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Some scholars have thought that Judith is a stylized account of real events and that this explains the supposed “historical inaccuracies” in the book–they are due to the form of stylization the author employs. You might compare the book of Judith to the book of Job, which Fundamentalists view as a stylized account of a real historical event. They believe the basic story in Job is real, since Job is mentioned elsewhere in the Bible (Ez 14:14, 20), but because chapter after chapter of the book is dialogue written in the form of Hebrew poetry, Fundamentalists concede it is a stylized account.
Other scholars have thought Judith is not a historical book but a “theological novel”–basically an extended parable–and that this could be recognized by any Jew reading the work. In this view, the fact that Nebuchadnezzar is declared to be the king of the Assyrians in the very first verse of the book is regarded as one of the cues that would tell the reader he is reading an allegory rather than history. Nebuchadnezzar was then the single most famous persecutor of the Jews, and every Jew knew he was king of the Babylonians.
Scholars who adopt this view point out that Judith’s name means “Lady Jew” and that she is placed against the two greatest enemies of the Hebrew people, Nebuchadnezzar, the king most famous for fighting them, and the Assyrians, the second most famous enemy of Israel. To give a modern equivalent of this, suppose you picked up a book that pitted Miss America against Adolf Hitler, king of the Russians. Would you identify the work as a piece of literal history or as an allegory intended to teach a point?
The idea that Scripture contains parables, allegories, and figurative language is something even Fundamentalists will admit. So long as the original audience recognized that what it was reading was a literary device, there could be no objection to including the work in Scripture–it would not have deceived the intended readers into thinking it was making factual claims when it was not. The parables of Jesus are a perfect example of this.
The status of the book of Judith is thus similar to that of the Song of Solomon. We are not sure whether this latter work is a stylized account of real events (was the wife of Solomon mentioned in the book a real person?) or whether it is a straight parable about ideal love. If the Song of Solomon can go into the Bible, so can Judith.