Ananda (2004) argues that, environmental auditing involves assessing whether the company is functioning in accordance with the requirements of environmental legislation. In addition, the audit intends to attain an independent external appraisal whether the management has formed proficient environmental policy and offered for satisfactory environmental approach. Environmental audits results to recommendations on how companies should reduce detrimental impacts to the environment in a cost-benefit and efficient approach, and how in the long term the company can save finances by via environmental friendly technology (Ananda 2004).
According to Ananda (2004), social audit is the process of evaluating a company’s code of conduct, operating procedures and other factors to determine its effects on the society. Social audit is a formal assessment of a companys activities in social responsibility. It evaluates factors such as an organizations record of charitable giving, energy use, volunteer activity and work environment-transparency (Ananda 2004). Additionally, it assesses, worker pay and benefits to appraise what kind of environmental and social impact a company is having in its locations of operation. Social audits are not obligatory since companies can prefer whether to execute them and whether to make public the results or only use them internally only (Donald 2004).
According to Anthony & Michael (2003), historically, public, corporate documentation of financial statements goes back to the 1850s. At that period, reporting on environmental and social matters was not so included in the corporate financial reports. The management included only financial accounting on their presentations on the financial statement information. The corporate entities focused on their economic activities only in their approaches to accounting.