In This Guide
The Quick Answer
Type I reports on whether controls are designed appropriately at a specific point in time.
Type II reports on whether controls are designed appropriately AND operating effectively over a period of time (typically 6-12 months).
Most enterprise customers want Type II. Type I is useful as a stepping stone or for customers with lower security requirements, but sophisticated buyers see Type I as "we have policies" vs. Type II as "we actually follow them."
Detailed Comparison
| Aspect | SOC 2 Type I | SOC 2 Type II |
|---|---|---|
| What's tested | Design of controls | Design AND operating effectiveness |
| Time coverage | Single point in time (e.g., "as of December 31") | Period of time (e.g., "January 1 - December 31") |
| Audit question | "Are controls suitably designed?" | "Are controls designed AND working?" |
| Testing methods | Inquiry, observation, inspection | Inquiry, observation, inspection, re-performance, sampling |
| Sample testing | No (design only) | Yes (samples from entire period) |
| Typical timeline | 2-4 months (readiness + audit) | 9-15 months (readiness + 6-12 month period + audit) |
| Typical cost | $15,000-40,000 | $30,000-100,000+ |
| Assurance level | Lower (intent, not execution) | Higher (proven track record) |
| Customer acceptance | Some accept; many prefer Type II | Strongly preferred by enterprise |
| Ongoing requirement | Often a one-time stepping stone | Annual renewal expected |
When to Choose Type I
Type I makes sense in specific situations:
1. First-Time SOC 2 (Bridge Report)
You need something to share with customers while building the track record for Type II. Type I demonstrates you've invested in controls and can satisfy customers who don't require Type II.
2. Urgent Customer Requirement
A deal requires SOC 2 faster than Type II allows. Type I can be achieved in 2-4 months vs. 9-15 months for Type II.
3. Lower-Risk Use Cases
Some customers (particularly SMBs or lower-risk engagements) accept Type I. If your customer base doesn't demand Type II, it may suffice.
4. Major System Changes
After significant infrastructure changes, a Type I report establishes the new baseline before accumulating operating history for Type II.
Type I Limitations
- Doesn't prove controls actually work in practice
- Sophisticated customers may not accept it
- May need to explain why you don't have Type II
- Creates expectation to "upgrade" to Type II
When to Choose Type II
Type II is the right choice for most organizations pursuing SOC 2 seriously:
1. Enterprise Customer Requirements
Fortune 500 companies, financial institutions, and healthcare organizations typically require Type II. It's table stakes for enterprise deals.
2. Long-Term Credibility
Type II demonstrates sustained commitment to security, not just a point-in-time compliance exercise.
3. Competitive Differentiation
When competitors only have Type I (or nothing), Type II sets you apart.
4. Genuine Security Improvement
The observation period forces you to actually operate controls consistently, improving real security posture.
Type II Considerations
- Requires longer timeline (plan ahead)
- Higher cost (but better value per dollar)
- Must maintain controls consistently (no gaps)
- Exceptions are documented (can't hide issues)
The Customer Perspective
Understanding how customers evaluate SOC 2 reports helps you choose wisely.
What Enterprise Customers Think
| Report Type | Customer Perception |
|---|---|
| No SOC 2 | "Not serious about security; requires extensive review" |
| Type I | "Getting started; has policies but unproven execution" |
| Type II (first year) | "Committed to security; building track record" |
| Type II (multiple years) | "Mature security program; proven track record" |
Common Customer Questions
- "Why only Type I?" Be prepared to explain your Type II timeline
- "When will you have Type II?" Have a concrete answer
- "Were there any exceptions?" Type II discloses these; be ready to discuss
Recommended Strategy
For most organizations, we recommend this approach:
Option A: Direct to Type II (Recommended)
If you can wait 9-15 months for your first report:
- Complete readiness and implement controls
- Begin observation period (minimum 6 months, ideally 9-12)
- Undergo Type II audit at period end
- Renew annually with 12-month Type II reports
Best for: Organizations planning ahead without urgent customer pressure
Option B: Type I Bridge to Type II
If you need something faster:
- Implement controls and get Type I report (2-4 months)
- Share Type I with customers, explaining Type II timeline
- Continue operating controls through observation period
- Get Type II report (6-12 months after Type I)
- Renew annually with Type II
Best for: Organizations with immediate customer requirements
Option C: Type I Only
Rarely recommended, but may work if:
- Your customers genuinely accept Type I
- You're a small/early-stage company with limited resources
- Type II is planned for the future
Think of Type I as training wheels. It's fine to start with, but plan to take them off. Staying at Type I signals you're not ready for enterprise-grade security scrutiny.
Frequently Asked Questions
Can I skip Type I and go straight to Type II?
Yes, absolutely. Many organizations go directly to Type II. Type I is not a prerequisite; it's an option for those who need something faster.
How long should my Type II observation period be?
For first-time reports, 6 months is the minimum most auditors accept. 9-12 months is preferred as it demonstrates full-cycle control operation. Subsequent years typically cover 12 months.
Can I convert a Type I to Type II?
Not directly. After receiving Type I, you continue operating controls, then undergo a separate Type II audit covering the observation period. The Type I doesn't "become" a Type II.
What if I have exceptions in my Type II?
Exceptions are documented in the report but don't necessarily prevent a clean opinion. The auditor evaluates whether exceptions are isolated incidents or systemic failures. Most Type II reports have some exceptions—customers understand this.
Do I need to renew SOC 2 every year?
Yes, for Type II. Reports cover a specific period; once that period passes, the report is historical. Customers expect current reports (typically within 12 months of issue date).