How to Conduct Successful Smart Contract Audits

Blockchain applications usually use smart contracts to interact with the blockchain. These smart
contracts are normally used to simplify business transactions and trade between two parties, and
sometimes without the need for a third party. They often contain crucial data and play critical role in
transacting business.

However, smart contracts are prone to security vulnerabilities and risks. For instance, once they are on a
blockchain, anyone can access smart contracts and any flaws in them. This is why it’s essential to hire
auditors to conduct a smart contract audit. So, what exactly is a smart contract audit and what
processes are involved in conducting a successful one? Keep reading to learn more about smart contract
audits.

What is a Successful Contract Audit?

A smart contract audit is a comprehensive review and scrutiny of the code used for underwriting a smart
contract’s terms and conditions. This audit is deemed successful if auditors are able to identify and
address potential vulnerabilities, flaws, bugs and security risks in a smart contract. The most important
goal of a successful audit is to ensure security, reliability, and integrity of the smart contract code.

Smart contract entail multiple processes and perspectives. However, the exact steps of audits may vary
depending on contracts. Some general smart contract audit steps include the following:

 Understand the purpose and functionality of the smart contract

 Identify and select your team of auditors
 Freeze your contract code
 Perform a code review
 Test the smart contract for functionality
 Remediate any identified issues
 Perform external auditing
 Document and report findings of the audit
 Continuous smart contract monitoring

1. Understand the Purpose and Functionality of the Smart Contract

Before performing any smart contract audit, it is important to first comprehend its intended use,
purpose and functions. This can help you identify any potential risks and security requirements
associated with the contract and ensure it is functioning as planned. Some things to consider when
reviewing the contract include:

 Identifying stakeholders: get to know who will use the contract and what are their objectives
and needs.
 Establish business logic, that is, what is the end goal of the smart contact? Also understand the
input and output parameters and how the contract can handle different circumstances.
 Identify the environment that the contract will be used in. Are there any restrictions or
limitations of the blockchain platform to be used by the contract deployment.
 Understand the long-term effects of the smart contract. Will it need any updates or changes and
if so, how will you handle these changes?
Ultimately review all of the project’s documentation and other relevant technical specification to get
clear understanding of the contract’s objectives and understanding. This will also help you to put your
audit efforts and allocate resources effectively.

2. Identify Your Team of Auditors

Once you understand the contract’s objectives, find a team of experienced auditors. Ensure they are
from a reputable company with expertise in smart contract auditing. Look out for auditors with a very
strong understanding of blockchain technology, and relevant technology languages.

3. Freeze Your Contract Code

Freezing code ensures that a smart contract cannot be changed or updated. This step prevents any
malicious attacks against the code. Auditors freeze code by storing an immutable (code that can’t be
changed) version of the code on a decentralized network or server. The immutable code version is then
compared with the code on the blockchain to ensure nothing has been modified. Should both codes
have any differences, the audit needs to be stopped and the codes fixed.

4. Perform a Code Review

Conduct a thorough review of the smart contract’s source code. This will help you to identify any
weaknesses, vulnerabilities, security risks and flaws. Pay close attention to widespread security flaws
such as re-entrance attacks, unsafe random number generation, and unsecure access controls.

In addition, ensure the code is well-written, easy to comprehend and well- maintained. Also ensure that
the contract logic is correct and addresses all potential cases appropriately.

5. Test the Smart Contract for Functionality

Your team of auditors must examine the smart contract extensively to ensure it works perfectly and has
no unforeseen issues or repercussions. Ensure the contract behaves as expected, handles cases
appropriately and produces accurate results. You may need to do the following:

Create case scenarios that account for edge situations and eventualities. This enables auditors to find
every possible problem and address them immediately.

Then, perform an automated code analysis. This entails using automated tools to examine contract
codes for any anomalies and vulnerabilities. Should the results indicate that further analysis is needed, it
might help to conduct penetration tests, unit test, integration tests, and individual functions that
identify potential security vulnerabilities.

You can also perform a manual analysis where your team of auditors will examine every code lines and
identify errors and vulnerabilities. While automated analysis are for identifying bugs in the code, manual
analysis detect issues with the contract logic, poor coding practices, gas optimization opportunities, and
weak points for common attacks.

It is advisable to perform both manual and automated review to produce the best results.

6. Remediate Any Identified Issues

Should auditors find any issues or vulnerabilities in the smart contract code after the analysis, they
should develop a plan to respond to them. The plan should identify and fix security vulnerabilities,
deploy or update new codes, and monitor contracts for any needed changes.

In addition, the plan should communicate any changes to stakeholders and provide them with guidance
on how they should use the contract.

7. Perform External Auditing

It would help to engage external auditors to perform an additional independent review. This can help to
identify any issues that might have been overlooked internally. Furthermore, additional external audits
also offer unbiased perspectives.

8. Document and Report Findings of the Audit

The final step of the smart contract audit is to prepare and deliver a comprehensive report of all the
findings of the smart contract audit process. Outline the audit process, methodology, findings, and
recommendations for remediation. Include all the evidence gathered, results of the analysis and any
activities related to the smart contract.

If the smart contract audit needs extra work, (post-audit) indicate when those activities will be
completed.

9. Continuous Smart Contract Monitoring

Ensure you conduct regularly monitor and review your smart contract even after your initial audits. Keep
updating the contract to address any emerging vulnerabilities and weaknesses in the ever-changing
threat landscape.

Most importantly, both the smart contract audit team and the project team should discuss the report
findings together. This can help the project team to understand every aspect of the audit process and
the recommendations.

Final Notes

It is essential to conduct a thorough smart contract audit as it helps to ensure your contract is safe and
trustworthy. The above steps can help ensure a smart contract meets its intended use and satisfies the
owner’s requirements. In addition, remember to stay up to date with the latest development in
blockchain technology to conduct more effective smart contract audits.