Type 1 vs. Type 2 SOC Reports: What’s the Difference? 

The American Institute of Certified Public Accountants (AICPA) allows SOC 1 and SOC 2 reports to be issued as either a Type 1 or Type 2. Understanding the difference between a Type 1 vs. Type 2 SOC report is essential for organizations seeking the right level of assurance. A Type 1 report assesses controls at a single point in time, while a Type 2 report evaluates whether those controls operated effectively over a defined review period — typically six to 18 months. 

In a previous article, Wolf & Company highlighted the differences between SOC 1, SOC 2, and SOC 3 reports. This article focuses on report type — explaining what each one covers, when each is appropriate, and what both issuers and readers of these reports need to consider. 

What Is a Type 1 SOC Report? 

A Type 1 SOC report is a point-in-time assessment. It provides assurance that an organization’s internal controls are suitably designed and implemented as of a specific date — but it does not assess whether those controls are actually operating effectively. 

When a Type 1 report is appropriate: 

• An organization is undergoing its first SOC audit and is building a foundation for long-term SOC compliance. 

• An organization needs to “reset” following a significant event — such as a merger or acquisition — that materially changed the control environment. 

Key limitation: Because a Type 1 report does not assess operating effectiveness, many clients and business associates prefer the stronger assurance provided by a Type 2. If an organization provides a Type 1 report, readers should ask why that report type was selected and whether a roadmap exists for issuing a Type 2 in the future. 

What Is a Type 2 SOC Report? 

A Type 2 SOC report covers a defined period — commonly 12 months, though review periods can range from six to 18 months. It provides assurance that internal controls are not only designed and implemented appropriately, but that they also operated effectively throughout that timeframe. 

Because of this additional layer of assurance, a Type 2 report is considered the stronger of the two report types. Organizations that issue Type 2 reports have typically completed prior SOC audits and have a mature, established control environment. 

Notable requirement: According to AICPA guidance, a SOC 3 report can only be issued as a Type 2 — it cannot be issued as a Type 1. 

SOC 1 vs. SOC 2: Understanding the Report Categories 

Before selecting a report type, organizations must first determine the appropriate report category: 

• SOC 1 focuses on internal controls over financial reporting (ICFR) and is most relevant for service organizations whose operations affect their clients’ financial statements. 

• SOC 2 focuses on controls related to security, availability, processing integrity, confidentiality, and privacy — the Trust Services Criteria. SOC 2 is more relevant for technology companies, cloud service providers, and organizations that handle sensitive data. 

Both SOC 1 and SOC 2 can be issued as either a Type 1 or Type 2, resulting in four possible report combinations: SOC 1 Type 1, SOC 1 Type 2, SOC 2 Type 1, and SOC 2 Type 2. 

Type 1 vs. Type 2 SOC Report: Side-by-Side Comparison 

Which SOC Report Type Does Your Organization Need? 

Choosing between a Type 1 and Type 2 SOC report depends on the organization’s current stage of SOC compliance and what level of assurance its clients or stakeholders require. 

• Type 1 is better suited for organizations undergoing their first SOC audit, or those rebuilding their control environment after a major organizational change. It establishes a documented baseline before a Type 2 period begins. 

• Type 2 is better suited for organizations with established controls that need to demonstrate ongoing operational effectiveness to clients, prospects, or regulators. 

For organizations on the path to SOC compliance, a Type 1 report can serve as a strategic stepping stone — provided there is a clear plan to transition to a Type 2 report. 

Frequently Asked Questions 

Q: Can an organization skip a Type 1 and go directly to a Type 2 SOC report? 
Yes. Organizations with established controls do not need to complete a Type 1 before issuing a Type 2 SOC report. A Type 1 is most useful for first-time audits or organizations resetting their control environment. If controls are already mature and well-documented, proceeding directly to a Type 2 audit is a viable path. 

Q: How long does a SOC 2 Type 2 audit take? 
The review period for a SOC 2 Type 2 report typically spans 12 months, though it can range from six to 18 months depending on the organization’s needs and audit timeline. The audit itself — including planning, fieldwork, and report issuance — requires additional time on top of the review period. 

Q: What is the difference between SOC 1 Type 2 and SOC 2 Type 2? 
A SOC 1 Type 2 report evaluates the operating effectiveness of controls relevant to financial reporting over a defined period. A SOC 2 Type 2 report assesses the operating effectiveness of controls related to the Trust Services Criteria — such as security, availability, and confidentiality — over a defined period. The “Type 2” designation in both cases refers to the review period and assessment of operating effectiveness, not the subject matter of the audit. 

Q: Do clients or regulators require a specific SOC report type? 
Many clients and regulators specifically request a Type 2 report because it provides a higher level of assurance through evidence of operating effectiveness. Organizations should confirm requirements with their clients before selecting a report type. 

Both Type 1 and Type 2 SOC reports play a distinct role in demonstrating an organization’s commitment to developing and maturing its internal control environment. The next article in this series covers how testing performed by the audit firm varies based on whether a SOC audit is for a Type 1 or Type 2 report. 

For questions about SOC reporting requirements, contact the Wolf & Company SOC reporting team.