Summary

This is the only mandatory criterion. It covers logical and physical access controls, encryption, monitoring, incident response, and change management. Every SOC 2 audit includes this category. SOC 2 Type II requires annual re-certification. Maintaining compliance means continuously monitoring controls, conducting regular access reviews, completing security training, managing vendor risks, and keeping policies updated as your product and infrastructure evolve.

SOC 2 Type II Guide for Software Companies: Everything You Need to Know

If you run a SaaS company, cloud platform, or any software business that handles customer data, SOC 2 Type II certification is no longer optional — it’s a competitive necessity. Enterprise customers expect it. Security questionnaires ask for it. And in many cases, deals stall or fall apart without it.

This guide walks you through exactly what SOC 2 Type II means, how it differs from Type I, what the audit process looks like, and how your software company can prepare efficiently without burning out your engineering and operations teams.

What Is SOC 2 Type II?

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

Security (required)
Availability
Processing Integrity
Confidentiality
Privacy

Most software companies start with Security and Availability, then expand based on what their customers care about most.

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

	SOC 2 Type I	SOC 2 Type II
What it covers	Controls exist at a point in time	Controls operate effectively over time
Audit period	Single date	Typically 6–12 months
Market weight	Good starting point	Gold standard
Typical timeline	1–3 months	6–12 months

Type I confirms that your controls are designed correctly. Type II proves they actually work — consistently, over an extended observation period. Enterprise buyers increasingly require Type II because it demonstrates operational maturity, not just documentation.

Why SOC 2 Type II Matters for Software Companies

Closing Enterprise Deals Faster

Security reviews are one of the biggest bottlenecks in B2B SaaS sales cycles. A SOC 2 Type II report lets your sales team answer security questionnaires in minutes instead of weeks. It signals to procurement teams and CISOs that your company takes data protection seriously.

Reducing Customer Churn Risk

When enterprise customers know you’re SOC 2 Type II certified, they’re less likely to churn over security concerns. It removes a common objection during renewal conversations and builds long-term trust.

Competitive Differentiation

In crowded SaaS markets, certification separates you from competitors who haven’t invested in formal security programs. It’s a trust signal that shows up in sales decks, security pages, and vendor qualification processes.

The Five Trust Services Criteria Explained

1. Security (Common Criteria)

This is the only mandatory criterion. It covers logical and physical access controls, encryption, monitoring, incident response, and change management. Every SOC 2 audit includes this category.

2. Availability

Focuses on whether your system is available for operation as committed. Relevant controls include uptime monitoring, disaster recovery planning, and incident response procedures.

3. Processing Integrity

Ensures your system processes data completely, accurately, and in a timely manner. Important for fintech, payroll, and data processing companies.

4. Confidentiality

Covers how you protect information designated as confidential — including encryption at rest and in transit, access controls, and data disposal policies.

5. Privacy

Addresses how personal information is collected, used, retained, and disclosed. This overlaps with GDPR and CCPA requirements, making it increasingly relevant for global software companies.

Step-by-Step SOC 2 Type II Audit Process for Software Companies

Step 1: Define Your Scope

Before anything else, determine which Trust Services Criteria apply to your business and which systems fall within the audit boundary. Narrowing scope reduces cost and complexity without sacrificing credibility.

Key questions to answer:

Which systems store or process customer data?
Which criteria do your customers care about most?
What’s your current infrastructure (AWS, GCP, Azure, on-prem)?

Step 2: Conduct a Readiness Assessment

A readiness assessment (also called a gap analysis) identifies where your current controls fall short of SOC 2 requirements. This is typically done 3–6 months before your audit begins.

Common gaps software companies find:

No formal vulnerability management program
Missing access review processes
Incomplete vendor risk management
Lack of documented security policies
Inadequate logging and monitoring

Step 3: Remediate Gaps and Implement Controls

This is the most time-intensive phase. Based on your gap analysis, you’ll need to implement or strengthen controls across areas like:

Identity and access management (MFA, least privilege, access reviews)
Endpoint security (MDM, antivirus, encryption)
Network security (firewalls, intrusion detection, segmentation)
Incident response (documented plan, tabletop exercises)
Vendor management (third-party risk assessments)
Change management (code review, deployment controls)

Step 4: Select a Qualified Auditor (CPA Firm)

Only licensed CPA firms can issue SOC 2 reports. Look for auditors with specific experience in SaaS and cloud-based companies. Costs typically range from $15,000 to $60,000+ depending on scope, company size, and auditor reputation.

Factors that affect cost:

Number of Trust Services Criteria included
Size and complexity of your infrastructure
Quality of your existing documentation
Whether you use a compliance automation platform

Step 5: Enter the Observation Period

Once your controls are in place, the auditor begins observing your controls over the agreed period (typically 6–12 months). During this time, your team must consistently follow documented procedures. Auditors will collect evidence including:

Access logs and user provisioning records
Security training completion records
Vulnerability scan reports
Incident response records
Change management tickets
Vendor assessment documentation

Step 6: Auditor Testing and Report Issuance

After the observation period, your auditor tests the evidence, interviews key personnel, and issues the SOC 2 Type II report. The report includes:

Management’s description of the system
The auditor’s opinion
A description of tests performed
Any exceptions noted

A clean report with no exceptions is the goal, but auditors can note exceptions with management responses if issues were identified and remediated.

Common Mistakes Software Companies Make

Starting the audit too early before controls are actually in place
Underestimating documentation requirements — auditors need evidence, not promises
Ignoring vendor risk — your cloud providers and SaaS tools are in scope
Treating it as a one-time project rather than an ongoing program
Not training employees — human error is a top audit finding

Tools and Platforms That Can Help

Compliance automation platforms like Vanta, Drata, Secureframe, and Tugboat Logic can significantly reduce the manual effort of collecting evidence and monitoring controls. They integrate with AWS, GitHub, Google Workspace, Okta, and dozens of other tools to automate evidence collection.

However, these platforms work best when paired with well-written policies, procedures, and documentation — which is where many companies still struggle.

Frequently Asked Questions

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

Most software companies take 9–18 months from kickoff to receiving their report. The observation period alone is typically 6–12 months. Starting with a Type I report and then transitioning to Type II can shorten the timeline.

How much does SOC 2 Type II certification cost?

Total costs typically range from $30,000 to $100,000+ when you factor in auditor fees, compliance tooling, staff time, and remediation work. Companies with strong existing documentation and controls can significantly reduce costs.

Do I need SOC 2 Type II or is Type I enough?

For early-stage startups trying to close their first enterprise deals, Type I is often acceptable. However, most mature enterprise buyers require Type II. If you’re targeting mid-market or enterprise customers, invest in Type II from the start.

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

SOC 2 is a US-focused standard commonly required by North American enterprises. ISO 27001 is an international standard more commonly required by European and global customers. Many scaling software companies pursue both. SOC 2 is generally considered faster and less prescriptive to achieve initially.

How do I maintain SOC 2 Type II compliance after the audit?

SOC 2 Type II requires annual re-certification. Maintaining compliance means continuously monitoring controls, conducting regular access reviews, completing security training, managing vendor risks, and keeping policies updated as your product and infrastructure evolve.

Start Your SOC 2 Journey the Right Way

The biggest time sink in any SOC 2 audit isn’t the audit itself — it’s the documentation. Writing security policies, procedures, and control descriptions from scratch takes weeks of internal effort and often results in policies that don’t actually hold up under auditor scrutiny.

Don’t start from a blank page.

Our ready-to-use SOC 2 compliance template packages give your software company a massive head start. Each template is written by compliance professionals, mapped to the AICPA Trust Services Criteria, and formatted exactly the way auditors expect to see them.

What’s included:

Information Security Policy
Access Control Policy and Procedures
Incident Response Plan
Vendor Risk Management Policy
Change Management Policy
Business Continuity and Disaster Recovery Plan
Employee Security Awareness Training Policy
And more — fully editable in Word and Google Docs

👉 Browse our SOC 2 compliance template library and get audit-ready faster →

Stop reinventing the wheel. Get the documentation your auditor expects, customize it for your company in hours — not weeks — and move forward with confidence.