In circumstances such as the recent pandemic, auditors have a choice of either coordinating the signing of the relevant pages by post using handwritten (wet ink) signatures or signing with a type of electronic signature. While the latter may be faster, many auditors are unsure whether it is permissible.
To help with this, ICAEW’s Audit and Assurance Faculty and Business Law Department have teamed up to provide a brief guide to the main factors that auditors need to consider around the use of electronic signatures in auditors’ reports, which ICAEW members can access here.
This guide focuses on UK auditing requirements, but its principles may also apply to other reporting engagements. It is intended to provide practical guidance, but if in doubt members are advised to seek legal advice.
In brief, wet ink signatures are no longer required in most cases as confirmed by the Law Commission’s September 2019 report: Electronic execution of documents.
The Law Commission took into account 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.
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)
If the entity’s constitutional documents do not specify how the financial statements must be signed, electronic signatures are presumed to be valid, unless the contrary can be proven.
The guide goes on to cover the following areas:
- What are the legal and regulatory requirements regarding signatures?
- What should an auditor consider before deciding to use electronic signatures?
- What is meant by ‘intention to authenticate’?
- What quality management procedures should firms be considering?
ICAEW members can access the brief guide by clicking here: ‘Coronavirus (COVID-19) – An introduction to using electronic signatures to sign an audit report’
