As the voice urging for more environmentally sound practices in industries are being heard louder, environmental auditing has been advocated as the proactive management tool to perform the task. Corporations in Japan as well as other countries are now working to form and implement environmental management and auditing systems accordingly. A questionnaire survey was conducted to find out the scope and extent of environmental auditing practice in Japan and it is shown that most Japanese companies have resources allocated for the practice but they do not have sufficient understanding concerning the formal (formally documented) objectives and policy of environmental auditing. It is found that big companies with their annual production more than ¥200 billion and other companies with less are different in terms of monetary and human resources allocation, motives of practice and the level of comparison of environmental policy with other companies. The practice of environmental auditing in Japan is greatly influenced by both the external (outside company) and internal (inside company) factors for decision-making which are inter-related.