Mounting public concern over the quality of the environment and stricter environmental legislation have led to a demand for reliable environmental information on industries and other types of enterprises. In recent years, environmental auditing has come to be seen as a tool for generating such information and for assessing enterprises for the potential environmental risks they may cause, their environmental liabilities, and their degree of compliance with environmental standards and legislation. Users of such information are the companies themselves, customers, commercial banks, other lending institutions, local and national governments, and the general public. Environmental audits help reduce environmental and public health risks, and assist in improving environmental management at the company level. The World Bank increasingly requests that environmental audits be done for certain types of projects. The audits are part of the overall environmental assessment (EA) process and may complement or substitute for normal EA studies, depending on the type of project. This Update discusses the principles of environmental auditing, different types of audits, and how they can be used in the context of Bank projects.