What Is SOC 2 a Plain-English Guide to Compliance

If you handle customer data, especially in a SaaS or cloud environment, you’ve probably heard people throw around the term “SOC 2.” But what is it, really?

Think of it less as a rigid checklist and more as a customized security blueprint for your organization. A SOC 2 report is an independent audit that proves you can be trusted with your customers’ most sensitive data. It’s third-party validation that your security promises aren’t just marketing fluff—they’re backed by real, audited controls that are consistently put into practice.

What Is SOC 2 and Why Does It Really Matter?

The framework was developed by the American Institute of CPAs (AICPA) specifically for service organizations that store and process customer data. In short, it gives your clients a standardized way to look under the hood and assess the risk of using your services. It’s a powerful testament to your commitment to security.

To make this crystal clear, here’s a quick breakdown of what SOC 2 is all about.

SOC 2 at a Glance

Concept	Description
What It Is	An independent audit report, not a certification, that verifies a company’s internal controls for protecting customer data.
Who Created It	The American Institute of Certified Public Accountants (AICPA).
Who Needs It	Any service organization that stores, processes, or transmits customer data, especially SaaS, cloud, and tech companies.
Core Principle	Based on 5 Trust Services Criteria: Security (mandatory), Availability, Processing Integrity, Confidentiality, and Privacy (optional).
Why It Matters	Builds customer trust, unlocks enterprise deals, and strengthens your overall security posture.
Is It Required?	Voluntary, but has become a non-negotiable requirement for selling to most enterprise customers.

Ultimately, SOC 2 provides a common language for you and your customers to talk about security and risk.

The Business Case for SOC 2

Let’s be honest: in today’s market, SOC 2 compliance is often a non-negotiable requirement for closing deals, particularly with enterprise-level clients. Many large companies won’t even consider a vendor that doesn’t have a current SOC 2 report. It’s become a fundamental part of their due diligence.

Having a SOC 2 report in hand gives you a serious competitive advantage by:

• Building Customer Trust: It’s independent proof that you actually do what you say you do when it comes to security.
• Accelerating Sales Cycles: Instead of spending weeks filling out lengthy security questionnaires from scratch for every new prospect, you can just hand over your SOC 2 report. Problem solved.
• Improving Internal Security: The process of getting ready for an audit forces you to find and fix security gaps you might not have known existed, making your entire organization stronger against cyber threats.

SOC 2 is a voluntary compliance standard, but for most B2B tech companies, it has become an essential ticket to the game. Without it, you risk being automatically disqualified by savvy buyers who prioritize data protection.

More Than Just a Report

At the end of the day, getting a SOC 2 report isn’t just about passing an audit. It’s about building a rock-solid security culture into your daily operations. The framework pushes you to document your processes, set clear policies, and create a system of checks and balances that makes your entire organization more resilient.

Introduced in 2010, the System and Organization Controls 2 framework has become the gold standard for tech companies. It’s built on five principles known as the Trust Services Criteria—security, availability, processing integrity, confidentiality, and privacy. You can find more data on its growing importance in this SOC reporting services market overview. This flexible structure allows you to tailor your audit to the specific services you offer, making your report a truly relevant and powerful statement about your security posture.

Understanding the Five Trust Services Criteria

At the core of every SOC 2 audit are the Trust Services Criteria (TSC), a set of five principles from the AICPA. The best way to think about them isn’t as a rigid checklist, but as a flexible menu of security promises you can make to your customers. Your entire audit is built around proving you live up to the criteria you choose.

This flexibility is what makes SOC 2 so practical. The framework recognizes that a data storage provider has different security priorities than a payroll processor. The TSCs let you focus your audit on what’s actually relevant to your services and the commitments you’ve made to your clients.

Let’s break down what each of the five criteria actually means in the real world.

Security: The Mandatory Foundation

The Security criterion is the one non-negotiable part of any SOC 2 audit. It’s often called the “common criteria” because it serves as the foundation for all the others. You simply can’t get a SOC 2 report without it.

This principle is all about how you protect your systems from unauthorized access, both logical and physical. It’s the absolute bedrock of your security posture.

Think of it as the basic security system for a bank. It includes things like:

• Access Controls: Making sure only authorized employees can get into the vault.
• Firewalls: Protecting the bank’s digital network from outside attacks.
• Vulnerability Management: Regularly checking for weak spots, like a broken lock on a back door, and fixing them promptly.

For a SaaS company, this translates to having strong password policies, using multi-factor authentication, and consistently scanning your code for security flaws. It’s the proof that you have the fundamentals locked down to protect customer data.

Availability: Is Your Service Reliable?

The Availability criterion is all about whether your systems are up and running as promised in your service level agreements (SLAs). If your customers depend on your service being constantly online and functional, this one is for you.

Imagine you run a major e-commerce platform. If your site crashes on Black Friday, you’re not just losing sales—you’re destroying the trust of your merchants and their customers. The Availability TSC shows you have the controls in place to prevent that nightmare scenario.

This means having solid disaster recovery plans, performance monitoring tools, and clear incident response procedures to minimize downtime and keep your service humming, even when things go sideways.

Processing Integrity: Is Your Data Accurate?

Processing Integrity proves that your system handles data completely, accurately, and on time. This is absolutely critical for any service where data precision is non-negotiable, like financial apps, payroll systems, or e-commerce transaction platforms.

Take a mobile banking app, for instance. When a user transfers $100 from checking to savings, they trust the system to process that exact amount—not $10 or $1,000.

To meet this criterion, you need to demonstrate that you have quality assurance checks and process monitoring controls to catch errors before they ever impact a customer. It’s about proving your system does exactly what it’s supposed to do, every single time, without mistakes. To learn more, check out our in-depth guide to the SOC 2 Trust Services Criteria.

Confidentiality: Protecting Sensitive Information

The Confidentiality criterion deals with your ability to protect information that has been specifically designated as confidential. This usually covers things like business plans, intellectual property, financial reports, or any other data restricted to a specific group of people.

Think of it like a secure digital briefcase. The data inside is locked down with strong encryption, both when it’s being stored (at rest) and when it’s being sent (in transit).

Controls for Confidentiality almost always involve data encryption, strict access controls, and network firewalls to ensure only the right people can ever see that sensitive information.

Privacy: Handling Personal Data Responsibly

Finally, the Privacy criterion covers how you collect, use, store, share, and ultimately dispose of personal information (PI). It might sound similar to Confidentiality, but Privacy is laser-focused on protecting Personally Identifiable Information (PII)—things like names, addresses, and Social Security numbers.

This criterion lines up closely with regulations like GDPR and CCPA. It proves you handle personal data according to your own privacy notice and the AICPA’s accepted privacy principles. It’s all about respecting individual privacy rights across the entire data lifecycle.

SOC 2 Type 1 vs Type 2: Which Report Do You Need?

Once you decide to get a SOC 2 audit, you’ll hit your first major fork in the road: should you get a Type 1 or a Type 2 report? This isn’t just a technicality; it’s a strategic choice that shapes your timeline, budget, and how much trust you can build with customers. Getting it right depends on your company’s maturity, your goals, and what your clients are asking for.

The easiest way to think about it is with a simple analogy.

A SOC 2 Type 1 report is like a photograph. An auditor shows up on a specific day, takes a look at your security controls, and confirms they are designed correctly at that single moment. It’s a snapshot that says, “As of right now, your security blueprint looks good on paper.”

A SOC 2 Type 2 report is more like a security camera recording. Instead of one snapshot, the auditor watches your controls operate over a longer period—usually 3 to 12 months. This report doesn’t just check the design; it proves your controls actually work day in and day out.

To help you decide, here’s a quick comparison of the two report types.

Comparing SOC 2 Type 1 and Type 2 Reports

Feature	Type 1 Report	Type 2 Report
Purpose	Evaluates the design of security controls at a single point in time.	Evaluates the design and operating effectiveness of controls over a period of time.
Timeline	Faster to obtain (typically 3-6 months).	Slower to obtain (typically 6-18 months, including the observation period).
Cost	Less expensive.	More expensive due to the extended testing period.
Level of Assurance	Lower. Proves you have a plan.	Higher. Proves you consistently follow the plan.
Customer Perception	Good starting point, but may not be enough for enterprise customers.	The gold standard. Required by most enterprise customers and savvy buyers.
Best For	Early-stage companies needing a quick compliance win to unblock a deal.	Companies selling to enterprise clients or handling highly sensitive data.

Ultimately, the Type 2 report provides a much higher level of assurance, which is why it has become the standard for most B2B relationships.

When to Choose a SOC 2 Type 1 Report

A Type 1 report is often the perfect entry point for companies just starting their SOC 2 journey. It’s quicker and cheaper, making it a great way to show prospects you’re serious about security while you work toward the more intensive Type 2.

Think of it as a strategic first step. A Type 1 report is the right move if you:

• Need to show compliance fast to get a deal unblocked or satisfy an urgent customer request.
• Are still building your security program and want an audit to validate your controls before committing to a lengthy Type 2.
• Want to manage costs while still getting a valuable, third-party stamp of approval on your security posture.

While a Type 1 gives you a solid baseline, its “point-in-time” nature means it offers less assurance than a Type 2. It’s a fantastic milestone, but many mature clients will eventually want to see more.

Why Most Customers Demand a Type 2 Report

For most enterprise buyers, the SOC 2 Type 2 report is the real gold standard. Why? Because a brilliantly designed security control is completely useless if no one actually follows it. A Type 2 report delivers the hard proof that your security program works in practice, not just on paper.

This is exactly why it’s become a non-negotiable for so many organizations. It shows a real, sustained commitment to security, which is the foundation of long-term trust. You can explore the details and see a side-by-side breakdown in our guide on SOC 2 Type 1 vs Type 2.

A Type 1 report shows you have a plan. A Type 2 report proves you follow that plan consistently. For partners entrusting you with their critical data, that proof is everything.

The commitment for a Type 2 is significant. The compliance landscape is getting tougher, with 92% of companies now conducting at least two audits a year. The average cost for a Type 2 can hit $75,000, and the timeline involves months of prep followed by a long audit period.

But the payoff is clear: certified firms report 30-50% faster sales cycles. For more on these trends, check out the 2025 Compliance Benchmark Report.

At the end of the day, choosing between a Type 1 and Type 2 is a business decision. A Type 1 can be a quick win, but a Type 2 is the long-term investment that unlocks the biggest deals and builds the deepest customer confidence.

A Step-by-Step Guide to the SOC 2 Audit Process

The SOC 2 audit can feel like a massive, intimidating project. But when you break it down, it’s really just a series of logical steps.

Think of it less like a final exam and more like a roadmap. Each phase builds on the last, turning an overwhelming task into a clear, manageable plan for your team. From initial planning to the final report, here’s how the journey unfolds.

Step 1: Scoping Your Audit

First things first: you need to define the scope. This is where you decide which of the five Trust Services Criteria (TSCs) actually matter for the services you provide and the promises you make to your customers. Security is always the non-negotiable foundation.

From there, you’ll decide if you need to add Availability, Processing Integrity, Confidentiality, or Privacy. Getting this right is critical. Scope too narrowly, and you might not satisfy your customers’ biggest concerns. Scope too broadly, and you’re just adding unnecessary cost and complexity. The goal is to perfectly align the TSCs with your business reality.

Step 2: Performing a Gap Analysis

With your scope set, it’s time for a gap analysis. This is basically a pre-audit where you or a consultant compares your current controls against the SOC 2 requirements for your chosen TSCs. The mission is simple: find the holes before your official auditor does.

A solid gap analysis provides a punch list of every weakness and area for improvement, saving you from nasty surprises later. Many companies kick this off with a formal readiness assessment to get a crystal-clear picture of where they stand. You can dig into the details in our guide on the value of a SOC 2 readiness assessment.

A gap analysis is your secret weapon. It turns the audit from a test you might fail into a process you can confidently manage, saving significant time, money, and stress down the line.

Step 3: Remediating Issues

Your gap analysis report is now your to-do list for the remediation phase. This is the hands-on part where your team rolls up their sleeves and fixes the problems you found.

This could mean writing new security policies, rolling out new software tools, or tweaking existing workflows to be more secure. It’s often the most time-consuming step, but it’s where the real security improvements happen. You’re not just checking boxes; you’re building a stronger, more resilient company.

This visual breaks down the two paths: the Type 1 audit is a “snapshot” of your controls on a single day, while the Type 2 is more like a “video recording” over several months.

Step 4: The Audit and Observation Period

Once remediation is done, the official audit kicks off. For a Type 1 report, the auditor tests your controls at a single point in time to confirm they are designed correctly.

For a Type 2 report, you enter an “observation period,” which usually lasts anywhere from three to twelve months. During this window, your auditor will gather evidence—logs, documentation, screenshots—to prove your controls were actually working effectively over that entire time.

Step 5: Receiving Your SOC 2 Report

Finally, the moment you’ve been waiting for: receiving your SOC 2 report. This is the formal document from the auditor that contains their professional opinion on your security posture, a detailed description of your systems, and the results of all their testing.

Assuming everything went well, you’ll get an “unqualified” opinion—the best possible outcome. This report is the tangible proof of all your hard work. It’s the asset you can share with prospects and customers to build trust, prove your commitment to security, and get deals done faster.

How SOC 2 Fits with ISO 27001, GDPR, and HIPAA

SOC 2 doesn’t exist in a bubble. The compliance world is crowded with different frameworks, and it’s easy to get confused about how they all fit together. The trick is to stop seeing them as competing requirements and start seeing them as complementary tools.

When you understand how they relate, you can build an integrated compliance strategy. This approach saves a ton of time and resources by avoiding duplicate work and mapping your security controls across multiple frameworks. You end up with a much stronger security posture without chasing each certification in a silo.

SOC 2 and ISO 27001: The Blueprint and the Inspection

Think of ISO 27001 as the master blueprint for your entire security program. It’s the globally recognized gold standard for creating and maintaining an Information Security Management System (ISMS). It’s all about your high-level security governance and risk management processes.

SOC 2, in contrast, is the detailed inspection report that proves specific controls within that system are actually working as designed. While ISO 27001 certifies your entire ISMS, a SOC 2 report is an auditor’s opinion on how effective your controls are for the specific Trust Services Criteria you chose.

Analogy: If ISO 27001 is the architectural plan for building a secure house, then SOC 2 is the home inspector’s report confirming the electrical wiring won’t cause a fire and the plumbing doesn’t leak. You need both, but they serve different purposes.

The good news is that many of the controls you’ll implement for SOC 2—like access controls, vendor management, and risk assessments—are also foundational to an ISO 27001-compliant ISMS. Nailing one gives you a huge head start on the other.

While SOC 2 is a beast in the U.S. market, it’s getting more competition from ISO 27001. A recent survey found 81% of organizations reported either having or planning for ISO 27001 certification. This is a big deal, and it shows why having a strategy for both is becoming the norm for companies with global ambitions. You can dig into more of these numbers in Secureframe’s compliance statistics report.

Connecting with GDPR and HIPAA

So where do regulations like GDPR and HIPAA fit in? These are legal mandates, not voluntary frameworks like SOC 2, but there’s a ton of overlap.

• GDPR (General Data Protection Regulation): This is the EU’s sweeping law on how companies handle the personal data of its citizens. Many of its security requirements map directly to the controls tested in a SOC 2 audit, especially if you include the Privacy and Confidentiality criteria. A clean SOC 2 report is a powerful way to demonstrate that you have the technical and organizational measures in place to comply with GDPR.

• HIPAA (Health Insurance Portability and Accountability Act): For any company touching sensitive patient health information in the U.S., HIPAA is the law of the land. The HIPAA Security Rule mandates specific safeguards. A SOC 2 audit that covers the Security and Confidentiality criteria can satisfy a huge chunk of these HIPAA requirements, giving your healthcare partners confidence that you’re handling their data correctly.

At the end of the day, the work you put into your SOC 2 audit creates a powerful foundation of evidence. You can reuse that evidence to streamline your path to GDPR and HIPAA compliance, making your life a whole lot easier.

Common Questions About SOC 2 Compliance

As you start digging into SOC 2, a ton of practical questions bubble up. It’s a complex process, no doubt. But getting clear, straight answers to the big questions will give you the confidence to move forward. This FAQ section cuts through the noise to give you the actionable info you need on costs, timelines, and the audit itself.

How Much Does a SOC 2 Audit Cost?

Let’s get right to it—the budget question. There’s no single price tag for a SOC 2 audit. It’s a lot like building a custom house; the final cost depends entirely on the size, complexity, and materials you choose.

Here are the biggest factors driving your SOC 2 price tag:

• Company Size and Complexity: A bigger company with tangled systems and hundreds of employees is going to have a much more involved—and expensive—audit than a small startup with a simple tech stack.
• Audit Scope: The number of Trust Services Criteria (TSCs) you choose directly impacts the cost. An audit for the mandatory Security criterion alone will be cheaper than one that also includes Availability, Confidentiality, and Privacy.
• Report Type (Type 1 vs. Type 2): A Type 1 report is a point-in-time snapshot, making it the less expensive option. A Type 2 report, however, requires the auditor to observe your controls over several months, which means more auditor hours and a higher price.
• Readiness Assessment: This is an upfront cost, but a smart one. A readiness assessment can actually save you a boatload of money by catching problems before the official audit begins, helping you avoid costly delays and re-testing.

So, what are the real numbers? A Type 1 report can run anywhere from $15,000 to $60,000. A more rigorous Type 2 report typically lands in the $30,000 to $100,000+ range. It’s a serious investment, but the payoff comes from unblocking bigger deals and shortening sales cycles with enterprise customers who won’t talk to you without it.

How Long Does It Take to Get SOC 2 Compliant?

Time is money, and the SOC 2 journey is definitely a marathon, not a sprint. The whole process really breaks down into two main phases: getting your house in order, and the audit itself.

First is the readiness and remediation phase. This is where you do all the heavy lifting—running a gap analysis, writing policies, implementing new security controls, and hunting down evidence. If you already have a mature security program, this might take you 3-6 months. If you’re starting from square one, plan on this taking 9-12 months, maybe even longer.

Once you’re ready for the auditor, the timeline depends on the report you’re after:

• SOC 2 Type 1: The audit itself is just a snapshot in time, so it’s pretty quick. The fieldwork and report can often be wrapped up in a couple of months.
• SOC 2 Type 2: This is the long haul. You need an observation period to prove your controls actually work over time, which is usually 6 to 12 months long. After that period ends, the auditor still needs another 4-8 weeks to finish their testing and write the report.

Key Takeaway: For your first-ever SOC 2 Type 2 report, a realistic timeline is anywhere from 9 to 18 months from the day you start to the day you have the final report in hand.

Is SOC 2 Compliance Mandatory?

This is a huge point of confusion. Let’s be clear: SOC 2 is not a law. No government agency is going to knock on your door and fine you for not having one. It’s a voluntary compliance framework created by the AICPA.

But here’s the reality in the B2B world: it’s commercially mandatory.

While it isn’t legally required, your customers will make it a requirement. Your biggest and most security-savvy prospects will flat-out refuse to sign a contract unless you can show them a current SOC 2 report.

For SaaS companies, data centers, and pretty much any service provider that touches customer data, SOC 2 has gone from a “nice-to-have” badge to the “ticket to the game.” It’s the universal language for proving you take security seriously. Not having it is a massive roadblock to growth. This market pressure is why a staggering 94% of enterprises now require SOC 2 Type II compliance for their vendors, as highlighted in the 2025 Compliance Benchmark Report.

How Do I Choose a SOC 2 Auditor?

Picking the right CPA firm for your audit is one of the most important decisions you’ll make. Your auditor isn’t just an inspector; they should be a partner who gets your business and your tech. The wrong choice can lead to a painful, confusing, and ridiculously expensive experience.

You want a firm that’s a true partner, not just a box-checker. A great auditor helps you navigate the framework’s gray areas, while a bad one just dumps a long list of problems on your desk without any helpful context.

Here are the key questions you need to ask any potential audit firm:

1. Do you have experience with companies our size and in our industry? An auditor who lives and breathes SaaS or FinTech is going to be infinitely more valuable than one who mostly audits manufacturing plants.
2. What’s your experience with modern cloud environments like AWS, Azure, or GCP? Make sure they speak your language and understand the tech you actually use.
3. Who will be on the audit team, and what’s their experience level? You want to work with seasoned pros, not junior auditors cutting their teeth on your dime.
4. What is your audit methodology and communication style? Get a feel for how they’ll work with your team, manage evidence requests, and keep you in the loop.
5. Can you provide references from companies similar to ours? Talking to their past clients is the single best way to find out what the audit experience will really be like.

Making the right choice here will make your entire SOC 2 journey smoother and a lot less stressful.

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