The auditor needs to direct efforts of engagement team towards matters that in his professional judgment are significant. Preliminary identification…

The auditor needs to direct efforts of engagement team towards matters that in his professional judgment are significant. Preliminary identification of material classes of transactions, account balances and disclosures helps auditor in establishing overall audit strategy. More energies need to be devoted to significant matters to obtain desired outcomes. Few examples are listed as under: Volume of transactions which may determine whether it is more efficient for the auditor to rely on internal controlSignificant industry developments such as changes in industry regulations and new reporting requirements.Significant changes in the financial reporting framework, such as changes in accounting standards.Other significant relevant developments, such as changes in the legal environment affecting the entity.