Top tips on using electronic – or digital – signatures.
The current pandemic and subsequent lockdown and social distancing rules have placed an increased emphasis on the ability of professionals to provide non-face to face services.
Accountants regularly provide or require information – including signed documents such as accounts, engagement letters, and reference letters – from their clients. With digital enablement, firms have been able to streamline their processes by using a digital platform to get these documents signed without compromising the security of their clients’ information.
What are digital signatures?
A digital signature is a qualified electronic signature which meets certain requirements under articles 26, 28, 29, and annexes I and II, of eIDAS.
Regulation (EU) No 910/2014 (the eIDAS Regulation) has direct effect in EU member states from 1 July 2016. It establishes an EU-wide legal framework for electronic signatures. Article 26 of eIDAS Regulation defines:
1) an 'electronic signature' as 'data in electronic form which is attached to or logically associated with other data in electronic form and which is used by the signatory to sign' 2) an 'advanced electronic signature' as one which meets the following requirements:
a) it is uniquely linked to the signatory
b) it is capable of identifying the signatory
c) it is created using electronic signature-creation data that the signatory can, with a high level of confidence, use under his sole control, and
d) it is linked to the data signed therewith in such a way that any subsequent change in the data is detectable, and
3) a 'qualified electronic signature' as 'an advanced electronic signature that is created by a qualified electronic signature creation device, and which is based on a qualified certificate for electronic signatures'.
Articles 25(2) and (3) of the eIDAS Regulation provide that a qualified electronic signature shall have the equivalent legal effect of a handwritten signature and that a qualified electronic signature based on a qualified certificate issued in one member state shall be recognised as a qualified electronic signature in another.
Does someone have to sign or type for electronic signatures?
Electronic signatures can take several different forms, where a person could:
type their name into a contract or into an email containing the terms of a contract
paste their signature (for example, in the form of an image) into an electronic (soft copy) version of the contract in the appropriate place (for example, next to the relevant party’s signature block)
access a contract through a web-based e-signature platform and clicking to have their name in a typed or handwriting font automatically inserted into the contract in the appropriate place (for example, next to the relevant party’s signature block); and
use a finger, light pen or stylus and a touchscreen to write their name electronically in the appropriate place (for example, next to the relevant party’s signature block) in the contract.
Which documents can be electronically signed?
Accountants can sign most documents digitally instead of traditional wet ink signatures provided that:
the entity’s legal documents do not prohibit electronic signatures (which is unlikely). The majority of constitutional documents require that the documents must be signed, without specifying the type of the signatures, hence electronic signatures are presumed to be valid.
The law does not specifically require wet signatures (eg in property exchange transactions).
The Law Commission considered EU law, UK legislation and case law, and stated that electronic signatures can be used to execute documents, including where there is a statutory requirement for a signature, provided that the signatory intends to authenticate the document. As noted by the Law Commission in 2001 an ‘intention to authenticate’ can be established if the conduct of the signatory indicated an authenticating intention to a reasonable person.
The UK government confirmed that it agreed with the Law Commission’s conclusion that electronic signatures have a legal basis (see Ministry of Justice announcement of 3 March 2020).
What should you consider before using a platform for digital signatures?
Before choosing to use a platform for digital signatures, the first thing to ensure is the security of your clients’ information as you would be sending confidential information on the platform to your client. Additionally, among other requirements, you need to consider:
whether the use of an electronic signature is appropriate for your client
what are the risks involved and insurance to cover them
how much would it cost
how easy is the platform to use and its interaction with other used software
does the platform provide an audit trail of electronic signature for evidence
how to tailor your firm’s management procedure for quality maintenance?
A signing platform is a software providing an interface through which people can both create and upload documents to be signed electronically and affix electronic signatures to those documents. Such platforms may also provide an ‘audit trail’ of an electronic document, which includes data such as the time at which it was signed and the IP address through which it was accessed.
All ACCA practitioners must send to their client a letter of engagement which sets out the terms under which they are agreeing to be engaged by their client before any work is undertaken or, if this is not possible, as soon as practicable after the engagement commences.
ACCA partners with Practice Ignition, which enables a subscribed firm to get not only their engagement letters signed digitally, but also an option to get their fee paid on time through in-built payment collection facility to avoid any future disputes.
Section 503 of The Companies Act 2006 requires:
the auditor's report must state the name of the auditor and be signed and dated
where the auditor is an individual, the report must be signed by him
where the auditor is a firm, the report must be signed by the senior statutory auditor in his own name, for and on behalf of the auditor
where more than one person is appointed as auditor, the report must be signed by all those appointed.
The above does not refer to any specific type (wet/electronic) of signature, hence either type has full validity as recognised by UK Law Commission and UK government.
Same regulations do apply for other types of entity’s audits and independent examination, covering charities, LLP, Co-operative societies etc.
ACCA partners with IRIS which offers an online IRIS Openspace solution where accountants can securely upload, store and approve documents. The platform is fully GDPR compliant which means you do not have to worry about the security of sharing confidential information.
Accounts and tax returns
Your professional responsibility towards clients emphasises the need to obtain appropriate instructions from clients and to ensure that clients have signed or otherwise approved accounts.IRIS Openspace does provide both options – approval or signature on their portal.
From Monday 27 July 2020, HM Land Registry will accept ‘witnessed electronic signatures’ – electronic signatures that enable an individual to sign legal documents, but which still require a witness who is present at the time to also sign the documents electronically.
Whichever platform you choose, good market research about the company and their commitment to keep the software protected, updated with technological advancement and market competitiveness is necessary.