What has a druid seen? Depends on the druid, duh, yes, but this is an important question nowadays because the 5e druid can be any animals they’ve seen: or, more accurately, any beast, which has a technical meaning. The list of every beast can be had here https://donjon.bin.sh/5e/monsters/ (filter for beasts): wherefrom we derive the well-known principle that druids cannot be magical monsters but can be giant versions of normal animals. But actually this already itself starts to be confusing, viz., if a druid has seen a rat but not a giant rat, evidently a druid can’t become a giant rat: but does that really make sense? Isn’t it possible to just mentally envision ‘a rat but bigger’ as you prepare to transform? But then where is the upper limit of this power – it would allow you to transform into anything at any size (or the lower limit, even – there are all sorts of interesting espionage uses for inch-long apes, probably).
But it also seems silly to assume that a green young acolyte from the northern woods has seen giant scorpions. The 5e DMG has that useful list of monsters by environment: it might be sensible to assign one such list to a druid at creation the same way a ranger gets favoured terrain, and say that they can transform into anything from that subset (plus anything obviously universal like rats and mice).
But this may itself not be enough, depending on the background of the druid in question. My current campaign has a druid using the 5e pirate background – which, incidentally, there is no very good way to set up a sea druid at the moment, but that’s for another time – who, we may justifiably assume (especially since she’s an elf and thus probably been around for a while) has seen the world, as one does when at sea. So she has probably seen a range of animals, including some quite unusual ones. A camel? A peacock? An orang-utan? These have all arisen, but deciding whether or not a character has seen them encompasses many questions about trade and travel and diversity that I had not properly considered.
At first we managed this by having her take nature checks whenever she wanted to be something outlandish – but this is an unsatisfactory, slightly soulless method. Better is simply this, and this is what I counsel for your games, along with the favoured terrain style list – the druid has to explain, satisfactorily, where and when and in what context they have seen this animal. If the story is good enough and filled with juicy detail, and crucially if it’s new and not a re-run of a story previously used to justify another such transformation, then it passes. There are a handful of obvious answers – as the pet of some warlord dude I met as a kid who liked exotic pets is perennially useful – but after a couple of those your druid will have to start being creative. And it gives you the chance to have the warlord with the exotic pet show up and really alarm everybody.
So, for this reason (and also because whoa, druids are, like, pretty good, especially Circle of the Moon ones) I am strongly in favour of being quite strict in the ‘animals you have seen’ rule. I have also considered being even stricter and changing it to ‘animals you have touched’ (‘the Animorphs system’) but this might be a bit cruel, since there are many commonplace animals you can be assumed to have seen frequently without necessarily ever having touched them (especially true once the druid gets access to birds).
Most of all, though, this is the reason for being strict: it incentivizes the party to break into zoos, pet shops, private menageries and so forth. And this is something all games need.