Understanding SOC 2 Type 1 vs Type 2: Choosing the right compliance for your business

Navigating the complexities of SOC 2 compliance can be challenging, especially when it comes to understanding the difference between SOC 2 Type 1 and Type 2. Simply put: Type 1 assesses the design of security processes at a single point in time, while SOC 2 Type 2 examines the operational effectiveness of those controls over a period of time. 

In this blog post, we’ll explore the distinct purposes of each type, the scenarios they’re suited for, and the benefits they provide, equipping you with the knowledge to decide which SOC 2 audit fits the needs of your service organization.

Key takeaways

• SOC 2 compliance is centered around five Trust Services Criteria (Security, Availability, Processing Integrity, Confidentiality, Privacy) and signifies an organization’s commitment to data protection, with SOC 2 Type 1 providing a snapshot of compliance at a specific time and SOC 2 Type 2 offering a more detailed, long-term assurance over a period of time.
• The choice between SOC 2 Type 1 and Type 2 depends on factors such as the organization’s specific needs, the sensitivity of the data, stakeholder requirements, and the pros and cons of each audit type. Type 1 offers a quicker and cost-effective approach for immediate proof of compliance, while Type 2 assesses effectiveness over time.
• Preparing for SOC 2 audits involves assembling a specialized compliance team, understanding and implementing controls that meet Trust Services Criteria, conducting a readiness assessment, and often engaging external support to ensure thorough preparation and adherence to necessary compliance standards.

SOC 2 compliance: An overview and the five trust services criteria

SOC 2 compliance serves as a reliable indicator of a service organization’s dedication to maintaining robust data security within its systems. It establishes confidence among clients by confirming that the organization follows industry-recognized best practices and is fully equipped to handle their information securely, ensuring the safeguarding of customer interests and confidentiality.

The foundation of SOC 2 compliance lies in adhering to five critical Trust Services Criteria, also referred to as Trust Service Principles.

1. Security
2. Availability
3. Processing integrity
4. Confidentiality
5. Privacy

These principles are crucial in upholding secure system operations that involve handling customer data effectively—ensuring its accuracy, availability when needed, confidentiality against unauthorized disclosure, and privacy for personal information held by organizations or systems responsible for managing such info with care at all times without failure (processing integrity). 

1. Security

The security principle is essential for protecting systems from unauthorized access, preventing potential breaches and misuse. To maintain robust protection, service organizations implement a variety of security controls, including:

• Access controls
• Encryption techniques
• Firewall deployment
• Intrusion detection mechanisms
• Continuous security monitoring procedures
• User authentication protocols

Important note: Security is the only TSC required in any SOC audit because it not only sets overarching security standards for your company, but also overlaps with the others: setting security controls for availability, confidentiality, privacy, and processing integrity.

2. Availability

Availability ensures that your systems are up and running, and accessible to customers at the times they need them most. For example, Service Level Agreements (SLAs) with your customers are a great way to show you are able and committed to meet uptime requirements. It’s a key criterion for startups that need to guarantee their users can access data and services during critical moments.

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3. Processing integrity

Processing integrity ensures the accuracy and completeness of data processing, managing the prompt detection and resolution of any processing errors. It safeguards against unauthorized changes to data during its input, storage, and output, thus guaranteeing that operations are conducted correctly and securely.

4. Confidentiality

Confidentiality pertains to the management and safeguarding of sensitive information, whether it’s personal data or proprietary business details like strategic plans, financial records, or legal contracts, that an organization is required to keep secure.

Beyond the security measures already mentioned, the confidentiality principle provides a framework for identifying sensitive information, ensuring its protection during use, and securely disposing of it when it’s no longer needed.

5. Privacy

Privacy involves the responsible management of personal data, such as individuals’ names, addresses, emails, Social Security numbers, or other identifiers, purchase records, and even criminal backgrounds.

While privacy focuses on the protection of customers’ personal data, confidentiality extends to safeguarding any sensitive information that an organization has committed to keeping confidential.

SOC 2 Type 1: A snapshot of compliance

Think of SOC 2 Type 1 as a snapshot that captures your company’s adherence to security protocols at one point in time. It offers immediate visibility into how well your firm safeguards sensitive data, providing startups and established businesses alike with critical leverage for gaining market advantage or sealing prompt business agreements. It also allows you to evaluate the design of the controls you plan to implement—consider it like a blueprint.

Offering expedited assessment turnaround and affordability, the quicker-to-achieve and less expensive SOC 2 Type I certification works well for most service organizations—particularly when swift verification is imperative for pressing business engagements.

The SOC 2 Type 1 audit process

The SOC 2 Type 1 audit process requires the involvement of independent certified public accountants to validate adherence to established auditing standards and ensure auditor neutrality. It is crucial to select an AICPA-accredited auditor with proven expertise in conducting SOC 2 audits for this purpose.

During the audit, evaluators examine both the implementation and design effectiveness of a service organization’s controls as they pertain to a single moment in time. They assess if these controls are correctly structured to satisfy the selected Trust Services Criteria and whether their operation was effective on a predetermined date. The primary objective is delivering confidence to stakeholders regarding the adequacy of control designs within the organization for meeting targeted criteria at that particular point in time.

Advantages of Type 1

SOC 2 Type 1 offers multiple benefits, being an economical and quicker alternative to a SOC 2 Type 2 audit. This makes it particularly suitable for businesses that have recently updated their data security protocols or are newly established, allowing them to showcase compliance efficiently when time is of the essence.

SOC 2 Type 1 can quickly instill confidence in potential customers regarding an organization’s commitment to data security. It stands out as an effective interim measure by offering faster auditing processes and reduced costs while addressing immediate client requirements for initial compliance validation.

SOC 2 Type 2: Testing operating effectiveness over time

In contrast to SOC 2 Type 1, which is more akin to a momentary assessment, SOC 2 Type 2 offers an intricate evaluation of how well an organization’s security controls function over time. An annual review culminating in a SOC 2 Type 2 report is often recognized as the gold standard and provides robust assurance about an entity’s compliance measures regarding the effectiveness of their internal controls over a period of time.

SOC 2 Type 2 audit process

In contrast to Type 1, a SOC 2 Type 2 audit focuses on an extended timeframe with the observation period lasting about 6 months. Usually, a Type 2 audit assesses your compliance over a six to 12-month review period. In this way, the audit period grants auditors enough time to thoroughly assess how consistently effective security controls are over several months—offering a more in-depth insight into organizational compliance.

The steps undertaken throughout this auditing process include:

• Deciding upon which Trust Services Criteria will be assessed
• Identifying all pertinent systems and their associated security controls
• Collecting comprehensive documentation related to these controls
• The auditor conducts evaluations and requests substantiation regarding control implementation from said organization. They may also ask for additional documents or clarification if needed
• A detailed SOC 2 report is then furnished at the completion stage
• Finally, any identified exceptions or issues can be attended to by the organization once they receive feedback post-audit

It’s worth noting that service organizations may need to allocate more resources and personnel to support the Type 2 audit process and ensure that your controls are maintained and monitored throughout the audit period.

Advantages of Type 2

By assessing controls over a standard duration of 12 months, the SOC 2 Type 2 report offers assurance that an organization maintains compliance in the long term. This type of extended evaluation underscores a company’s dedication to upholding stringent security protocols continuously.

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Type 2 reports further boost stakeholder trust by delivering a thorough and prolonged assessment of the entity’s controls. As with type 1, external assistance for audit preparation is crucial for achieving this unblemished level of compliance with SOC 2 Type standards, which in turn simplifies due diligence processes and strengthens confidence among stakeholders.

Getting your SOC 2 report can be a very manual and painstakingly slow process; however, there are SOC 2 compliance automation providers to help streamline the process. Thoropass is the only solution of its kind to offer both SOC 2 readiness and the audit, all from within an easy-to-use platform. Thoropass’s clients typically start with a Type 1 and then build to a Type 2 unless a specific client requires a Type 2 immediately.

Choosing between Type 1 and Type 2

Determining which SOC 2 type to pursue, whether Type 1 or Type 2, isn’t an easy choice and should be influenced by multiple considerations such as the needs of your organization, how sensitive the data is that you’re handling, and what exactly your clients or partners demand. 

In general, most businesses should start with a Type 1 and then build to a Type 2, unless a specific client requires a Type 2 immediately. However, the type of report can depend on how urgently businesses need compliance, and if they will eventually need a Type 2 report.

When deciding between achieving Type 1 and Type 2, consider factors like time constraints, budgetary limits, and the level of detail desired in evaluating the effectiveness of controls.

New ventures targeting enterprise-level clientele might find that a SOC 2 Type 1 certification meets certain client demands due to its quicker turnaround time and lower associated costs. For those enterprises demanding thorough evidence of sustained compliance over time, it will likely require attaining a SOC 2 Type 2 certification. 

Not sure if SOC 2 is right for your business? Take our compliance quiz to find out.

Transitioning from Type 1 to Type 2

Transitioning from SOC 2 Type 1 to SOC 2 Type 2 is a significant step in the compliance trajectory of any organization. Initially, entities venturing into their inaugural SOC 2 audit are encouraged to commence with a SOC 2 Type 1 report. This serves as an essential foundation that paves the way towards achieving type two conformity.

Advancing to a Type 2 classification affirms your organization’s unwavering adherence to robust security controls but also demonstrates this over an extended timeframe. Thoropass’s clients typically start with a Type 1 and then build to a Type 2 unless a specific client requires a Type 2 immediately.

Conclusion: Compliance requires ongoing dedication

In our ever-increasingly digital world, ensuring the security and privacy of sensitive customer data is imperative for any service organization. Achieving SOC 2 compliance signifies to customers and stakeholders that a company is dedicated to implementing best practices in safeguarding their information. It’s important for an organization to understand the differences between SOC 2 Type 1 and Type 2 audits in order to select the appropriate type that aligns with its operational requirements.

Keep in mind that achieving compliance isn’t just about reaching an endpoint. It involves ongoing dedication and improvement. Throughout your progression toward obtaining SOC 2 compliance, aim beyond simply acquiring a favorable audit report—strive instead for establishing durable systems of data protection designed to be enduringly secure against future challenges.

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