SOC 2 Type 1 vs Type 2: Complete Comparison

Type 1 or Type 2? This single decision affects your cost ($12K-$450K), timeline (3-20 months), and whether enterprise customers will accept your report. Here's how to choose.

The Simple Explanation

SOC 2 Type 1

What it tests: Are your security controls designed properly at a specific point in time?

Timeframe: Single day (point-in-time snapshot)

What auditor checks: "Do you have the right controls in place? Are they designed to meet the Trust Service Criteria?"

SOC 2 Type 2

What it tests: Are your controls designed properly AND do they work effectively over time?

Timeframe: Observation period (3-12 months)

What auditor checks: "Do you have the right controls? Are they working consistently? Can you prove they operated throughout the audit period?"

Side-by-Side Comparison

Factor	Type 1	Type 2
What it proves	Controls are designed properly	Controls are designed AND operating effectively
Timeframe	Point-in-time (single day)	Period of time (3-12 months)
Timeline	3-8 months	6-20 months
Cost	$12K-$160K	$15K-$450K
Evidence required	Policies, designs, screenshots	All Type 1 evidence + proof of operation over time
Customer acceptance	50-60% of enterprise customers	90-95% of enterprise customers
Best for	Early-stage, speed-focused, budget-limited	Enterprise sales, most common requirement

Type 1 Deep Dive

What Type 1 Tests

Type 1 evaluates whether your controls are suitably designed to meet the Trust Service Criteria. The auditor reviews:

• Written policies and procedures
• System configurations and settings
• Control design documentation
• Screenshots and architecture diagrams

What Type 1 DOESN'T test:

• Whether controls actually work
• Whether you follow your policies consistently
• How controls perform under real-world conditions
• Control effectiveness over an extended period

Type 1 Costs

• Specialist auditors: $12K-$40K
• Regional auditors: $15K-$50K
• Mid-tier auditors: $20K-$65K
• Big Four auditors: $40K-$160K

Type 1 Timeline

1. Preparation: 1-3 months (implement controls, write policies)
2. Auditor engagement: 2-4 weeks (get quotes, negotiate)
3. Audit execution: 2-4 weeks (evidence collection, testing)
4. Report issuance: 2-3 weeks (draft review, final report)

Total: 3-8 months

When to Choose Type 1

• Speed is critical: You need certification in 3-6 months
• Limited budget: $15K-$40K vs $20K-$75K for Type 2
• Stepping stone strategy: Get Type 1 now, Type 2 in 6-12 months
• Early-stage proof: Demonstrate security maturity to investors or partners
• Customer accepts it: Specific customer only requires Type 1 (rare)

Type 2 Deep Dive

What Type 2 Tests

Type 2 evaluates both design and operating effectiveness. Everything from Type 1, plus:

• Controls operated throughout observation period (3-12 months)
• Evidence of consistent control operation (logs, tickets, reports)
• Exceptions and deficiencies identified and addressed
• Control changes tracked and documented

Observation period requirements:

• Minimum 3 months (rarely accepted by customers)
• Standard 6 months (common for first audit)
• Preferred 12 months (enterprise preference, rolling coverage)

Type 2 Costs

• Specialist auditors: $15K-$75K
• Regional auditors: $20K-$95K
• Mid-tier auditors: $30K-$120K
• Big Four auditors: $60K-$450K

Type 2 Timeline

1. Preparation: 2-4 months (implement controls, write policies)
2. Auditor engagement: 2-4 weeks (get quotes, negotiate)
3. Observation period: 3-12 months (controls must operate consistently)
4. Testing and fieldwork: 3-6 weeks (auditor tests evidence)
5. Report issuance: 3-5 weeks (draft review, final report)

Total: 6-20 months (typically 9-14 months)

When to Choose Type 2

• Enterprise sales: 90%+ of enterprise customers require Type 2
• Competitive advantage: Type 2 beats competitors with Type 1 only
• Long-term value: Type 2 remains valid for 12 months vs Type 1's limited shelf life
• Security maturity: Demonstrates real operational excellence, not just policy
• Investor/acquirer requirements: Due diligence almost always requires Type 2

Real-World Customer Preferences

Research from 500+ RFPs (2025):

• Fortune 500 companies: 98% require Type 2
• Mid-market enterprises (500-5000 employees): 85% require Type 2, 15% accept Type 1
• SMB customers (under 500 employees): 60% require Type 2, 40% accept Type 1
• Public sector/government: 95% require Type 2
• Financial services: 99% require Type 2
• Healthcare: 90% require Type 2

Bottom line: If you're selling to enterprise (1000+ employees), plan for Type 2. Type 1 might get you in the door, but you'll need Type 2 to close.

The Stepping Stone Strategy

Many companies do Type 1 first, then Type 2 6-12 months later. Here's how:

Step 1: Type 1 (Months 1-6)

• Implement all necessary controls
• Document policies and procedures
• Complete Type 1 audit
• Use Type 1 report for early-stage prospects

Step 2: Observation Period (Months 6-12)

• Continue operating controls consistently
• Collect evidence of ongoing operation
• Fix any issues discovered during Type 1
• Leverage Type 1 report while working toward Type 2

Step 3: Type 2 Upgrade (Months 12-15)

• Engage auditor for Type 2 testing
• Use 6-month observation period (or longer)
• Complete Type 2 report
• Replace Type 1 with Type 2 for all prospects

Cost savings: Many auditors credit 40-60% of Type 1 cost toward Type 2 if done within 12 months.

Evidence Requirements Comparison

Type 1 Evidence

One-time snapshots:

• Current security policies (v1.0)
• Screenshot of MFA settings (today)
• Current firewall rules
• List of current employees with production access
• Network diagram (as-is)
• Current vendor list

Type 2 Evidence

Everything from Type 1, plus ongoing operational evidence:

• Access reviews: Quarterly reviews throughout observation period
• Vulnerability scans: Monthly scans with remediation tracking
• Backup logs: Daily backup success logs for entire period
• Change tickets: All production changes with approvals
• Training records: Proof of security training completion
• Background checks: Completed checks for new hires during period
• Incident logs: All security incidents (or attestation of zero incidents)
• Vendor reviews: Annual vendor risk assessments

Internal effort:

• Type 1: 150-300 hours
• Type 2: 300-600 hours (due to ongoing evidence collection)

Exceptions and Findings

Type 1 Exceptions

If auditor finds control design issues in Type 1:

• Minor issues: Document in report, remediate, retest
• Major issues: May delay report until controls are properly designed
• Impact: 2-4 week delay typically

Type 2 Exceptions

If auditor finds operating effectiveness issues in Type 2:

• Minor exceptions: Missed 1-2 access reviews, late patches (documented exceptions in report)
• Material exceptions: Controls not operating consistently (qualified opinion, unacceptable to customers)
• Impact: Must remediate and potentially extend observation period

Type 2 is harder to pass because you must prove consistent operation over months. One missed control test = exception.

Report Validity Period

Type 1 Report Lifespan

• Technical validity: Only valid for the audit date (single day)
• Practical acceptance: Customers typically accept for 6-12 months
• Shelf life: Short — must upgrade to Type 2 or re-audit within a year

Type 2 Report Lifespan

• Technical validity: Covers observation period (e.g., Jan 1 - Dec 31, 2025)
• Practical acceptance: Customers accept until report is 12-15 months old
• Shelf life: Longer — annual surveillance maintains continuous coverage

Continuous coverage strategy: Do annual Type 2 audits with rolling 12-month observation periods for uninterrupted certification.

Cost-Benefit Analysis

Type 1 ROI

• Cost: $15K-$40K (specialist auditor)
• Time to value: 3-6 months
• Customer acceptance: 50-60% of enterprises
• Best for: Unblocking SMB deals, early proof of security

Type 2 ROI

• Cost: $20K-$75K (specialist auditor)
• Time to value: 6-12 months
• Customer acceptance: 90-95% of enterprises
• Best for: Enterprise sales, long-term value, competitive advantage

Break-even calculation:

• Incremental cost: $10K-$35K (Type 2 vs Type 1)
• Value: Accept 40% more deals (those requiring Type 2)
• If you close 1 additional $100K deal, Type 2 pays for itself 3x over

Common Questions

Can I upgrade from Type 1 to Type 2 mid-year?

Yes. Complete Type 1, then immediately begin observation period for Type 2. Most auditors will credit 40-60% of Type 1 cost if you upgrade within 12 months.

Will customers accept a 3-month Type 2 report?

Rarely. While AICPA allows 3-month minimum observation periods, most enterprise customers prefer 6-12 months. A 3-month report often raises questions about why you didn't go longer.

Do I need Type 2 if I'm just starting out?

It depends. If you're selling to SMBs and need certification quickly, Type 1 works. If your pipeline includes enterprise prospects (Fortune 5000), go straight to Type 2 — don't waste time on Type 1.

Can I switch auditors between Type 1 and Type 2?

Yes, but you lose the upgrade discount. Switching auditors means starting fresh and paying full Type 2 price. If you plan to upgrade, commit to one auditor for both.

What happens after the first audit?

Annual surveillance audits. Most companies do annual Type 2 audits to maintain continuous coverage. Cost is typically 60-70% of initial audit.

Decision Framework

Choose Type 1 if:

• You need certification in under 6 months
• Budget is very limited ($15K-$25K)
• Selling primarily to SMBs who accept Type 1
• Using as proof of concept for investors/partners (not customers)
• Planning to upgrade to Type 2 within 12 months

Choose Type 2 if:

• Selling to enterprise customers (strongly recommended)
• You can afford $20K-$75K and 9-12 month timeline
• You want long-term value and broad customer acceptance
• Security maturity and operational excellence matter
• You're doing this once and want to do it right

Our recommendation for 80% of companies: Go straight to Type 2 with a 6-12 month observation period. The incremental cost ($10K-$35K) is worth the broad customer acceptance and long-term value.

Related articles: SOC 2 Pricing Guide • SOC 2 Timeline • How to Choose an Auditor