Sec.  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
    Sec. 53.211  and  the analysis and evaluation of the audit as specified in
    Sec. 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]