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Governance, Risk, Audit & Privacy · Advanced

Tolerable Error Rate

Maximum error rate an auditor will accept while still concluding a control or balance is acceptable.

Definition

Tolerable error (or tolerable deviation rate) sets the threshold for acceptable exceptions in sampling. Lower tolerable error requires a larger sample size. If the projected error exceeds it, the auditor concludes the control is ineffective.

Example

With a 5 percent tolerable rate, 4 exceptions in 40 samples (10 percent) indicates the control failed.

Exam tip

Expected error rate up, sample size up; tolerable error down, sample size up.

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