Tolerable Misstatement

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Accounting glossary · Understand, connect, apply

Tolerable misstatement is an amount set for an audit sampling application to help evaluate the possibility that the population is materially misstated.

Example

An auditor tests inventory pricing using a tolerable misstatement set for that population and assesses the projected error together with sampling risk.

Remember the difference

The amount guides the sampling evaluation. It does not turn identified errors into acceptable accounting or replace financial statement materiality.

Browse the accounting glossary · PCAOB reference: AS 2315

Prepared with AI assistance. Examples are fictional and simplified for learning.

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Examples are simplified for learning. Where a term depends on US law, IFRS, US GAAP or a historical rule, check the context explained above and the requirements relevant to your course.

Study references: OpenStax financial accounting and managerial accounting. For reporting requirements, consult the applicable IFRS Standards or FASB guidance. US tax terms should be checked against the relevant tax-year IRS instructions.

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