Summary from the AICPA:

Quote:

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The audit committee shall establish procedures for the "receipt, retention, and treatment of complaints" received by the issuer regarding accounting, internal controls, and auditing.

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Salespeople keep pitching an outsourced "hotline" that they try to convince me is required. Anybody else doing this?

My proposed solution was to include in the code of conduct (signed annually by all employees) a statement that any employee could contact the internal auditor confidentially, or anonymously by mail, or contact any audit committee member confidentially, or anonymously by mail, with any complaints.

Thoughts?

I am in agreement with you. Your solution is fine,it does not have to be outsourced.

One perceived advantage of outsourcing is the anonymity factor for those making the complaints - since they are calling a # or accessing a website outside of the company, they may feel more comfortable doing so. That being said, my company is not currently outsourcing, though we're thinking about it. Some service providers made their services fairly inexpensive.

J'man:
Your procedure is fine, we have it in our code of conduct as well. The employee communications can be addressed to the secretary for our audit and compliance committee of the board. They will be transmitted unopened to the chairman of the committee. I am anticipating getting as many of these types of communications as we get requests for the Public File and annual HMDA files.

You may want to consider having a redundant system. Recently there was a need to use the internal reporting line to report suspicious activity by an employee. Well, the inside line was to the Legal department and the concern was with the chief counsel. A second line was to write to the audit committee c/o Legal. An outside line would address this problem with reporting to the fox about the fox's activities. Or, a second direct line of communication directly to the audit committee.

The important part is that there needs to be two channels if issues will be communicated only internally.

(Posted anonymously for obvious reasons)