A tolerable misstatement is Financial statement items may differ by amounts from their true amounts without affecting the fair presentation of the entire financial statement. Auditors use this concept when designing audit procedures to examine clients’ financial statements.

Is Tolerable Misstatement the same as Performance Materiality?

In other words, tolerable misstatement is an example of the performance importance that auditors apply when selecting and evaluating sampling results. …in this case, the tolerable false positive is The importance of always being lower than or equal to actual performance The number of accounts or balances.

What is another name for tolerable misstatement?

AU-C Section 320 has changed the terms previously used (such as program materiality and tolerable misstatement) to materiality and performance importance, respectively. The importance of performance applied to sampled applications is now referred to as Tolerable Misstatement.

What is a Tolerable Error in Auditing?

Tolerable errors are The maximum error the auditor is willing to make in the population. Accept and still conclude that audit objectives have been achieved• Tolerable error is considered at the planning stage, and for substantive procedures, in relation to the auditor’s judgment of materiality.

What is the tolerable error in sampling?

The Tolerable Error Rate (TER) is Maximum acceptable error rate for sample results. TER = EPER + sampling risk tolerance (error or precision).

Example: Performance Materiality or Tolerable Misstatement | CPA Exam

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