Expected error rate and Tolerable error rate

Hi Experts

Good evening

Could some one please explain expected Error rate and tolerable error rate in IT Audit or in Financial Audit with a practical example

Thanks in Advance
Replies (1)

In IT Audit or Financial Audit, error rates are commonly used as a metric to evaluate the accuracy of financial or operational data. The expected error rate is the percentage of errors that are expected to occur in a particular sample, while the tolerable error rate is the maximum allowable error rate for that sample.

For example, let's say a company is conducting an audit of its accounts payable process. The auditor takes a sample of 100 invoices and performs a review of the invoice data to determine if there are any errors.

The expected error rate might be 5%, meaning the auditor expects that 5 of the 100 invoices will have errors. The tolerable error rate might be set at 3%, meaning that no more than 3 of the 100 invoices can have errors without triggering further investigation or remediation.

If the auditor finds that only 2 of the 100 invoices have errors, then the audit would be considered a success and the company would be satisfied that its accounts payable process is operating effectively. However, if the auditor finds that 4 or more of the 100 invoices have errors, then additional investigation or remediation may be required to address the issues.

Leave a Reply

Your are not logged in . Please login to post replies

Click here to Login / Register  

Company
14 October 2026
Asst. Manager/Dy Manager (Costing)

manufacturing

Pune

CMA

View Details
Company
12 October 2026
Chartered Accountant - Internal Audit

HKC | Chartered Accountants & Business Advisors

Ludhiana

CA

View Details
Company
19 September 2026
Finance Manager

Mugdha Art Studio

Hyderabad

CA

View Details
Company
ARTICLESHIP 01 October 2026
Articled Assistant

KPSN & Associates LLP

Chennai

CA Inter

View Details
Company
ARTICLESHIP 08 October 2026
ARTICLE TRAINEE

S.B.G. & CO. CHARTERED ACCOUNTANTS

New Delhi

CA Inter

View Details
Company
ARTICLESHIP 17 October 2026
Articled Assistant

RRPM & Associates LLP

Chennai

CA Inter

View Details
Company
Featured 21 September 2026
Consultant - Reporting

Finrep Advisors LLP

Mumbai

CA

View Details
Company
07 October 2026
Senior Account Manager

Amplio Invest

Mumbai

M.Com

View Details