Which statement best describes an external audit vs internal audit?

• A. External audits are performed by outside entities.
• B. External is performed by outside entities; internal is performed within the organization to ensure accuracy and compliance.
• C. External audits happen quarterly; internal audits happen yearly.
• D. External audits are only for finances; internal audits for coding.

Answer: (B)

The main idea here is who does the review and why. External audits are performed by independent outside entities—such as payers, regulators, or third-party firms—to provide objective assurance about financial statements, coding accuracy, and compliance to external stakeholders. Internal audits are conducted by the organization’s own staff to evaluate and strengthen internal controls, risk management, and ongoing compliance, including reviewing coding practices and revenue integrity. This combination—the outsiders handling the external audit and internal staff handling the internal audit to ensure accuracy and compliance—best describes how these two types differ, which is why it’s the strongest choice. In real-world healthcare settings, external audits can involve payer reviews or regulatory inspections, while internal audits aim to continuously improve processes and catch issues like coding errors before they become problems. The other statements are less accurate because audit frequency varies, external reviews aren’t limited to finances, and internal audits cover more than coding alone, encompassing broader controls and compliance.