Tolerable misstatement is the amount of misstatement in an account balance that the auditor could tolerate and still not judge the underlying account balance to be materially misstated.

Question

Quizplus · Accepted Answer

Tolerable misstatement is a concept used in audit planning and materiality assessment, which refers to the maximum amount of error or misstatement that the auditor is willing to accept in a particular account balance without affecting their judgment on the overall fairness of the financial statements. Tolerable misstatement is usually set based on the auditor's professional judgment and takes into account factors such as materiality, inherent risk, control risk, and audit risk. By comparing the tolerable misstatement to the actual misstatement identified during the audit, the auditor can determine whether the account balance is materially misstated or not.

Tolerable Misstatement Is the Amount of Misstatement in an Account