Moving from SOC 2 Type I to Type II: A Practical Path

Why Transition from Type I to Type II?

You have your SOC 2 Type I report. Congratulations - you've demonstrated that your controls are suitably designed. But your customers, especially enterprise buyers, likely want more.

Customer Pressure

Most enterprise customers see Type I as a stepping stone, not a destination. Common responses to Type I include:

• "When will you have Type II?"
• "We'll accept Type I for now, but need Type II for renewal"
• "Type I is fine for pilot, but production requires Type II"

Type II Benefits

• Higher assurance: Proves controls actually work, not just exist
• Customer acceptance: Meets enterprise procurement requirements
• Fewer questionnaires: Type II answers more questions than Type I
• Real security improvement: Forces sustained control operation

Typical Transition Timeline

The transition from Type I to Type II isn't instantaneous - you need an observation period where controls operate.

Scenario: Type I in December 2025

Minimum vs. Recommended Period

• Minimum: 6 months (some auditors accept 3 for first Type II)
• Recommended: 9-12 months for first Type II
• Standard: 12 months for subsequent years

A shorter observation period is not faster - it just means your Type II covers less time. Customers may ask about the gap between reports or why the period is so short.

The Practical Path: Step by Step

Step 1: Review Type I Findings

Your Type I audit likely identified areas to strengthen. Before starting the observation period:

• Address any exceptions noted in Type I
• Implement auditor recommendations
• Close any gaps that were accepted for Type I

Step 2: Establish Evidence Collection Processes

Type II requires evidence that controls operated throughout the period. Set up:

• Automated logging and retention
• Regular evidence exports (don't wait until audit time)
• Ticketing systems with proper documentation
• Calendar reminders for periodic controls

Step 3: Formalize Periodic Controls

Some controls execute periodically. Document schedules and owners:

• Access reviews (quarterly or semi-annual)
• Vulnerability scans (monthly or continuous)
• Backup testing (quarterly)
• Security awareness training (annual)
• Vendor assessments (annual)
• Risk assessments (annual)

Step 4: Communicate Responsibilities

Everyone involved needs to understand:

• What controls they own
• How to document control execution
• Where to report issues or exceptions
• That the observation period has started

Step 5: Monitor Throughout the Period

Don't set and forget. Actively monitor:

• Are periodic controls executing on schedule?
• Are exceptions being documented and addressed?
• Is evidence being collected properly?
• Have there been significant changes to systems?

Step 6: Prepare for Type II Fieldwork

4-6 weeks before audit:

• Organize evidence by control
• Identify any gaps in evidence
• Document any exceptions and remediation
• Brief control owners on the audit process

Control Maintenance During Observation

The observation period tests whether controls work consistently - not whether you can scramble to make them work when the auditor arrives.

What "Operating Effectively" Means

• Consistent: The control operates every time it should
• Complete: All required steps are performed
• Documented: Evidence exists that the control operated
• Timely: The control operates when it should (not after the fact)

Handling Changes During Observation

Your environment will change during the observation period. Handle changes by:

• Documenting significant changes to scope or systems
• Ensuring new systems are covered by controls
• Updating control documentation as processes change
• Communicating changes to your auditor

When Controls Fail

Control failures happen. What matters is how you handle them:

• Document the failure: What happened, when, how discovered
• Assess impact: What was the actual or potential consequence?
• Remediate: Fix the immediate issue
• Root cause: Why did the control fail?
• Prevent recurrence: What changes prevent future failures?

Evidence Collection Best Practices

Types of Evidence Needed

Evidence Collection Tips

• Automate where possible: System logs, automated tickets, scheduled exports
• Collect continuously: Don't wait for audit time
• Retain everything: You don't know what samples auditors will request
• Organize by control: Makes audit preparation faster
• Test your evidence: Can you actually retrieve what you need?

Common Pitfalls to Avoid

1. Starting Observation Before Ready

If controls aren't fully implemented, the observation period captures failures, not successes. Ensure controls are ready before the clock starts.

2. Inconsistent Control Execution

"We did it most months" isn't sufficient. Auditors sample across the period and expect consistent operation.

3. Lost or Missing Evidence

Can't prove it happened if you don't have evidence. Ensure retention policies cover the observation period.

4. Ignoring Exceptions

Exceptions happen, but unaddressed exceptions suggest control weakness. Document and remediate.

5. Major Changes Mid-Period

Significant system or process changes mid-observation create complexity. Plan changes around audit cycles when possible.

6. Last-Minute Scramble

If you're scrambling to find evidence the week before fieldwork, the period wasn't managed well. Plan ahead.

Frequently Asked Questions

Can we use the same auditor for Type II?

Yes, and it's often easier. They already understand your environment from Type I. However, you're free to switch auditors.

What if we have gaps in evidence?

Gaps in evidence typically result in exceptions. If you discover gaps mid-period, fix the collection process going forward. Explain gaps honestly to your auditor.

Can the observation period overlap with Type I?

Technically yes - the observation period can start before the Type I report is issued. However, it's cleaner to start after Type I confirms controls are ready.

What if we add new systems during observation?

New systems should be covered by your controls. Document when they came into scope and ensure controls applied from that point forward.

How do we handle an exception we can't fix?

If a control exception cannot be remediated (e.g., a system limitation), document the exception, assess the risk, and implement compensating controls if possible. Discuss with your auditor.