BlackLine Blog

March 04, 2024

The Crucial Role of Type 1 & Type 2 SOC Reports When Buying Automation Software

Modern Accounting
2 Minute Read

Danny Wheeler

Share Article

The Importance of Ensuring Security

In today's digital age, where data breaches and cyber threats loom large, the importance of ensuring the security and reliability of software solutions cannot be overstated. As organizations increasingly rely on software to drive their operations, it's imperative to have mechanisms in place to evaluate and mitigate risks effectively.

This is where System and Organization Controls (SOC) attestation reports come into play, offering valuable insights into and assurance over the control environments of software providers. However, not all SOC reports are created equal, and understanding the distinction between Type 1 and Type 2 is crucial for making informed decisions.

The Difference Between Type 1 & Type 2 SOC Reports

Type 1 SOC reports provide a snapshot of an organization's control environment at a specific point in time, focusing primarily on the design of these controls. While this offers valuable insights into the structure and intentions behind the controls, it may not provide a comprehensive understanding of their operational effectiveness over time.

On the other hand, Type 2 SOC reports delve deeper, offering a thorough evaluation of controls' operational effectiveness over a specified period, typically spanning six months to a year. This comprehensive assessment goes beyond design considerations, providing valuable insights into how well the controls are implemented and maintained in practice.

Why Type 2 SOC Matters When Buying Software

For customers purchasing software solutions, insisting on Type 2 SOC reports is paramount for several reasons.

Risk Mitigation: Type 2 SOC reports offer a more robust assessment of an organization's ability to manage risks effectively. By evaluating controls' operational effectiveness over time, customers can make more informed decisions, reducing the likelihood of potential disruptions or security breaches.

Continuous Assurance: In today's rapidly evolving threat landscape, a one-time assessment is not sufficient. Type 2 SOC reports provide ongoing assurance by monitoring controls' performance over an extended period, enhancing trust and confidence in the software provider's commitment to security and compliance. In addition bridge letters can be provided to confirm there have been no change or failures to the documented controls since the date of the report. Bridge letters are typically provide monthly following the report issuance.  

Regulatory Compliance: With regulatory requirements becoming increasingly stringent, demonstrating compliance is essential. Type 2 SOC reports offer smoother audits and regulatory compliance efforts.

Vendor Accountability: Insisting on Type 2 SOC reports sends a clear message to software vendors that consistency of control effectiveness and application and security are non-negotiable. This emphasis encourages vendors to invest in robust control environments, fostering a culture of accountability and driving continuous improvement.

Prioritizing Type 2 SOC reports when purchasing software solutions is essential for safeguarding investments, maintaining operational resilience, and mitigating risks effectively. By demanding the depth and reliability that Type 2 SOC provides, organizations can ensure they are making informed decisions and safeguarding their data in an increasingly complex digital landscape.

Learn more about BlackLine’s SOC 1 and 2 certified Invoice-to-Cash platform.

BlackLine Invoice-to-Cash

Learn more

About the Author


Danny Wheeler