To complete Audrey's work using compensation to solve the subtraction problem 5.35 - 0.07, she began by simplifying the problem to 5.35 - 0.10 = 5.25. Since she subtracted too much (0.10 instead of 0.07), the final step is to add back the difference between 0.10 and 0.07, which is 0.03.
So the final step needed is: Add 0.03.