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PROFESSIONAL LIABILITY SPOTLIGHT

Use of e-signatures for

engagement documentation

By Steven M. Platau, CPA, J.D., and Deborah K. Rood, CPA

s a client’s electronic signature on engagement the beneficiary of a life insurance policy using an
Signing on Iletters, management representation letters, and e-signature. Subsequent to the insured’s death,
the digital other documents acceptable? This is a question both the new beneficiary and the prior beneficiary
line many practitioners pose to the AICPA Professional questioned the validity of the e-signature. The court
Liability Insurance Program. Generally speaking, held that, absent some proof to the contrary, the
754 e-signatures are binding and thus comparable to individual who changed the beneficiary had the
a “wet” signature on a hard copy document for
correct login information to create the change. As a
million purposes of proving their validity, enforceability, and result, the court upheld the record change made via
the e-signature.
admissibility in the event of litigation. However,
The number of there are caveats that need to be considered and Takeaway: The greater the amount of per-
global e-signature understood. This column explores those consider- sonal information required to create and use an
transactions in ations in order to help refute an assertion that an e-signature, the more likely that the signature’s
2017, an increase e-signature is not authentic. validity will be upheld. According to the Zulkiewski
from 89 million court, some of this information may include, but is
in 2012. THE LAW not limited to:
On June 30, 2000, the Electronic Signatures in ■ Account numbers;
Source: Statistica.com.
Global and National Commerce Act (E-Sign Act), ■ Tax identification numbers; and
P.L. 106-229, was signed into law, providing a ■ Mother’s maiden name.
general rule for the validity of electronic records and
signatures pertaining to transactions in or affecting Will multiple documents with a single e-signature
interstate or foreign commerce. For a signature to be be upheld?
valid under the E-Sign Act, information relating to a The cases: In Mitchell, et al. v. Craftworks
transaction affecting interstate or foreign commerce Restaurants & Breweries, Inc., No. 18-879 (RC)
must be provided or made available to the consumer (D.D.C. 2018), a restaurant worker claimed not
in writing. The use of an electronic record to provide to have e-signed an employment agreement. In its
or make available such information is satisfied if it opinion, the court reasoned that because docu-
meets several basic requirements related to consent, ments were signed individually by the employee,
withdrawal, and notification. there was little chance of confusion about what was
The E-Sign Act is mirrored, in some form of being signed.
legislation, by all states and permits most documents Similarly, but with a different decision, in
to be signed electronically. However, enforcement of Ruiz v. Moss Bros. Auto Group, Inc., 232 Cal. App.
e-signed documents can be more involved. Appli- 4th 836, 181 Cal. Rptr. 3d 781 (4th Dist. 2014),
cable case law challenging e-signatures demonstrates the alleged e-signature of an employee on an
that they are most likely to be upheld, which has employment agreement was not upheld. The court
precedential value with respect to the successful use sided with the employee who did not specifically re-
of e-signatures. Below we outline several common member signing employment documents. There was
questions regarding the validity of e-signatures, sum- no detailed record of when or how the documents
marize cases that help address these questions, and had been signed. Therefore, the court concluded
provide takeaways for CPA firms to consider. that the employer lacked a security procedure to
support its assertion that the employee had signed
Did the e-signature actually come from the the documents.
individual whose signature is affixed? Takeaway: If multiple documents require a
The case: In Julie Ann Zulkiewski v. American signature, ensure that an e-signature is affixed to
General Life Insurance Co., No. 299025 2012 WL each document to help reduce confusion regarding
2126068 (Mich. Ct. App. 2012), someone changed which documents were signed.

4 | Journal of Accountancy January 2022