SOC 2 Type I vs Type II: Which Do You Need First?

Your enterprise prospect just sent a security questionnaire. Line 47: "Do you have a current SOC 2 report?" You don't. The deal is $400K ARR. The procurement team says they need something within 60 days.

This is where most startups make one of two mistakes: they either rush into a Type II audit they won't finish in time, or they assume Type I is a shortcut that will satisfy the buyer. Both mistakes can kill the deal.

The answer depends on what your prospect actually needs, what you can realistically deliver, and how the two report types are perceived by enterprise security teams. This guide explains the differences clearly, gives you the data to make the right decision for your situation, and walks through the transition from Type I to Type II.

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The Core Difference, Plainly Stated

SOC 2 Type I is a point-in-time assessment. An auditor evaluates whether your security controls are designed correctly as of a specific date. It answers the question: "Do you have the right controls in place today?"

SOC 2 Type II is a period assessment. An auditor evaluates whether your security controls operated effectively over an observation period—typically 3 to 12 months. It answers the question: "Did your controls actually work consistently over time?"

The distinction matters because a Type I report can be obtained quickly—6 to 12 weeks from start to signed report. A Type II requires completing an observation period before the audit can even begin, making the minimum timeline 6 to 9 months from decision to report.

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What Each Report Contains

Both report types use the same AICPA Trust Services Criteria (TSC) framework. Both are prepared by a licensed CPA firm. Both result in a formal report you can share with customers.

The structural difference is in Section 4 of the report:

Type I Report Structure:

• Auditor's opinion letter
• Management's assertion
• Description of system (your controls as designed)
• Auditor's opinion on design suitability

Type II Report Structure:

• Auditor's opinion letter
• Management's assertion
• Description of system (controls as designed)
• Auditor's opinion on design suitability and operating effectiveness
• List of tests performed and results (evidence of control operation over time)

That last section is what enterprise security teams are actually reading. They want to see test results. They want evidence that your logging system ran for 6 months, that your access reviews happened quarterly, that your vulnerability scans were conducted and findings remediated. Type I contains none of that because there's no observation period.

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Side-by-Side Comparison

Factor	Type I	Type II
What it attests	Controls designed correctly at a point in time	Controls operated effectively over a period
Observation period	None	3–12 months (6 months typical)
Time to first report	6–12 weeks	6–18 months
Auditor fee (Security only)	$8,000–$25,000	$15,000–$50,000
Total first-year cost	$25,000–$60,000	$50,000–$150,000
Enterprise buyer acceptance	Conditional	Broadly accepted
Validity period	Point-in-time (no expiry, but ages quickly)	12 months from period end
Useful as bridge strategy	Yes	No (it's the destination)
Renewable annually	No (either renew as Type I or upgrade to Type II)	Yes, annual renewal audits

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When Type I Is Enough

Type I is the right first step in three specific situations.

1. You have a deal that won't wait but can tolerate Type I.

Some enterprise buyers, particularly mid-market companies with less mature security programs, will accept a Type I report as satisfactory—especially if you accompany it with a commitment letter indicating Type II is in progress. Before investing in Type I as a bridge strategy, confirm directly with your prospect's security team: "Would a Type I report allow you to proceed while we complete a Type II?" Many will say yes. Some will not.

2. You're less than 12 months into building your security program.

Type II requires that your controls operated effectively over the observation period. If you haven't had formal controls in place for at least 3–6 months, you cannot honestly start a Type II observation period yet—you'd be building controls while claiming to demonstrate their effectiveness. Type I lets you get your controls designed and audited while you accumulate the observation history needed for Type II.

3. You need to understand your audit exposure before committing to a longer engagement.

Type I audits surface exactly the same control gaps as Type II. The remediation findings from a Type I audit are highly predictive of what you'll encounter in Type II. Some companies use Type I as a paid gap assessment that produces a deliverable—more valuable than a pure gap assessment, though more expensive.

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When You Should Go Straight to Type II

1. Your enterprise pipeline specifically requires it.

Large enterprises—healthcare systems, financial institutions, Fortune 500 procurement—increasingly specify Type II in their vendor security requirements. Some will explicitly decline Type I. If you sell into regulated industries or large enterprise, verify requirements before starting.

Pharmaceutical companies, health systems, and government contractors almost universally require Type II. No Type I bridge strategy works here.

2. You've had security controls in place for 6+ months.

If you've been running on cloud infrastructure with IAM, logging, encryption, and access controls in place for at least 6 months, you may already be through most of your observation period. Starting Type II now costs more upfront but gets you a more valuable report faster than the Type I → Type II sequence.

3. You're targeting multiple enterprise deals simultaneously.

Type I has a shelf life. Enterprise buyers who receive a Type I report today will ask for your Type II renewal within 12–18 months. If you're closing enterprise deals at volume, the Type I bridge approach means you're perpetually in audit mode. Going directly to Type II, even on a longer timeline, may be more efficient.

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What Enterprise Buyers Actually Expect

Understanding how security teams evaluate SOC 2 reports helps calibrate your strategy.

Security questionnaire responses: Most enterprise security questionnaires have fields for both Type I and Type II. Checking "Type I" rather than "Type II" does not automatically disqualify you—but it often triggers a follow-up question about when Type II will be available.

Annual review cycles: Enterprise vendors with access to customer data are typically reviewed annually. A Type II report expiring in 12 months with no renewal in progress will flag during the review. Type I reports don't have formal expiry but are considered stale by most buyers after 18–24 months.

The bridge strategy in practice: The standard approach for startups who close their first enterprise deal before they have Type II is:

1. Get Type I quickly (6–12 weeks)
2. Start Type II observation period immediately after Type I controls are in place
3. Be transparent with the prospect: "Our Type I is complete. Our Type II observation period started [date]. We expect our Type II report by [date]."
4. Deliver Type II within the timeline you committed

This works when you're honest about the timeline. It fails when startups imply Type I is equivalent to Type II or when the Type II delivery date slips.

What security reviewers look for in a Type II report: Beyond the auditor's opinion, reviewers look at the test results section. Specifically:

• Were any exceptions noted? (Exceptions indicate controls that didn't work as designed during the observation period)
• What was the scope? (Security only, or additional criteria?)
• What was the observation period length? (6 months vs. 12 months vs. continuous)
• When does the report expire? (Anything over 12 months old is stale)

A Type II report with noted exceptions is not a deal-killer if management responses address them adequately. A Type II report with no exceptions and a 12-month observation period is the gold standard.

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Cost Comparison in Detail

Costs vary by company size, scope, and approach. These ranges reflect what 20–200 person SaaS companies are paying in 2026 for Security criterion only.

Type I Total Cost

Component	Range
Auditor fees	$8,000–$25,000
Compliance tooling (Vanta, Drata, etc.)	$7,000–$15,000/yr
Gap assessment / readiness consulting	$5,000–$20,000
Internal engineering time (est.)	$10,000–$25,000
Total first year	$30,000–$85,000

Type II Total Cost (First Year)

Component	Range
Auditor fees	$15,000–$50,000
Compliance tooling	$7,000–$20,000/yr
Readiness consulting or managed service	$15,000–$50,000
Internal engineering time (est.)	$20,000–$50,000
Total first year	$57,000–$170,000

Type I Then Type II (Two-Year Total)

The common criticism of the Type I bridge strategy is that you pay for two audits. That's accurate—but the math depends on timing.

If you close a $500K enterprise deal with Type I that you wouldn't have closed otherwise, the cost of the extra audit ($8K–$25K) is irrelevant. The math that matters is whether Type I unblocks revenue while Type II is in progress.

If you would eventually need Type II regardless—which you would, if you're targeting enterprise—the Type I → Type II sequence costs $20,000–$40,000 more over two years than going straight to Type II. Whether that premium is worth paying depends entirely on whether there's a deal waiting.

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The Transition: Type I to Type II

Many companies complete Type I and then treat Type II as a separate future project. This is a mistake that adds time and cost.

The optimal approach is to treat Type I as the beginning of the Type II observation period, not a separate engagement.

Immediate post-Type I actions:

1. Document your observation period start date. The day your Type I controls are attested as designed is logically the start of your Type II observation period. Formally record this.

2. Maintain continuous evidence collection. Your compliance platform (Vanta, Drata, etc.) should be continuously collecting evidence from day one. Don't pause evidence collection between audits.

3. Schedule your Type II kickoff. Talk to your auditor the week your Type I report is delivered. Book the Type II audit for 3–6 months later. Your auditor has context from the Type I; using the same firm for Type II is efficient.

4. Resolve all Type I findings. Your Type II observation period includes the time after your Type I report. If Type I findings remain open during the observation period, they become Type II exceptions. Fix everything before the observation period is meaningfully underway.

5. Maintain controls without gaps. Type II auditors look for continuity. A control that was in place for 5 months, lapsed for 3 weeks, then reinstated is weaker than one that ran continuously. Operations discipline matters.

Observation period length strategy:

You can run a 3-month Type II observation period (minimum) or a 12-month period. Longer observation periods are perceived more favorably by enterprise buyers—they demonstrate sustained operation, not just a 90-day sprint to certification.

For first-time Type II, 6 months is the practical standard. It's long enough to be credible and short enough to deliver a report within a year of starting.

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Scope Decisions That Affect Both Types

Both Type I and Type II require you to define scope before the audit begins. Scope decisions affect cost, timeline, and buyer perception.

Trust Service Criteria: SOC 2 requires only the Security criterion. The other four—Availability, Processing Integrity, Confidentiality, and Privacy—are optional add-ons. Each additional criterion increases audit scope and cost by 15–40%.

Start with Security only. Add criteria in later audit cycles when customer demand is demonstrated. Availability is the most commonly requested add-on for SaaS; Privacy is relevant for consumer health data.

System boundary: The system boundary defines which infrastructure, services, and processes are in scope. Narrowing scope is legitimate—a company might scope their SOC 2 to their production environment only, explicitly excluding development and staging. Buyers sometimes ask what's excluded and why.

Over-scoping adds cost and complexity. Under-scoping raises questions. A well-defined, defensible boundary that covers the systems your customers care about is the goal.

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Making the Decision

Answer these questions to determine your path:

Does a current prospect require SOC 2 within 90 days?

• Yes, and they'll accept Type I → Get Type I immediately, start Type II observation period simultaneously
• Yes, and they require Type II → Escalate internally; you cannot deliver Type II in 90 days unless you have 6+ months of existing controls already in place
• No → Consider going straight to Type II if your controls are already mature

Have you had formal security controls in place for 6+ months?

• Yes → Evaluate starting Type II directly; you may be further along the observation period than you think
• No → Type I first while you build the control history needed for Type II

What industries are your enterprise prospects in?

• Healthcare, financial services, government → Type II required; no shortcuts
• General enterprise, mid-market → Type I with committed Type II timeline may work; confirm with each prospect

Do you have internal resources to manage the audit process?

• Yes (dedicated engineer or security role) → Consultant-led or DIY approach feasible
• No → Managed compliance service accelerates timeline and reduces internal distraction

For teams that want to evaluate their current control posture before committing to an approach, the SOC 2 Readiness Checklist covers all 61 AICPA Common Criteria controls and helps you understand how close you already are to audit-ready.

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What to Do This Week

If you're reading this because an enterprise prospect asked about SOC 2, the most valuable thing you can do today is call them.

Ask specifically: "Does your security team require Type II, or would a Type I report with a committed Type II timeline allow us to proceed?" The answer determines everything about your strategy.

If they require Type II: start the process immediately. The observation period is the long pole in the tent, and every week you wait is a week of observation period you're not accumulating.

If they'll accept Type I: request quotes from auditors this week. You can have a Type I report in hand within 6–10 weeks with the right auditor and preparation.

Book a free SOC 2 assessment to get a current-state evaluation of your controls, a gap analysis against Type II requirements, and a realistic timeline and cost estimate for your specific environment. Most companies are further along than they think—or have specific gaps that, once identified, are faster to close than expected.