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Toleratable misstatement

Auditing

Can someone explain me how Tolerable mistatement is linked with performance materiality?

Satha Sivam

CA Inter

★ 6K+

24-Feb-24 11:36

Answers (2)

Every financial statement has misstatement and sometimes it's material. Tolerable misstatement is the amount till which we can accept misstatement. In performance materiality the auditor will set the limit for tolerable misstatement at less than the acceptable level of material misstatement. It set that way so that the aggregate of uncorrected and undetected material misstatement does not exceed the materiality for the financial statement as a whole

AK SPEC VIDS

CA Inter

★ 3K+

24-Feb-24 12:14

Material misstatement is there but it is tolerable i.e Acceptable. Tolerable misstatement always below the performance materiality. Suppose Auditor set performance materiality bench mark as 500 Lakh. Let say 450 Lakh is tolerable.