Why a code audit is critical before buying or selling your business

Why a Code Audit is Critical Before Buying or Selling your Business

code audit
How many times have you heard of someone finding a dream car at a bargain price, only to find out they’d purchased a lemon? Yikes! I guess they didn’t do their due diligence.

Just like in car shopping, in-depth investigation is a critical step in the process of buying or selling a tech company. Typically, mergers and acquisitions focus on the financials, but software product risks deserve the same level of investigation since they can deliver unexpected expenses and liabilities further down the road. To ensure that neither party ends up with a lemon, an audit of the codebase should be performed before switching ownership.

Code audits are critical to a seamless transfer and involve a comprehensive review of the software, or product’s, code to ensure that it’s of high-quality, secure and manageable. The benefits of a code audit will be experienced for years to come. In fact, according to a study, each hour spent in code review saves 33 hours in maintenance. In the following paragraphs, will cover the reasons to do a code audit, how to do it and some tips to ensure you’re successful.

Why perform a code audit?

  • A manual code audit is beneficial for the seller as it gives them the chance to confirm that their codebase is written according to common standards and that it is mature and secure. An audit also allows the seller to show that any product licenses are up-to-date and that the code – even if some modules have been built using open source code – do not violate any copyright infringement. With the confirmation of high-quality code, the sellers are then armed with the proof needed to drive up potential bids from buyers and grow the company’s valuation.
  • The buyer will find value in a manual code audit as it’s an opportunity to have questions answered about their purchase. A code audit gives the buyer the chance to look under the hood and find answers for the following:
    • How much of the codebase was written by in-house developers and how much is open source or from a third party? What methodologies, if any, did the developers use to write the code?
    • Do any security vulnerabilities or functional gaps exist, such that there’s potential for malicious hacking or loss of trade secrets/data?
      Is the code manageable and apt for additional features?
    • Are the modules documented properly with comments, dates and authors?
    • Does the code reference any separate technology or call on any other programs? If so, are the licenses current?
  • A manual code audit provides an understanding of the current structure of the existing code. If the code lacks order or does not follow standard organization practices, that’s a good sign that there will be big bugs deeper inside. Code riddled with unusual patterns or quick fixes are a bad sign, while code that follows standard protocol provide assurance that the codebase is more stable and apt for management, or additional features.
  • The sooner a bug is found, the easier – and less expensive – it is to fix. Manual code review provides an opportunity to find and fix a large number of bugs before the product is sold or purchased.
  • During the code audit, reviewers will search for security threats and vulnerabilities that could be detrimental to your product. If application backdoors and malicious code are caught during the audit before being exploited, you’ll save time and money that would otherwise be spent on resources to fix the security threat. Age is another reason to do a code audit. If your code is a few years old, it may be relying on outdated tools, which poses a security threat because the code won’t mesh with newly published security updates.

How to perform a code audit

  • A manual code audit involves three different phases: frontend code review, backend code review and infrastructure review.
    1. The front end code review involves analyzing the code that will impact the end user’s experience, such as the speed at which the code calls files or loads images, or whether the code has lines to ensure that the application will display properly on different devices.
    2. A backend review dives deep into the codebase to analyze how the product is interacting with other tools and to check for security vulnerabilities. It’s during the backend review, that code is also compared to standard structure and determined to be either stable or a mess.
    3. An infrastructure review looks across many areas of your system, including hardware, software, processes and responsibilities to ensure everything is up to date and following recommended Best Practices with documented procedures. It covers normal operations and exception situations, such as Disaster Recovery.
  • A code audit is a daunting task as projects can have thousands of lines of code. To avoid being overwhelmed or getting lost in the process, it’s a good idea to use a checklist and break down the product into modules to be reviewed individually, before reviewing the whole product. The following are three general steps to take during the code audit:
    1. First, software engineers from either the buyer or seller’s team, or both, spend time reviewing code and familiarizing themselves with structure and functionality. Their goal is to gain a general understanding of the code and catch any glaringly obvious bugs.
    2. Second, an in-depth manual audit is performed to dive deep into the frontend, backend and infrastructure code.
    3. Third, results from both the team review and audit are compiled into a document listing all of the discovered issues and suggested remedies.

Advice for a successful code audit

  • Consider hiring a 3rd party to perform the audit, since developers of the product may be too close the work and miss existing issues or potential threats. An additional set of eyes will bring about important dialogue that can aid the development team in fixing bugs.
  • With manual code audits, it’s easy to spend too much time reviewing the details while neglecting serious risk areas. Therefore, before launching the audit, create a document to specify the scope and who will be auditing which code modules. Even better, use a checklist to ensure that all important areas are reviewed and that there’s no redundancy in efforts.
  • Perform regular audits throughout the development of the project, not just when it’s finished or when there’s an opportunity to buy or sell. This will save time and headaches in the future and allow the auditing team to focus on recent changes, instead of trying to fix glaring bug issues.

Before buying or selling your business, you should ensure that the codebase is stable and clean. Auditing the frontend, backend and infrastructure code is a good start for guaranteeing the buyer will be able to implement upgrades, add features or improve security. Code audits can be an intensive process, requiring a development team and a testing team with the necessary time to thoroughly review the application.

We have experience performing manual audits and would be happy to talk to you about reviewing your codebase prior to purchase or sale. A secure codebase provides a solid foundation for the growth of any business, and we’re here to get you ready for launch.

Orion Jensen

Orion Jensen

Orion received his BS in Computer Science from the University of Texas at Austin and went on become a lead developer for Solar Winds, SecureCare, and Buildasign. As Technical Operations Manager at Buildasign, Orion helped grow Buildasign from one employee to a company with multiple teams of developers and $30M in revenue. These successes led him to found Clear Launch in 2013 with the mission of improving his clients’ business processes from purchase and production to fulfillment and logistics.
Orion Jensen