Below is the outline of  this teaching, from Grudem's of his work on  systematic theology, given at Scottsdale Bible Church  in Scottsdale, AZ. At the end of the outline is a link to the mp3 audio files (3 parts) of Grudem's teaching. Important reading and listening.

What kind of authority does the church have?

How should church discipline function?

Definition: The power of the church is its God-given authority to carry on spiritual warfare, proclaim the gospel, andexercise church discipline.

A. Spiritual Warfare. 2 Cor. 10:3-4; Eph 6:10-18

1. The church's weapons: prayer, worship, Scripture, faith, righteous and holy lives, authority over demonic forces

2. Breaks through sin and hardened opposition, awakens faith in believers (Acts 12:1-7; 20-24; Acts 13:8- 11;16:16-18)

3. Positive power: Acts 16:14; 1 Pet 1:23

4. Can this be used in the church (2 Cor. 13:2-4, 2 Cor. 13:10, Acts 5:1-11, Acts 13:8-11)

5. Does the church today have the same power in spiritual warfare?

Some say No:

a. There is a distinction between the Apostles and early Christians.

b. Paul does not specifically instruct leaders at Corinth, nor even Timothy and Titus, to exercise

Some say Yes:

a. Paul instructed the Corinthian church to exercise church discipline (1 Cor. 5:1-4)

b. Eph 6:10-18 and 2 Cor. 10:3-4 seem applicable to Christians in general Modern examples?

B. The Keys of the Kingdom.Matt. 16:15-19

1. Elsewhere in NT: a key always implies authority to open a door and give entrance to a place or realm:Luke 11:52, Rev. 1:18

2. Conclusion: The "keys of the kingdom" represents at least the authority to preach the gospel of Christ, and thus, to open the door of the kingdom of heaven and allow people to enter

3. But there is probably more involved here:

(a) "Keys" suggests more than one door - some authority within the kingdom is also suggested

(b) "Binding" and "loosing" parallels Matthew 18:17-18, where "binding" and "loosing" means to place under /release from church discipline

4. The term "whatever" (not "whoever") is neuter in Greek: Perhaps this indicates that Jesus is not speaking ofpersons, but more generally of situations and relationships that come up within the church (including persons andrelationships)

5. The Greek periphrastic future perfect tense (an action that would be completed before some future point) allows this kind of translation: "Whatever you shall bind on earth shall have been bound in heaven, and whatever you shall loose on earth shall have been loosed in heaven."

6. Legitimate church discipline involves the awesome certainty that corresponding heavenly discipline has alreadybegun.

7. Church discipline is not unlimited. It is effective only against sin, as defined by God. Ultimate authority to forgive sinbelongs only to God (Isa. 43:25, Mark 2:7, Rom. 2:15-16, 1 John 1:9)

8.  Submit to church discipline - do not try to run from it!

C. The Power of the Church and the Power of the State. Should the church use physical force to advance the kingdom?

1. God gives the state the right to bear the sword (Rom. 13:1-7).

2. Jesus refused to use physical force to compel people to follow him or believe in him: (Matt. 22:21, Luke 9:54-55, John 18:36; 2 Cor. 10:4 )

3. Genuine faith in Christ cannot be forced. Therefore: Therefore the church should not use the power of government ("the power of the sword") to compel people to become Christians, or to support the church.(This took a long time for the church to realize.) Implication: No civil governments should enforce laws requiring or prohibiting kinds of church doctrine, or abridging the people's freedom to worship as they choose.-- or using tax dollars to support any one church. However, this does not prohibit Christians from attempting to bring positive moral influence on government(this should be done!)

D. Church discipline

1. The purposes of church discipline

a. Restoration and reconciliation of the believer who is going astray:Similar to a wise parent disciplining his or her child: Prov 13.24; Heb 12:6 Such restoration should be done with genuine love: Gal. 6:1; James 5:20 Even "excommunication" should be done with the hope of eventual repentance:1 Tim. 1:20; 1 Thess. 5:12; 2 Tim. 4:2; Titus 1:3; James 5:19-20

b. To keep the sin from spreading to othersHeb. 12:15; 1 Cor. 5:2, 6-7; 1 Tim. 5:20

c. To protect the purity of the church & honor of Christ:Rom. 2:24; 1 Cor. 5:1-2; 2 Pet. 3:14; Rev. 2:20;If a church does not exercise discipline, often the Lord Jesus will do it himself: 1 Cor. 11:29; Rev. 2:5, 15

2. For what sins should church discipline be exercised?

a. In cases where a personal sin against another person cannot be resolved privately:Matt. 18:15-17: "If your brother sins against you, go and tell him his fault, between you and him alone. If he listens to you, you have gained your brother.16 But if he does not listen, take one or two others along with you, that every charge may be established by the evidence of two or three witnesses.17 If he refuses to listen to them, tell it to the church. And if he refuses to listen even to the church, let himbe to you as a Gentile and a tax collector."

b. But there are many other different kinds examples from the NT:

Rom 16:17, Titus 3:10: Divisiveness

1 Cor. 5:1: Incest

2  Thess. 3:6-10: Laziness and refusing to work

2 Thess. 3:14-16: Disobeying what Paul writes

1 Tim. 1:20: Blasphemy 2 John 10-11: Teaching heretical doctrine

Principle: All these sins that were subject to church discipline in the NT were publicly known, outwardly  evident sins. Many sins continued over a period of time. In such cases, reproach was being brought on thechurch, Christ was being dishonored, and others would be encouraged to follow wrongful patterns.

3. How should church discipline be carried out?

a. Knowledge of the sin should be kept to the smallest group possible for proper resolution (Matt. 18:15-17)[however, some sins are already publicly known, and should be dealt with publicly]

b. Disciplinary measures should increase in strength until there is a solution: See Matt. 18:15-17 above [elders would ordinarily be involved before going to the church]

Jesus' presence is behind the decisions made by the church: Matt. 18:19-20; 1 Cor 5:4Some verses speak of avoiding fellowship with a person claiming to be a Christian but engaging in publicly known, serious sin. This is to prevent the church from giving the impression of approving of the disobedience: 1 Cor. 5:11; 2 Thess. 3:6, 14-15; 2 John 10-11

c. Discipline of church leaders: a special situation:1 Tim. 5:19-21: Do not admit a charge against an elder except on the evidence of two or three witnesses. 20As for those who persist in sin, rebuke them in the presence of all, so that the rest may stand in fear. 21 In the presence of God and of Christ Jesus and of the elect angels I charge you to keep these rules withoutprejudging, doing nothing from partiality.

d. Other aspects of church discipline:

(1) As soon as genuine repentance has occurred, the person should be quickly be brought back to fellowship of the church: 2 Cor. 2:7-8; Gal. 6:1; Matt. 18:21-22, 35

(2) But it is unwise to set any timetable in advance for church discipline to be finished - different situations will be different in how they work out.

(3) And granting forgiveness is different from restoring trust.Trust is built only slowly over time, and can be shattered quickly and take a long time to rebuild.

Part 1:

http://scottsdalebible.com/assets/audio/christian-essentials/20080907WGrudem.mp3

Part 2

http://scottsdalebible.com/assets/audio/christian-essentials/20080921WGrudem.mp3

Part 3

http://scottsdalebible.com/assets/audio/christian-essentials/20080928WGrudem.mp3