The handling of allegations of bullying and blackmail by a senior Conservative aide must be the subject of a fully-independent inquiry, the former head of the party's voluntary wing said.
Baroness Emma Pidding - who denies any wrongdoing during her tenure as chair of the National Conservative Convention - warned any internal investigation into Mark Clarke, who denies the claims, "will lack credibility".
The prominent activist - awarded a peerage this year by David Cameron - backed a call by the parents of activist Elliot Johnson who killed himself, leaving a note accusing Mr Clarke of bullying, for an independent probe.
But George Osborne defended the process and insisted the party was "absolutely determined to make sure we find out what went wrong".
The Chancellor said party chairman Lord Feldman, who is under pressure to follow Grant Shapps in quitting over the affair, was an "outstanding" figure and "a person of real integrity".
Lord Feldman, a close friend and ally of Prime Minister David Cameron, chairs the Conservative Party board which is meeting today to discuss the issue.
Mr Shapps, who was co-chairman with Lord Feldman until the general election, resigned as International Development Minister at the weekend, telling Mr Cameron the buck stopped with him.
But the father of Mr Johnson has called for both to fall on their swords.
The party had previously insisted that no complaints against Mr Clarke, who ran its RoadTrip canvassing drive in the run-up to the election, were received before August. He has since been expelled from the party.
Law firm Clifford Chance LLP has been instructed to prepare a report on the issues raised, with a remit to assess whether complaints were handled properly and "identify any individuals who were at fault".
The firm's lawyers will also consider the integrity of the evidence-collecting process and whether the right people have been interviewed.
The collection of evidence is not expected to be completed until the end of the year and Clifford Chance will produce the report "as soon as possible after that".
Downing Street insisted at the weekend that Mr Cameron retained full confidence in Lord Feldman.
Mr Osborne told LBC radio: "Andrew Feldman is a outstanding chairman of the Conservative Party. He is also a person of real integrity.
"We owe it to the family of Elliot Johnson, the poor boy who took his life, to make sure we get to the bottom of what happened.
"There is an inquiry under way. It will report to our party board and the party board is full of some very strong, independent-minded people.
"We have some of the top lawyers in the country acting as proper independent oversight of this process.
"So, the Conservative Party is absolutely determined to make sure we find out what went wrong in the past and make sure it's not repeated in the future."
In a statement published by the ConservativeHome website, Baroness Pidding said: "Events over the past 48 hours have made it clear any investigation organised by the Conservative Party into its own handling of this sorry affair will lack credibility.
"At the heart of this, we are talking about the tragic and needless death of a young man who lived for our party. I have come to the conclusion his parents are right in saying any inquiry must be entirely independent of that party.
"Otherwise, I do not believe the public at large will trust the outcome."
Baroness Pidding dismissed reports she may have released details of complaints made against him to Mr Clarke.
"I have already made it clear that allegations made against me are false. I am hiding nothing and I am quite happy to answer any questions an independent inquiry may put to me," she said.
"I believe it is time for the Conservative Party to be put up to the same level of scrutiny."