(1) Local government entity audits conducted under the provisions of Title 2, chapter 7, part 5, MCA, must be conducted by an independent auditor as defined by 2-7-501 , MCA. For purposes of this requirement, an "independent auditor" is:

(a) a federal, state, or local government auditor who meets the standards specified in Government Auditing Standards as established by the Comptroller General of the United States; or

(b) a licensed accountant who meets the standards specified in Government Auditing Standards as established by the Comptroller General of the United States (see ARM 2.4.411).

(2) In order to conduct audits of local government entities, an independent auditor must be on the roster of independent auditors authorized to conduct such audits that is maintained by the department.

(3) In order to be placed on the roster, independent auditors must complete an application form prescribed by the department and meet the criteria set out in this rule.

(4) Independent auditors with separate offices registered as required by 37-50-335 , MCA, must submit separate application forms for each office that is to be placed on the roster.

(5) To be eligible for inclusion on the roster, an independent auditor must:

(a) if an individual, hold a current Montana certificate as a certified public accountant and hold a current annual permit to engage in the practice of public accounting under 37-50-314 , MCA, or hold a current license as a licensed public accountant, have been licensed on or before December 31, 1970, and hold a current annual permit to engage in the practice of public accounting under 37-50-314 , MCA;

(b) have each office established or maintained in this state for the practice of public accounting by:

(i) a certified public accountant or a partnership or corporation of certified public accountants registered annually as provided under 37-50-335 , MCA; or

(ii) a licensed public accountant or a partnership or corporation of licensed public accountants registered annually as provided under 37-50-335 , MCA, and have been registered on or before December 31, 1970;

(c) meet the continuing education requirements specified in Government Auditing Standards, as established by the Comptroller General of the United States;

(d) have an external quality control review at least once every three years that meets the requirements specified in Government Auditing Standards, as established by the Comptroller General of the United States, and receive an unqualified review report from the reviewing firm, team, or association;

(e) not have been restricted in the conduct of governmental auditing by the Montana Board of Public Accountants;

(f) not have been debarred, suspended, proposed for debarment, declared ineligible, or otherwise excluded from performing audits by any state or federal department or agency;

(g) not have been deemed ineligible to conduct local government entity audits by the department because:

(i) of failure to conduct local government entity audits under contract with the department during the previous two years in accordance with the audit standards described in ARM 2.4.405;

(ii) of failure during the previous two years to adhere to the terms and conditions of an audit contract with the department; or

(iii) the independent auditor is more than 90 days delinquent in filing an audit report required under an existing contract with the department and has not obtained the department's written consent to an extension of the contracted filing date.

(6) An independent auditor may be removed by the department from the roster of independent auditors authorized to conduct audits of local government entities for failure to continue to meet the eligibility requirements specified above.

(7) If an independent auditor is removed by the department from the roster as provided in (6), the independent auditor must complete the application form prescribed by the department, meet the eligibility requirements set out in (5), and pay the fee specified in (10) in order to again be placed on the roster.

(8) To remain on the roster, an independent auditor must complete and submit to the department on or before June 30 of each year a renewal form prescribed by the department on which the independent auditor certifies that the individual, partnership, or corporation continues to meet the eligibility requirements specified above.

(9) To ensure that each independent auditor meets the eligibility requirements specified above, the department may, at any other time during the year, require the independent auditor to submit to the department evidence that the independent auditor meets the above eligibility requirements, including, but not limited to, documentation of required continuing professional education and the required external quality control review.

(10) At the time of original application to the department for placement on the roster, and at the time the annual renewal form is submitted to the department, each independent auditor, including each office, shall pay to the department a fee of $100.

(11) If an independent auditor is removed from the roster, or if an independent auditor does not properly renew for continuance on the roster, any and all contracts for local government entity audits entered into under the provisions of 2-7-506 , MCA, to which the independent auditor is a party are terminated, and the department will notify the local government entities of the termination. If an independent auditor is removed from the roster, the department will not refund any portion of the fee paid to the department by that independent auditor for placement on the roster.

(12) Upon notification of the termination of a contract for a local government entity audit, the local government entity must select another independent auditor from the department's roster of independent auditors authorized to conduct local government audits and present a signed contract to the department for approval within 90 days of notification of the termination.

(13) Upon termination of a contract for a local government entity audit, if the local government entity fails to present a signed contract to the department for approval with the 90-day period in (12), the department will designate an independent auditor to perform the audit as provided by 2-7-506 , MCA.