How accurate does a torque wrench have to be?

your method for checking the torque wrench is an acceptable home-way to measure precision.
You may want to repeat the test 3 to 5 times and get an average error and an estimation of the accuracy.

Most click wrenches are more precise and accurate towards the middle of the tools capacity and less precise and accurate towards the ends.

So vary the weight and check at the low - center - and high end, plot the average error and you will see how linear the tool is.

5% would be well within acceptable tolerances for normal engine assembly.
If you find the tool consistantly reads for example 4 lbs light, you could boost the target by 4 lb..

Click torque wrenches are handy and are an absolute must when your working in a position where you can't see the scale.. When working in environments where the scale is easily visable,,like building an engine on a bench,, for criticals like head-main-rod bolts,,I assemble with a click torque wrench and go back and verify with a beam style torque wrench. The beam wrench is accurate and precise to the resolution on the scale unless the pointer or tool is damaged.