Lotus Ltd., a rapidly growing manufacturing company, appointed Ridhi & Co., as statutory auditor. The engagement team of Ridhi & Co.…

Consider the factors that, in the auditor's professional judgment, are significant in directing the engagement team's efforts. 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 help auditor in establishing overall audit strategy. More attention need to be devoted to significant matters to obtain desired outcomes. Examples of the factors need to be considered by CA Ravi for establishing audit strategy are: Volume of transactions which may determine whether it is more efficient for the auditor to rely on internal control.Significant 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.