Final answer:
An increase in tolerable misstatement decreases sample size because less precision is needed, while an increase in assessed level of control risk increases sample size to gather more evidence and reduce detection risk.
Step-by-step explanation:
How increases in tolerable misstatement and assessed level of control risk affect the sample size in a substantive test of details can be understood through concepts of audit sampling. An increase in tolerable misstatement implies that the auditor is willing to accept a higher level of misstatement before considering the impact on the financial statements, which typically reduces the sample size because less precision is required from the sample results. Conversely, an increase in the assessed level of control risk indicates that there is a greater likelihood of material misstatements in the financial statements, hence the auditor would generally increase the sample size to gather more evidence and reduce detection risk.
The correct answer is that an increase in Tolerable Misstatement would lead to a decrease in sample size, and an increase in Assessed Level of Control Risk would lead to an increase in sample size (b).