What is SOC 2? Complete Guide to SOC 2 Compliance [2025]

What is SOC 2?

SOC 2 (System and Organization Controls 2) is an auditing framework developed by the American Institute of CPAs (AICPA) that evaluates how service organizations manage and protect customer data. It's the gold standard security certification for SaaS, cloud, and technology companies.

Unlike compliance frameworks that prescribe specific controls (like ISO 27001 or PCI DSS), SOC 2 is principles-based. You design your own security controls based on the Trust Service Criteria, and an independent auditor verifies they're working effectively.

Think of SOC 2 as proof that your security practices aren't just marketing BS. It's third-party validation that you actually do what you say you do when it comes to protecting customer data.

Who Needs SOC 2 Compliance?

SOC 2 is required for any service organization that stores, processes, or transmits customer data. Here's the reality:

• SaaS Companies: If you're selling to enterprise customers (especially Fortune 500), SOC 2 Type 2 is non-negotiable. You'll lose deals without it.
• Cloud Infrastructure Providers: AWS, Google Cloud, and Azure competitors need SOC 2 to be taken seriously.
• Data Centers & Hosting: Physical and virtual hosting providers must demonstrate infrastructure security.
• Managed Service Providers: MSPs handling customer systems and data need SOC 2 certification.
• FinTech & Healthcare: Highly regulated industries demand SOC 2 plus industry-specific certifications.
• API & Integration Platforms: If customer data flows through your systems, you need SOC 2.

When do you need it? Most companies pursue SOC 2 when:

• Enterprise prospects include it in security questionnaires
• You're losing deals due to lack of certification
• A specific customer makes it a contract requirement
• You're raising a Series A/B and investors want assurance
• You're preparing for an exit or IPO

The 5 Trust Service Criteria

SOC 2 evaluates your controls based on five Trust Service Criteria (TSC). Security is mandatory; the others are optional based on your business model.

1. Security (Mandatory)

Required for all SOC 2 audits. Covers how you protect systems and data from unauthorized access, both physical and logical.

Key controls include:

• Access controls (authentication, authorization, MFA)
• Network security (firewalls, segmentation, monitoring)
• Encryption (data at rest and in transit)
• Vulnerability management (patching, scanning)
• Incident response (detection, response, recovery)
• Change management (code reviews, testing, deployment)
• Physical security (data center access, badges, cameras)
• Risk assessment (annual risk reviews)

2. Availability (Optional)

Evaluates system uptime and accessibility. Choose this if your customers depend on your service being available 24/7.

Key controls include:

• Redundancy and failover systems
• Disaster recovery planning and testing
• Monitoring and alerting for downtime
• SLA commitments and tracking
• Capacity planning and load testing

3. Processing Integrity (Optional)

Ensures your system processes data completely, accurately, and in a timely manner. Important for financial systems, payment processors, and data analytics platforms.

Key controls include:

• Data validation and error checking
• Transaction processing controls
• Quality assurance and testing
• Data reconciliation procedures

4. Confidentiality (Optional)

Protects information designated as confidential. Different from Security (which protects all data) — this covers data specifically marked as confidential by customers.

Key controls include:

• Data classification policies
• Non-disclosure agreements (NDAs)
• Confidentiality training for employees
• Secure data destruction procedures

5. Privacy (Optional)

Addresses personal information (PII) collection, use, retention, disclosure, and disposal. Critical for companies subject to GDPR, CCPA, or handling sensitive personal data.

Key controls include:

• Privacy notices and consent mechanisms
• Data subject rights (access, deletion, portability)
• Third-party data sharing agreements
• Breach notification procedures
• Data retention and destruction policies

Recommendation: Most companies start with Security only for their first SOC 2. Add other criteria in subsequent audits based on customer requirements.

SOC 2 Type 1 vs Type 2: What's the Difference?

This is where most people get confused. Here's the simple version:

SOC 2 Type 1

• Evaluates: Are your controls designed properly?
• Timeframe: Point-in-time assessment (one specific date)
• Duration: 3-6 months to complete
• Cost: $12K-$160K depending on scope and auditor
• Use Case: Early-stage companies, proof of security maturity

SOC 2 Type 2

• Evaluates: Are your controls designed properly AND working effectively over time?
• Timeframe: Observation period (minimum 3 months, typically 6-12 months)
• Duration: 6-18 months to complete (including observation period)
• Cost: $15K-$450K depending on scope and auditor
• Use Case: Enterprise sales, most common requirement

Which one do you need?

• Type 2 if you're selling to enterprise customers (most common)
• Type 1 if you need something fast or you're very early stage
• Many companies do Type 1 first, then Type 2 6-12 months later

Reality check: Most enterprise customers prefer or require Type 2. Type 1 might help you get in the door, but you'll need Type 2 to close larger deals.

→ Read our complete Type 1 vs Type 2 comparison

How Much Does SOC 2 Cost?

Let's talk real numbers. SOC 2 costs vary wildly based on:

• Auditor choice: Specialist firms ($15K-$75K Type 2) vs Big Four ($60K-$400K+ Type 2)
• Company size: 10 employees vs 500 employees = vastly different scope
• System complexity: Simple SaaS app vs complex microservices architecture
• Trust Service Criteria: Security only vs Security + Availability + Privacy
• Readiness level: Controls already in place vs starting from scratch

Typical Pricing by Firm Type

Firm Type	Type 1 Cost	Type 2 Cost	Timeline
Specialist (Prescient, A-LIGN, KirkpatrickPrice)	$12K-$40K	$15K-$75K	3-8 months
Regional (Moss Adams, Sensiba, Aprio)	$15K-$50K	$20K-$95K	4-10 months
Mid-Tier (RSM, Grant Thornton, BDO)	$20K-$65K	$30K-$120K	5-14 months
Big Four (Deloitte, PwC, KPMG, EY)	$40K-$160K	$60K-$450K	6-20 months

Hidden costs to factor in:

• Internal labor: 200-500+ hours of employee time for preparation, evidence collection, and remediation
• Tools & platforms: Compliance automation tools ($5K-$50K/year) like Vanta, Drata, Secureframe
• Control remediation: Fixing gaps found during readiness assessment ($10K-$100K+ depending on gaps)
• Annual surveillance: Ongoing monitoring and recertification (typically 60-70% of initial audit cost)

Total first-year cost: $30K-$500K+ depending on choices made

→ Read our complete SOC 2 pricing guide

How Long Does SOC 2 Take?

Here's the realistic timeline from "we need SOC 2" to "we have our report":

Type 1 Timeline: 3-8 Months

1. Readiness Assessment: 2-4 weeks (identify gaps)
2. Control Implementation: 1-3 months (fix gaps, document policies)
3. Auditor Selection: 2-4 weeks (get quotes, negotiate)
4. Audit Kickoff: 1 week (planning meeting, scoping)
5. Evidence Collection: 2-4 weeks (gathering documentation)
6. Testing & Fieldwork: 2-4 weeks (auditor reviews controls)
7. Remediation: 1-4 weeks (fix any findings)
8. Report Issuance: 2-3 weeks (final report drafted and delivered)

Type 2 Timeline: 6-18 Months

1. Readiness Assessment: 2-4 weeks
2. Control Implementation: 2-4 months
3. Auditor Selection: 2-4 weeks
4. Observation Period Begins: Minimum 3 months (typically 6-12 months)
5. Interim Testing: 2-4 weeks (auditor checks in mid-period)
6. Evidence Collection: Ongoing during observation period
7. Final Testing & Fieldwork: 3-6 weeks (after observation period ends)
8. Remediation: 2-4 weeks
9. Report Issuance: 3-5 weeks

Variables that affect timeline:

• Auditor responsiveness: Specialist firms (same-day) vs Big Four (3-5 business days)
• Your internal resources: Dedicated compliance person vs part-time effort
• Control maturity: Already have policies/procedures vs starting from scratch
• Finding severity: Minor documentation gaps vs major security issues

→ Read our detailed SOC 2 timeline guide

SOC 2 Audit Process: Step-by-Step

Phase 1: Readiness Assessment (2-4 weeks)

Before engaging an auditor, conduct an internal or third-party gap assessment. This identifies control deficiencies you need to fix before the official audit.

Key activities:

• Review existing security policies and procedures
• Map controls to Trust Service Criteria
• Identify gaps and create remediation plan
• Estimate timeline and budget for fixes

Phase 2: Control Implementation (1-4 months)

Fix the gaps identified in the readiness assessment. This is the most time-consuming phase.

Common tasks:

• Document security policies (acceptable use, access control, incident response, etc.)
• Implement technical controls (MFA, encryption, logging, monitoring)
• Establish change management processes (code review, testing, deployment)
• Create vendor management program (vendor assessments, contracts)
• Set up background check and security training programs
• Configure evidence collection automation (using Vanta, Drata, etc.)

Phase 3: Auditor Selection & Engagement (2-4 weeks)

Get quotes from 3-5 auditors, compare proposals, negotiate pricing, and sign engagement letter.

What to compare:

• Pricing (Type 1, Type 2, annual surveillance)
• Timeline and availability
• Industry experience and references
• Responsiveness and communication style
• Technology platform and evidence portal

→ Read our auditor selection guide

Phase 4: Audit Kickoff & Planning (1 week)

Initial meeting with auditor to finalize scope, timeline, and evidence requirements.

Key outputs:

• Final audit scope and TSC selection
• System description (narrative of your environment)
• Evidence request list (PBC - provided by client)
• Audit timeline and key milestones

Phase 5: Evidence Collection (2-4 weeks for Type 1; ongoing for Type 2)

Gather documentation and evidence of control operation. This includes policies, screenshots, logs, reports, and attestations.

Common evidence types:

• Security policies and procedures
• Employee access reviews and termination reports
• Vulnerability scan results and patching logs
• Change management tickets and code reviews
• Background check and training completion records
• Vendor risk assessments and contracts
• Incident response logs and post-mortems

Phase 6: Testing & Fieldwork (2-6 weeks)

Auditor reviews your evidence, tests control effectiveness, conducts interviews, and identifies exceptions or deficiencies.

What to expect:

• Weekly status calls with auditor
• Follow-up evidence requests and clarifications
• Interviews with key personnel (IT, security, HR, finance)
• Technical testing (configuration reviews, access testing)

Phase 7: Remediation (1-4 weeks)

Fix any control deficiencies or exceptions found during testing. Provide supplemental evidence demonstrating remediation.

Common findings:

• Incomplete or missing documentation
• Access reviews not performed consistently
• Patches applied outside policy timelines
• Terminated employees with lingering access
• Vendor assessments not completed

Phase 8: Report Issuance (2-5 weeks)

Auditor drafts final SOC 2 report, you review and comment, final version is issued.

Report contents:

• Independent auditor's opinion (unqualified/qualified)
• Management's assertion and system description
• Trust Service Criteria and control objectives
• Description of tests performed and results
• Exceptions and management responses (if any)

Common SOC 2 Mistakes to Avoid

1. Starting Too Late

Don't wait until you've lost a deal to start SOC 2. Begin 6-9 months before you expect enterprise customers to ask for it.

2. Choosing the Wrong Auditor

Big Four isn't always better. Specialist firms often deliver faster, better service at lower cost. Choose based on your needs, not brand.

3. Skipping Readiness Assessment

Starting an audit before you're ready wastes time and money. Do a gap assessment first, fix major issues, then engage the auditor.

4. Under-resourcing the Project

SOC 2 requires 200-500+ hours of internal effort. Assign a dedicated owner and get executive support.

5. Poor Evidence Organization

Auditors need evidence in specific formats. Use a GRC tool (Vanta, Drata, Secureframe) to automate collection and stay organized.

6. Treating It as One-and-Done

SOC 2 is continuous. You'll need annual audits, ongoing monitoring, and control testing throughout the year.

SOC 2 vs Other Compliance Frameworks

SOC 2 vs ISO 27001

• SOC 2: US-centric, principles-based, flexible scope
• ISO 27001: International, prescriptive controls, broader ISMS requirement
• Use Case: Many companies do both — SOC 2 for US customers, ISO 27001 for EU/UK customers

→ Read full SOC 2 vs ISO 27001 comparison

SOC 2 vs PCI DSS

• SOC 2: General security framework for service providers
• PCI DSS: Specific to companies handling credit card data
• Use Case: Payment processors need PCI DSS, may also get SOC 2 for broader assurance

SOC 2 vs HIPAA

• SOC 2: Voluntary framework demonstrating security controls
• HIPAA: Mandatory regulation for healthcare data (PHI)
• Use Case: Healthcare companies must comply with HIPAA, often add SOC 2 for customer assurance

Tools to Automate SOC 2 Compliance

Manual SOC 2 compliance is painful. These platforms automate evidence collection, monitoring, and reporting:

Top GRC Platforms

• Vanta: $20K-$60K/year, market leader, best integrations
• Drata: $15K-$50K/year, strong automation, good UX
• Secureframe: $12K-$40K/year, cost-effective, solid features
• Strike Graph: $10K-$35K/year, budget-friendly, good for early stage
• Tugboat Logic: $15K-$45K/year, multi-framework support

Do you need one? If you're doing SOC 2, the answer is probably yes. The time savings and reduced audit costs usually justify the expense.

FAQ: SOC 2 Compliance

Next Steps: Get Your SOC 2 Audit Quotes

Ready to start your SOC 2 journey? Here's what to do:

1. Assess your readiness: Do an internal gap assessment or hire a consultant
2. Fix major gaps: Implement critical controls and document policies
3. Get auditor quotes: Compare 3-5 auditors on pricing, timeline, and fit
4. Choose your auditor: Balance cost, speed, and service quality
5. Execute the audit: Stay organized, respond quickly, and maintain momentum

Related guides: SOC 2 Audit Cost • How to Choose an Auditor • Prepare for Your First Audit • Type 1 vs Type 2