This paper proposes an approach of determining the pitch, the roll and the azimuth with three mutually orthogonal accelerometers and magnetometers. The configuration of the system and the calculation of the attitude were firstly described. In order to compensate for the effects of perturbing magnetic fields associated with magnetized sections of the drill collar, a correction method of determining the azimuth which relies on the knowledge of local geomagnetic field was described in great detail. Furthermore, the correction process and simulation were presented. Results from simulation show that the correction method can determine an absolute azimuth by means of using a measuring instrument disposed in a relatively short non-magnetic drill collar, so it minimizes the length of non-magnetic drill collar and saves drilling costs greatly.