§  53.209   Biennial audit.

   (a) A Bell operating company required to operate a separate affiliate
   under section 272 of the Act shall obtain and pay for a Federal/State
   joint audit every two years conducted by an independent auditor to
   determine whether the Bell operating company has complied with the
   rules promulgated under section 272 and particularly the audit
   requirements listed in paragraph (b) of this section.

   (b) The independent audit shall determine:

   (1) Whether the separate affiliate required under section 272 of the
   Act has:

   (i) Operated independently of the Bell operating company;

   (ii) Maintained books, records, and accounts in the manner prescribed
   by the Commission that are separate from the books, records and
   accounts maintained by the Bell operating company;

   (iii) Officers, directors and employees that are separate from those of
   the Bell operating company;

   (iv) Not obtained credit under any arrangement that would permit a
   creditor, upon default, to have recourse to the assets of the Bell
   operating company; and

   (v) Conducted all transactions with the Bell operating company on an
   arm's length basis with the transactions reduced to writing and
   available for public inspection.

   (2) Whether or not the Bell operating company has:

   (i) Discriminated between the separate affiliate and any other entity
   in the provision or procurement of goods, services, facilities, and
   information, or the establishment of standards;

   (ii) Accounted for all transactions with the separate affiliate in
   accordance with the accounting principles and rules approved by the
   Commission.

   (3) Whether or not the Bell operating company and an affiliate subject
   to section 251(c) of the Act:

   (i) Have fulfilled requests from unaffiliated entities for telephone
   exchange service and exchange access within a period no longer than the
   period in which it provides such telephone exchange service and
   exchange access to itself or its affiliates;

   (ii) Have made available facilities, services, or information
   concerning its provision of exchange access to other providers of
   interLATA services on the same terms and conditions as it has to its
   affiliate required under section 272 that operates in the same market;

   (iii) Have charged its separate affiliate under section 272, or imputed
   to itself (if using the access for its provision of its own services),
   an amount for access to its telephone exchange service and exchange
   access that is no less than the amount charged to any unaffiliated
   interexchange carriers for such service; and

   (iv) Have provided any interLATA or intraLATA facilities or services to
   its interLATA affiliate and made available such services or facilities
   to all carriers at the same rates and on the same terms and conditions,
   and allocated the associated costs appropriately.

   (c) An independent audit shall be performed on the first full year of
   operations of the separate affiliate required under section 272 of the
   Act, and biennially thereafter.

   (d) The Chief, Enforcement Bureau, shall work with the regulatory
   agencies in the states having jurisdiction over the Bell operating
   company's local telephone services, to attempt to form a Federal/State
   joint audit team with the responsibility for overseeing the planning of
   the audit as specified in §  53.211 and the analysis and evaluation of
   the audit as specified in §  53.213. The Federal/State joint audit team
   may direct the independent auditor to take any actions necessary to
   ensure compliance with the audit requirements listed in paragraph (b)
   of this section. If the state regulatory agencies having jurisdiction
   choose not to participate in the Federal/State joint audit team, the
   Chief, Enforcement Bureau, shall establish an FCC audit team to oversee
   and direct the independent auditor to take any actions necessary to
   ensure compliance with the audit requirements in paragraph (b) of this
   section.

   [ 62 FR 2926 , Jan. 21, 1997, as amended at  67 FR 13226 , Mar. 21, 2002]

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