Final answer:
An auditor analyzes inventory turnover rates to assess the valuation and allocation of inventory on the balance sheet. The correct option is D.
Step-by-step explanation:
An auditor would likely analyze inventory turnover rates to obtain evidence concerning management's balance assertions about valuation and allocation. Inventory turnover is a measure of how quickly a company sells its inventory within a given period. By examining these rates, auditors can determine if the inventory valuation on the balance sheet is reasonable and if there is proper allocation of costs. For example, high inventory turnover may indicate efficient sales and inventory management, whereas low turnover might suggest overstocking or obsolescence, potentially signaling issues with inventory valuation.
The assertion of existence relates to whether inventory items are actually present, which is typically verified through physical counts rather than turnover analysis. Rights and obligations refer to whether the entity has legal title to the inventory, which also is not directly related to turnover rates. Completeness pertains to whether all inventory that should be recorded is recorded, which, while possibly indicated by turnover rates, is not the primary focus of this metric.
Therefore, the main balance assertion that analyzing inventory turnover rates would address is valuation and allocation, as it offers insight into whether the inventory is appropriately valued and the related cost of goods sold is correctly allocated in the financial statements. Auditors use this analysis as part of their procedures to assess if the inventory balances reported are reflective of the true economic reality of the entity's inventory management.