PUBLIC NOTICE FEDERAL COMMUNICATIONS COMMISSION 1919 M STREET, N.W. WASHINGTON, D.C. 20554 DA 97-1494 News media information 202/418-0500 Fax-On-Demand 202/418-2830 Internet: http://www.fcc.gov ftp.fcc.gov Released: August 27, 1997 PROPOSED MODEL FOR PRELIMINARY BIENNIAL AUDIT REQUIREMENTS Under Section 272 of the Telecommunications Act of 1996, a Bell Operating Company ("BOC") may manufacture equipment, originate in-region, interLATA telecommunications services, and provide interLATA information services provided it conducts these operations through one or more separate affiliates and complies with certain other requirements. Section 272 also requires that the BOC obtain a joint Federal/State audit every two years conducted by an independent auditor to determine whether the company has complied with the requirements of Section 272 and any regulations promulgated under Section 272. To oversee the biennial audits required under Section 272, a Federal/State biennial oversight team was established pursuant to Section 53.209(d) of the FCC rules. The oversight team includes staff members from 40 state regulatory commissions and the FCC. Under Section 53.211 of the FCC Rules, the oversight team is required to review a BOC's preliminary audit requirements before the BOC engages an independent auditor to conduct the audit. To facilitate compliance with this requirement, a coalition of BOCs has submitted a model for the preliminary audit requirements to the oversight team for review. The oversight team has thoroughly reviewed the model and has made modifications to it. The full text of the model as modified by the oversight team is contained in Appendix A to this Public Notice. By this Public Notice, the oversight team is requesting comments on the proposed model. It specifically seeks suggestions on any additional procedures that should be included as part of the biennial audit engagement. Among other things, the preliminary audit requirements should set forth proposed agreed-upon-procedures to be performed by the independent auditor during the biennial audit as well as the proposed audit scope and the extent of compliance and substantive testing. The oversight team is required to review these preliminary audit requirements to determine whether they are adequate to meet the audit requirements prescribed in Section 53.209(b) of the FCC rules. The team may make modifications where necessary and incorporate the changes into the final audit requirements. Based on the final audit requirements, the BOC then must engage an independent auditor to conduct the biennial audit. The oversight team believes that a generic model such as the attached Appendix A will facilitate the initial steps in planning biennial audits by providing general guidance on what may be considered acceptable. The oversight team believes that such guidance will result in submissions of individual BOCs that are more complete, more consistent with the rules, and easier to review. When reviewing an individual BOC's submission, of course, the oversight team will consider the individual circumstances of each audit and, based on special circumstances, may require modifications of the BOC submission. Interested parties should file comments on the model for the preliminary biennial audit requirements by September 15, 1997, and reply comments by October 6, 1997. Two copies should be sent to Marvin E. Gentry, Common Carrier Bureau, FCC, Room 257, 2000 L Street, N.W., Washington, D.C. 20554, and one copy should be sent to the Commission's contractor for public service records duplication, International Transcription Service, Inc. (ITS), 1231 20th Street, N.W., Washington, D.C. 20036. Additionally, one copy should be sent to each state representative listed in Appendix B. Parties filing comments and reply comments in this non- docketed proceeding should reference their submissions using the assigned file number, AAD 97-83. The model is available for inspection and copying in the Common Carrier Bureau's Public Reference Room, Room 812, 2000 L Street, N.W., Washington, D.C. 20554. Copies can also be obtained from ITS by calling (202) 857-3800. For further information contact Marvin E. Gentry at (202) 418-0858. -FCC-