AVERAGE COST METHOD Definition

AVERAGE COST METHOD is using a weighted average cost for items in inventory rather than actual cost for each specific item.

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PREMISE OF VALUE is an assumption regarding the most likely set of transactional circumstances that may be applicable to the subject valuation; e.g. going concern, liquidation.

EXPECTATION GAP, in accounting, is the gap between an auditors actual standard of performance and the more rigorous public expectation of what an auditors performance should be. The users of financial statements should be allowed to expect that the auditors materiality levels correspond with their own. If this is not the case an expectation gap will arise. Especially if the financial statements contain non-corrected known errors or omissions classified as immaterial by the auditor, but classified as material by the users. The unknown material errors and omissions are still a part of the audit risk.

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