tolerable misstatement is maximum misstatement which is acceptable, even if this much misstatement exists in population auditor is going to say there are no material misstatements
it is dependent of materiality level
as we reduce it, that means materiality level is reduced, say from 10 lakhs to 4 lakhs
we have to increase checking to ensure that even small misstatements are not left out

comment back for further explanation and discussion if required