What's the best way to handle whistleblower complaints?

The Sarbanes-Oxley Act breathed new life into whistleblower programs for public companies in the U.S. Not only did the Act hand audit committees the responsibility for setting up processes to deal with complaints related to financial reporting, it required them to guarantee confidentiality and anonymity to any employee who blew the whistle.

The only problem was, it didn't tell them how. As a result, audit committees still struggle with the best way to handle complaints once they are received.

The latest issue of Grant Thornton LLP's CorporateGovernor Series, "Hear that Whistle Blowing!" presents a step-by-step approach called the Model Accounting Complaint-Handling (MACH) Process for dealing with complaints received through a whistleblower hotline.

One of the biggest challenges is juggling the needs of the various stakeholders impacted by a complaint.

"Affording confidentiality to a whistleblower doesn't mean audit committees can ignore the information needs of other interested parties," notes Brad Preber, managing partner for Grant Thornton's Western Region Economic Advisory Practice and the lead author of the paper. "It's a delicate balance, and audit committees need to be aware of the ramifications."

The MACH Process also addresses the key issue of screening complaints. Many of these tend to involve workplace disputes and are often not relevant to financial reporting. Audit committees can usually delegate these to a human resources professional to handle. But not always.

"HR issues can sometimes be tremendously material to the financial statements," cautions Preber. "That's why a reliable screening process is critical."

The MACH Process uses a series of questions to determine different courses of action for the audit committee:

• Does the complaint have merit?
• Is it relevant to accounting, internal accounting controls or auditing matters?
• Is the issue sensitive - might it harm the organization?
• Is there a potential for material impact to the financial statements?

For a copy of "Hear that Whistle Blowing!" or past issues of the CorporateGovernor Series, go to http://www.grantthornton.com/cgwhitepapers.