Financial Statements are often not hundred percent due to error or fraud or management biases. If such statements are materially misstated, it may affect the economic decisions of the users of financial statement.

A tolerable error is the threshold amount by which a financial statement line item can differ from its true amount without impacting the fair presentation of the entire financial statement. 

Is the maximum error in the population that auditor is willing to accept and still conclude that the resist from the sample has achieved audit objective.

The lower the tolerable error, the larger would be the sample size.

Perceived  risk level is high, the tolerable error will be a similar percentage of the planning material/

The auditor considers the risk of material misstatement at two levels a. the financial statement level. b. The assertion level in relation to classes of transaction account balance and discolsures.


Better aware about the audit sampling 


n=( SD of Population*coeff. level* population size)/ accuracy 

Computing sampling interval adjustment 

= Adjusted tolerable error/ Reliability factor 


Size of sample/

Total population/ Sampling interval