Due Dilligence: What Tech Auditors Actually Look For

I spent weeks preparing for a major due diligence process, convinced the aging systems I had inherrited shortly before would sink the deal. The codebase was creaky. Some components hadn’t been properly refactored in years. I could see the auditors’ report in my mind: “Significant technical risk. Recommend caution.”

So I gathered my engineering leads and audited ourselves first. We went digging for skeletons. We made a high level list of tech debt, architectural weakness. Essentially everything that would make us, and therefore potentially them, wince. Then we drew up a remediation plan.

When the auditors arrived, they spent weeks poking at every corner of our technology and our organisation. We had five full day sessions being grilled. They had access to all the code, as requested, but they didn’t study it. What they wanted to see was our plan. In their final report, they even attached cost estimates to our remediation roadmap - numbers far larger than we’d ever get funded to address. But their conclusion? Managed risk. The deal went through.

They’re Not Auditing Your Code

This is the uncomfortable truth that most CTOs don’t hear until they’ve been through the process: technical due diligence isn’t really about your code quality. It’s about your awareness of risk and your ability to manage it.

The auditors know they won’t find everything in a few weeks that your team has built over years. They’re not trying to. What they’re doing is sampling. Spot-checking. Looking for patterns that suggest either competence or chaos.

A messy codebase with a clear remediation plan is manageable. A pristine codebase maintained by a team that can’t articulate their technical strategy is a red flag.

What Actually Raises Red Flags

In my experience, both as the CTO being audited and as someone who’s dug into other systems to advice or invest, here’s what genuinely concerns auditors:

Hidden tech debt. Not tech debt itself - that’s normal, even healthy if managed well. The problem is debt that leadership doesn’t know about, or pretends doesn’t exist. Most engineers who’ve worked on a system for a while know where the skeletons are. But they often don’t go digging, either because they feel it’s not their place or because they’d rather not think about it. But it is the CTOs job to know. Go digging. Make risk-assessed judgement calls about what to address and when.

Single points of failure. The developer who’s the only person who understands the payment system. The server that hasn’t been documented because “John set it up and John knows how it works.” These aren’t just operational risks; they’re signals that the organisation doesn’t think systematically about resilience.

Misrepresentation. If you claim to have robust CI/CD and the auditors find manual deployments, that’s a problem. Not because manual deployments are fatal, but because you’ve demonstrated that your self-assessment can’t be trusted. They’ll wonder what else you’ve misrepresented.

Choices likely to cause near-term problems. Security gaps that could lead to a breach. Architectural decisions that will collapse under the growth the investment is meant to fund. Infrastructure that can’t scale. These are the things that could derail the investment thesis itself.

What Founders Stress About Needlessly

Here’s the flip side: there’s plenty that keeps CTOs up at night before DD that auditors genuinely don’t care much about.

The actual codebase. I know, I know. You’re embarrassed about that module from 2019. But the auditors aren’t investing in your code; they’re investing in your outputs. If you’ve been shipping valuable product despite imperfect code, that’s actually evidence that your team knows how to deliver. The code is a means to an end.

Perfect process. Context matters enormously here. What’s appropriate for three developers in one office is wildly different from five squads across three time zones. No CI/CD might be an amber flag, but it’s not a reason to fail DD if you’ve been producing good output. The auditors understand that process should be proportionate.

Security theatre. Auditors have seen it all. They know the difference between genuine security practices and box-ticking. “We’ve never been hacked” is not a security strategy. But they’re also not expecting perfection - they’re looking for evidence that you take it seriously and have thought about it systematically.

The Self-Audit: A Tactic That Works

If you’re heading into DD, consider doing what we did: audit yourself first. Get your engineering leads together and actively go looking for problems. Without AI this would take days, at least. But now a good LLM can do it in minutes. Document what you find. Create a remediation plan, even if you know you’ll never get the resources to execute all of it.

Why does this work? Because it demonstrates exactly what auditors are looking for: awareness and management capability. You’re showing them that you understand your own risks and have a rational approach to addressing them. You’re making their job easier, and you’re proving that you’re the kind of leadership team that can be trusted with an investment.

The Managed Part of Managed Risk

Every technology organisation carries risk. The question investors are really asking is: does this team know what their risks are, and can they manage them?

The auditors who assessed us could have written a damning report about our aging systems. Instead, they saw a team that had done its homework. We knew where the problems were. We had a plan. We could articulate the trade-offs we’d made and why.

That’s what technical due diligence is actually looking for. Not perfection - awareness.