For hospitals, there are several critical steps involved in responding to an external audit. First, it is necessary to make contact with the auditors and gain a clear understanding of the scope of the inquiry. Then, it is essential to conduct an internal audit in order to assess any potential risk. Once an internal audit has been performed, then the focus can shift to using the data obtained to respond strategically to the external audit and mitigate any potential liability for recoupments or other penalties to the fullest extent possible.