CPT 2010, in the green text under Musculoskeletal System Excision of subcutaneous soft-tissue tumors , it states "extensive undermining or other techniques to close a defect created by skin excision may require a complex repair which should be reported separately." (CPT Professional Edition, AMA, p.86). Code 12032 is an intermediate repair, not a complex repair. In this guidance, CPT is referring to adjacent tissue transfers such as Z-plasty, or complicated closures in the 131XX range. The excision codes in the integumentary system allow for additional code reporting for the intermediate closure, but you coded from the Musculoskeletal system, so that would not apply. I think your auditor may be incorrect, but it depends on what was truly documented.
Any time we bring in an external auditor, we contract for the opportunity for our coders to participate in a 'rebuttal' session, to address coding recommendations made by the auditor that we deem incorrect. We also ask for regulatory guidance on any coding recommendation where the auditor suggests we made a coding error.
Let us know how this turns out.