPA SOC 2 (SOC 2 stands for "Service Organization Control 2) audit to evaluate the design and efficacy of their security protocols. However, there are two specific types of SOC 2 reports. So, this begs the question: SOC 2 Type 1 vs. Type 2: what’s the difference?

In today’s guide, we will provide a complete explanation of SOC II reports, including the differences between Type 1 and Type 2, as well as suggestions for which kind of report is the best fit for your organization.

SOC Reports Explained

When it comes to AICPA standards, there are three kinds of reports you should know about: SOC 1, SOC 2, and SOC 3. Of these three reports, SOC 2 is by far the most thorough and informative. SOC 1 reports pertain to the fairness of a service organization’s system and a description of the system’s ability to achieve the control objectives by the specified date. However, like SOC 2, SOC 1 reports also have two types. SOC 1 Type 1 provides a description of a system’s ability to achieve objectives by a specific date, while SOC Type 2 provides a description of the system’s protocols and operational efficacy over a set period of time (at least 6 months). 

Alternatively, the SOC 3 report provides a general overview of an organization’s controls and their ability to conform with the 5 trust principles outlined by the AICPA (Security, Availability, Processing Integrity, Confidentiality, and Privacy). SOC 3 reports do not contain any confidential information and are therefore available for public viewing. As a result, you can often find SOC 3 reports on the websites of SOC-compliant businesses.

While SOC 2 and SOC 3 reports require the auditor to evaluate system controls based on the 5 trust principles, the SOC 2 report is more detailed and is therefore reserved for the internal use of the audited service organization, its customers, and its stakeholders. However, it’s important to distinguish between SOC 2 Type 1 and Type 2 reports, as they provide completely different forms of CPA attestation. So, let’s take a closer look at each type of audit:

What is the Difference Between SOC 2 Type 1 Type 2 Reports?

As previously mentioned, SOC 1 has two distinct types of audits. SOC 2 audits work in a similar fashion, with the Type 1 report pertaining to a specific date and the Type 2 report pertaining to a set period of time. In any case, both types of SOC II reports can provide invaluable information about the strength of a service organization’s cybersecurity system.

SOC 2 Type 1

SOC 2 Type 1 reports outline the suitability of design controls to the service organization’s system at a specific point in time. More specifically, the SOC II Type 1 report evaluates the relevant parameters (Security, Availability, Processing Integrity, Confidentiality, and Privacy) in relation to a designated date. This kind of report demonstrates if your service organization has the necessary practices in place, or at least could have them in place by a certain deadline. Prior to the audit, the service organization and the CPA who will conduct the evaluation must agree on the date in question so that the auditor can make an informed report.

SOC 2 Type 2

SOC 2 Type 2 uses the same 5 trust principles as Type 1: Security, Availability, Processing Integrity, Confidentiality, and Privacy. However, Type 2 is far more time-consuming, resulting in a report that outlines the suitability and efficacy of internal controls over a designated period of time. This ensures that a service organization is effectively managing data and using the best security practices. In short, SOC II Type 2 audits provide a more comprehensive AICPA report on cybersecurity than SOC Type 1 audits.

Do You Need the SOC 2 Type 1 or Type 2 Report?

This question will largely depend on your timeframe, your budget, and your reason for seeking SOC 2 compliance in the first place. Both SOC 2 Type 1 and Type 2 reports are restricted to use, which means that they cannot be shared with the general public. Instead, they are intended for internal use within a service organization. The organization can then choose to share the SOC 2 report with consumers or potential consumers as evidence of its compliance with AICPA standards.

So, which is the best option for your organization? If you want to quickly secure SOC 2 compliance to share with your customers or clients, then Type 1 is the best option. When an auditor provides you with a clean SOC 2 Type 1 report, it will show that your organization has the best security practices in place. Though it will not provide a lot of detail regarding the implementation of your internal controls, it will give customers the peace of mind that their data is in good hands. This is also particularly useful if you’re looking to quickly secure a deal with another firm that requires SOC 2 compliance.

Additionally, SOC 2 Type 1 reports are better for the budget-conscious. A lengthy audit can take up a lot of resources. Fortunately, a Type 1 audit is short, as the CPA simply needs to review the descriptions of your internal controls and all relevant documentation. So, if you want to be SOC 2 compliant without spending a fortune, SOC 2 Type 1 is the better option.

Alternatively, if you want a complete evaluation of your cybersecurity protocols, the SOC 2 Type 2 report is the best option. Not only will this ensure that you’re implementing the best practices, but it can really help your service organization stand out from the competition. Customers and clients will be able to see that a third-party auditor thoroughly evaluated your processes and provided their professional attestation. Despite the increased cost of running a long-term (6 months or more) audit, the SOC 2 Type 2 report can help you show the strength of your cybersecurity system, potentially leading to more business in the future.