Use of Electronic Signature for Signing Audit Reports & Certificates

Use of Electronic Signature for Signing Audit Reports & Certificates

Institute of Chartered Accountants of India has come with an announcement dated 13th April 2020, which legitimize/ allows usage of E-sign to sign Auditors’ Report. ICAI have invoked A57 of the Standard on Auditing (SA) 700 (Revised) under the title “Signature of the Auditor” which reads “In some cases, law or regulation may allow for the use of electronic signatures in the auditor’s report.”

ICAI have further laid down the criteria and the validity of the E-sign which is as per the Information Technology Act, 2000 (“IT Act 2000”) including its subsequent amendments.

Relevant provisions of the IT Act 2000 are reproduced below:

Section 2(ta)

Definition: Electronic signature means authentication of any electronic record by a subscriber by means of the electronic technique specified in the Second Schedule and includes digital signature.

Section 3A: Electronic Signature

1. Notwithstanding anything contained in section 3, but subject to the provisions of sub-section (2), a subscriber may authenticate any electronic record by such electronic signature or electronic authentication technique which —

    • (a) is considered reliable; and
    • (b) may be specified in the Second Schedule.

2. For the purposes of this section any electronic signature or electronic authentication technique shall be considered reliable if —

  • (a) the signature creation data or the authentication data are, within the context in which they are used, linked to the signatory or, as the case may be, the authenticator and to no other person;
  • (b) the signature creation data or the authentication data were, at the time of signing, under the control of the signatory or, as the case may be, the authenticator and of no other person;
  • (c) any alteration to the electronic signature made after affixing such signature is detectable;
  • (d) any alteration to the information made after its authentication by electronic signature is detectable; and
  • (e) it fulfils such other conditions which may be prescribed.

3. The Central Government may prescribe the procedure for the purpose of ascertaining whether electronic signature is that of the person by whom it is purported to have been affixed or authenticated.

4. The Central Government may, by notification in the Official Gazette, add to or omit any electronic signature or electronic authentication technique and the procedure for affixing such signature from the Second Schedule: Provided that no electronic signature or authentication technique shall be specified in the Second Schedule unless such signature or technique is reliable.

5. Every notification issued under sub-section (4) shall be laid before each House of Parliament.

Section 4: Legal Recognition Of Electronic Records

Where any law provides that information or any other matter shall be in writing or in the typewritten or printed form, then, notwithstanding anything contained in such law, such requirement shall be deemed to have been satisfied if such information or matter is –

  • (a) rendered or made available in an electronic form; and
  • (b) accessible so as to be usable for a subsequent reference\

Section 5: Legal Recognition Of Electronic Signatures

Where any law provides that information or any other matter shall be authenticated by affixing the signature or any document shall be signed or bear the signature of any person, then, notwithstanding anything contained in such law, such requirement shall be deemed to have been satisfied, if such information or matter is authenticated by means of electronic signature affixed in such manner as may be prescribed by the Central Government.

ICAI IN ITS ANNOUNCEMENT ALSO MANDATES THE COMPLIANCE OF E-SIGN WITH THE INDIAN EVIDENCE ACT 1872, THE RELEVANT SECTIONS ARE REPRODUCED BELOW: 

Section 3: Interpretation – Clause

  1. All statements which the Court permits or requires to be made before it by witnesses, in relation to matters of fact under inquiry; such statements are called oral evidence;
  2. All documents including electronic records produced for the inspection of the Court; such documents are called documentary evidence.

Section 47A: Opinion As To Digital Signature Where Relevant

When the Court has to form an opinion as to the electronic signature of any person, the opinion of the Certifying Authority which has issued the electronic Signature Certificate is a relevant fact.

Section 67A: Proof As To Electronic Signature

Except in the case of a secure electronic signature, if the electronic signature of any subscriber is alleged to have been affixed to an electronic record the fact that such electronic signature is the electronic signature of the subscriber must be proved.

Both the above-mentioned legislation i.e. The IT Act and The Indian Evidence Act allows and use of Electronic Signature for Authentication of documents. In addition to this, with the recent ICAI announcement; all its members that practice as Chartered Accountants may use electronic signature for signing audit reports, all reports issued pursuant to any attestation engagement and certificates.

Documents that are to authenticated /sign by CAs:

  • Financial Audit Report
  • Net worth/ Turnover Certificates
  • Search Status Reports
  • Valuation Report
  • Tax Audit Report
  • GST Audit Report
  • Statutory Audit Report
  • Internal Audit Report
  • 15 CA, CB copies
  • Current Account Opening Introduction Form.
  • XBRL Reports
  • Projected Statements/Reports
  • Financial Statements Certification
  • Working Capital/Cash Flow Statements Certification.
  • Engagement/Retirement Forms.
  • Exam Forms/Membership Forms for ICAI.

In addition to above, a CA firm; just like any other entity will have to sign varied documents like Appointments letters/ Engagement Letters/ NDAs/ Service Agreements etc.

What is Cygnature?

Cygnature is an Electronic Signing tool based on one of the most secured platform of Blockchain. Cygnature allows users to sign documents using multiple types of signature, A user can choose types of signature that will based on the sensitivity of the document & level of authentication that is required from the signer. With Cygnature you get Blockchain security to the documents where all activities on a document are stored on block-chain in an encrypted format and all activities on the document are tracked and timestamped for secured Audit Trail. The purpose of blockchain data is to disable any kind of modification and secure the data as it was sent. The intricacies of this highly scalable and secure technology might be hard to grasp but the growing acceptance and its pervasiveness is not hidden by anyone.

Some of the vital Security feature includes but not limited to Two Factor authentication, Capture Geo Location, Capture browser and device details, Blockchain transaction audit trail, document and version history, certificate of completion etc.

Cygnature is one of very few E-sign provider in India that has a broader acceptability as it qualifies as Electronic Signature as per the IT Act as well as Qualified Electronic Signature [QES] which is a Government authorised form of E-sign in all of European Union as well as United Kingdom. Furthermore, Cygnature is legally valid in the USA, Canada, South Africa, UAE, Australia as well as other countries that follow.

Cygnature is wide based and can be used to sign/ authenticate documents including but not limited to Corporate functions such as Sales, Purchase, Legal, Human Resource, Operations and Finance. In addition to the statutory requirement of Electronic and Digital Signatures, Cygnature also provides bouquet of various forms of Digital authentication such as Face ID, Iris Scan, Fingerprints and also Live Signature lets you sign documents like signing person using a webcam, Microphone and Screen sharing.

HOW CYGNATURE IS RELEVANT TO THE CHARTERED ACCOUNTANT COMMUNITY?

In current scenario of Lockdown and restricted physical interaction, CA community is facing some very peculiar problems such as:

  • Physical Copy collection not possible in Lockdown.
  • Courier Services not available.
  • Loan disbursements & Foreign payments delayed as certificates not available.
  • Delay in appointment of Auditors by companies.

Our product Cygnature; in addition to providing the convenience of sitting at one place and managing all documentation/ certification; it also satisfies all the criteria as mandated by ICAI under the IT Act as well as the Indian Evidence Act. Though E-sign was legal and acceptable for signing Auditor Reports and Certificates, so far the usage of E-sign by Auditors for authenticating Auditor report and the certificates was a long shot as there was no specific mandate by the governing body of the members and the members for obvious reasons didn’t consider to operate in the Digital/Electronic Signature Area and continued with the traditional method of wet ink signing. Now with this announcement by the CAs’ apex body, the acceptability and the operational value of E-sign in the Auditor community shall increase manifold.

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