Tolerable misstatement is always less than or equal to performance materiality.

Question

Quizplus · Accepted Answer

Tolerable misstatement is the maximum amount of misstatement that can exist in a financial statement without materially affecting the decisions of the users. Performance materiality is usually set at a lower level than the overall materiality, and it is often used as a benchmark for assessing the materiality of individual misstatements. Therefore, the tolerable misstatement is always less than or equal to the performance materiality.

Tolerable Misstatement Is Always Less Than or Equal to Performance