Summary

The Security criterion — also called the Common Criteria — is mandatory for every SOC 2 audit. It covers: SOC 2 Type II requires evidence over time. Setting up a control in month one and forgetting about it in month six creates audit findings.

SOC 2 Type II Complete Guide for Software Companies

If you’re a software company handling customer data, SOC 2 Type II certification is no longer optional — it’s a competitive necessity. Enterprise prospects ask for it during sales cycles, security questionnaires reference it constantly, and customers increasingly expect it before signing contracts. This guide walks you through everything your software company needs to know to achieve and maintain SOC 2 Type II compliance.

What Is SOC 2 Type II?

SOC 2 (System and Organization Controls 2) is an auditing framework developed by the American Institute of Certified Public Accountants (AICPA). It evaluates how a service organization manages customer data based on five Trust Services Criteria (TSC):

Security (required for all audits)
Availability
Processing Integrity
Confidentiality
Privacy

Type I vs. Type II: What’s the Difference?

SOC 2 Type I evaluates whether your controls are designed appropriately at a single point in time
SOC 2 Type II evaluates whether those controls operate effectively over a defined period — typically 6 to 12 months

For software companies, Type II carries far more weight. It demonstrates sustained commitment to security, not just a one-time snapshot. Most enterprise customers and prospects will specifically request a Type II report.

Why SOC 2 Type II Matters for Software Companies

Software-as-a-Service companies are uniquely positioned to benefit from SOC 2 Type II certification. Here’s why:

Accelerate Sales Cycles Enterprise deals often stall in security review. A current SOC 2 Type II report answers the majority of security questionnaire questions upfront, reducing friction and shortening close times.

Build Customer Trust Customers entrust you with sensitive data — financial records, health information, employee data, or intellectual property. A clean audit report signals that you take that responsibility seriously.

Reduce Risk of Data Breaches The process of achieving SOC 2 compliance forces you to identify and remediate security gaps before they become costly incidents.

Meet Contractual Obligations Many enterprise contracts now explicitly require SOC 2 Type II reports as a condition of doing business.

The Five Trust Services Criteria Explained

1. Security (Common Criteria)

The Security criterion — also called the Common Criteria — is mandatory for every SOC 2 audit. It covers:

Logical and physical access controls
System operations and monitoring
Change management processes
Risk mitigation procedures

Most software companies focus their initial audit exclusively on Security before adding additional criteria in subsequent years.

2. Availability

This criterion applies if your customers depend on your system being operational. It includes uptime monitoring, incident response, disaster recovery, and business continuity planning.

3. Processing Integrity

Relevant for companies processing financial transactions or critical business data. It ensures your system processes data completely, accurately, and in a timely manner.

4. Confidentiality

Addresses how you protect data that’s designated as confidential — including encryption, access restrictions, and data retention policies.

5. Privacy

Focuses on how you collect, use, retain, and disclose personal information. This criterion aligns closely with regulations like GDPR and CCPA.

SOC 2 Type II Audit Timeline for Software Companies

Understanding the timeline helps you plan resources and set realistic expectations with stakeholders.

Phase 1: Readiness Assessment (4–8 Weeks)

Before engaging an auditor, conduct an internal gap analysis to understand where you stand. This involves:

Mapping your current security controls to the Trust Services Criteria
Identifying gaps in policies, procedures, and technical controls
Prioritizing remediation based on risk and audit requirements

Phase 2: Remediation and Control Implementation (2–6 Months)

This is typically the longest phase. Common remediation tasks for software companies include:

Writing or updating security policies (access control, incident response, change management)
Implementing multi-factor authentication across systems
Setting up vulnerability scanning and penetration testing
Establishing vendor risk management processes
Deploying endpoint detection and response (EDR) tools
Creating employee security awareness training programs

Phase 3: Observation Period (6–12 Months)

Once your controls are in place, the clock starts on your observation window. Your auditor will assess whether controls operated consistently throughout this period. This is what distinguishes Type II from Type I — the sustained evidence of operational effectiveness.

Phase 4: Audit Fieldwork (4–8 Weeks)

Your auditor reviews evidence, interviews personnel, and tests controls. Evidence typically includes:

Access review logs
Change management tickets
Incident response records
Vendor assessment documentation
Training completion records

Phase 5: Report Issuance (2–4 Weeks)

After fieldwork, the auditor issues your SOC 2 Type II report. The report includes the auditor’s opinion, a description of your system, and detailed findings on each control tested.

Choosing the Right Auditor

Not all CPA firms are equal when it comes to SOC 2. When selecting an auditor for your software company:

Look for SaaS experience — auditors who understand cloud infrastructure, CI/CD pipelines, and modern development practices
Compare pricing — costs typically range from $15,000 to $50,000+ depending on scope and firm size
Evaluate communication style — you’ll work closely with this team for months
Ask about automation support — some auditors integrate with compliance automation platforms like Vanta, Drata, or Secureframe

Common Mistakes Software Companies Make

Avoiding these pitfalls can save you months of rework and thousands of dollars:

Starting Without a Readiness Assessment Jumping straight to an audit without understanding your gaps is expensive. Auditors charge by the hour, and surprises during fieldwork are costly.

Underestimating Documentation Requirements Controls must be documented in written policies. Having a firewall isn’t enough — you need a policy that governs how it’s configured and reviewed.

Neglecting Vendor Risk Management Your auditor will ask about third-party risk. If you haven’t assessed your critical vendors (cloud providers, payment processors, subprocessors), you’ll have gaps.

Failing to Maintain Evidence Continuously SOC 2 Type II requires evidence over time. Setting up a control in month one and forgetting about it in month six creates audit findings.

Scope Creep Trying to include every system and service in your first audit makes the process unnecessarily complex. Start with your core product and infrastructure.

Using Compliance Automation Tools

Compliance automation platforms significantly reduce the manual burden of SOC 2 preparation. These tools:

Continuously monitor your cloud environments (AWS, GCP, Azure)
Automatically collect evidence from integrated systems
Track control completion and alert you to gaps
Generate audit-ready reports

Popular options include Vanta, Drata, Secureframe, Tugboat Logic, and Laika. While these platforms streamline evidence collection, they don’t replace the need for well-written policies and procedures — which remain your responsibility.

Maintaining SOC 2 Type II Year Over Year

SOC 2 isn’t a one-time project. Most software companies undergo annual audits to keep their report current. To maintain compliance:

Conduct quarterly access reviews
Perform annual risk assessments
Test your incident response plan at least annually
Review and update policies when your environment changes
Monitor vendors on an ongoing basis
Keep employee security training current

Building a compliance calendar with recurring tasks ensures nothing falls through the cracks between audit cycles.

Frequently Asked Questions

How long does SOC 2 Type II take for a software startup?

For most software startups starting from scratch, the full process takes 9 to 18 months. The readiness and remediation phases typically take 3 to 6 months, followed by a 6-month observation period, then 6 to 8 weeks of audit fieldwork. Companies with mature security programs can compress this timeline.

How much does SOC 2 Type II cost?

Total costs vary widely. Audit fees typically range from $15,000 to $50,000. Add in compliance automation tools ($10,000–$25,000/year), internal staff time, and potential consulting fees. Budget $30,000–$100,000+ for your first Type II audit cycle.

Do we need SOC 2 Type II or Type I first?

Many software companies start with a Type I report to demonstrate compliance readiness quickly during a sales cycle, then pursue Type II in the following year. If your customers specifically require Type II, you can skip Type I and go straight to the longer observation period.

What’s the difference between SOC 2 and ISO 27001?

Both are security frameworks, but they serve different purposes. SOC 2 is primarily used in North America and focuses on service organizations. ISO 27001 is an international standard with global recognition. Some software companies pursue both, particularly when selling to European enterprise customers.

Can a small software company achieve SOC 2 Type II?

Absolutely. Many companies with fewer than 20 employees successfully complete SOC 2 Type II audits. The key is scoping appropriately, using automation tools to reduce manual burden, and prioritizing documentation early in the process.

Start Your SOC 2 Journey With the Right Foundation

The single biggest bottleneck for most software companies pursuing SOC 2 Type II isn’t technology — it’s documentation. Writing security policies, procedures, and control frameworks from scratch is time-consuming, and poorly written policies create audit findings.

Don’t start from a blank page.

Our professionally written, auditor-approved SOC 2 compliance template library gives your software company everything you need to hit the ground running — including security policies, risk assessment templates, vendor management frameworks, incident response plans, and more. Every template is mapped to the Trust Services Criteria and ready to customize for your environment.

→ Browse our SOC 2 compliance template packages and accelerate your path to certification today.