Code Auditor is primarily a tool that scans files in your directory, and is not a web crawler (like SSW Link Auditor).
So then how do we scan a URL if we are not crawling? When Code Auditor checks a folder, it also checks if that folder is a website directory, (and hence, whether output from a webserver should be checked instead). It takes all the files that need to be checked from the directory, append the URL directory as a prefix, and requests that page from the webserver.
For example, say: C:\Inetpub\wwwroot\Northwind is served as http://localhost/Northwind
When Code Auditor checks the: default.aspx page in C:\Inetpub\wwwroot\Northwind\default.aspx
.. it takes that file and appends the prefix of: http://localhost/
to form http://localhost/Northwind/default.aspx
and then checks the contents of that URL as served by a web server. Now you know the reason why Code Auditor requires both URL and folder path when scanning URLs.