Final answer:
The planned precision in attribute sampling is the difference between the expected error rate and the maximum tolerable error rate. It acts as a buffer for sampling risk and greatly influences audit sample sizes and procedures.
Step-by-step explanation:
When planning an attribute sampling application, the difference between the expected error rate and the maximum tolerable error rate is referred to as the planned precision. Precision in this context is the allowance for sampling risk, representing the amount by which the actual results derived from the sample can differ from what the true population results could be and still be considered acceptable.
In practical terms, if an auditor expects a certain error rate based on experience or previous audits (expected error rate), but the client or regulatory standards dictate that the error rate must not exceed a higher threshold (maximum tolerable error rate), the difference between these two rates is the leeway or precision the auditor has to work with when determining the sample size and when evaluating the results of the sample. It is a critical component of audit planning as it affects both the scope of the audit procedures and the confidence in the conclusions drawn.