June 2013 examination series
IIA Advanced Diploma and
IIA IT Auditing Certificate chief examiner report
IIA ADVANCED DIPLOMA
IIA IT AUDITING CERTIFICATE
JUNE 2013 EXAMS
REPORT FROM THE SENIOR CHIEF EXAMINER
The results for all IIA Advanced Diploma papers produced an average pass rate of
79.9%, compared with the 70.5% in November 2012 and 70.4% in June 2012.
Results
The percentage pass rates for each paper, to the nearest decimal point, for UK and
Ireland IIA Advanced Diploma students in the June 2013 examinations are
summarised below:
June 2013
Module
M1 Strategic Management
M2 Financial Management
M3 Risk assurance and Audit Management
M4 Advanced Internal Auditing Case Study
All candidates
81.8
71.7
85.0
81.1
Last three series
Module
M1 Strategic Management
M2 Financial Management
M3 Risk assurance and Audit Management
M4 Advanced Internal Auditing Case Study
June 2013
81.8
71.7
85.0
81.1
Nov 2012
58.7
65.7
79.0
80.9
June 2012
59.7
60.3
76.3
82.6
Paper comments
M1 Strategic Management
The pass rate of 81.8% achieved by the 77 candidates who sat the paper was
considerably higher than that achieved in November 2012, and is the highest we
have seen to date. We have examined a wide selection of the marking and are
content that the higher than ‘normal’ pass rate is justified. One candidate achieved a
distinction and 28 candidates achieved merits. Only one candidate scored fewer
than 39 marks.
Question 1 was the compulsory scenario question and few candidates scored very
highly. Although students’ points to define and differentiate between corporate and
business strategies were not very perceptive, there were sufficient to secure
adequate marks. Whilst candidates covered the basics, many did not develop their
points and there was a tendency for repetition rather than providing rounded,
effective answers. For example when part of the question asked for descriptions of
the typical processes to aggregate and monitor the risks, phrases which appear in
the M1 syllabus, many candidates instead discussed at length various ways to
mitigate risks that they had identified, thereby not meeting the requirement of the
question.
Generally, most candidates performed sufficiently well, were able to demonstrate
sufficient understanding, and could meet the overall requirements of the questions.
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A significant proportion of the candidates attempting the optional Question 2 about
performance measurement scored well, producing a healthy pass rate. This proved
to be the second most popular optional question. However a number of candidates
mixed up all question parts into combined paragraphs covering tools, benefits and
key performance indicators. This occasionally made it difficult to unpick individual
points made and to score them.
The weakest answers tended to produce few or no points with no real description of
the reasons why they were made.
Question 3, about ethics proved to be the most popular of the optional questions.
Overall we were pleased that this also proved to be well answered, with several
candidates obtaining full marks. The majority of candidates demonstrated a good
understanding of the objectives and importance of ethics and how sound ethical
practices and behaviours are key to strategy. They made useful reference to brand
leadership through ethics, benefits such as a more positive media portrayal, and
assisting the company through ensuring high levels of employee and corporate
compliance. The contents of an ethical training programme was well constructed
and a large range of options proposed. Embedding ethical training was less well
answered however. Higher marks were achieved by candidates who were able to
outline short and longer term objectives effectively.
Question 4, required candidates to demonstrate their understanding of three
strategic options that were presented within the question context. This proved to be
the least popular optional question and resulted in the lowest mean mark. In terms of
providing a recommendation there was no right answer and candidates were
expected to provide their reason, based on the advantages and disadvantages - and
marks would have been gained accordingly. Having made a recommendation
candidates then had to consider its impact. This part of the question was not
answered well by many candidates. Candidates who gained marks considered their
recommendation, the next steps for implementation, and its consequent impact.
Question 5 was about strategy and strategic change, and was deliberately drafted in
a more academic style than the other optional questions on the paper. It was
attempted by 68% of the candidates and while the majority provided an adequate
answer to the question whilst there were very few good or excellent answers there
were also only a few poor answers. This clearly shows that candidates had prepared
well on this syllabus area.
M2 Financial Management
Out of the 53 candidates who sat this paper, 38 were successful. This represents a
pass rate for the series of 71.7%, a very good result overall and in line with the
historic trends on this paper. There were some excellent scripts, enabling three
candidates to achieve a distinction and a further eleven to gain a merit.
The spread of marks on each question was acceptable, including for question 4
which was the least popular question by far but returned a reasonable average mark.
Question 1, the compulsory 40 mark question on the paper, proved to be
challenging for candidates. It covered capital investment appraisal and risk; and
many students provided well thought out and knowledgeable answers.
In part a, candidates showed a good appreciation of capital investment appraisal but
some found it more challenging to equate how capital expenditure appraisal added
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value. Many candidates, though, were more reticent in directly addressing the idea of
value added.
In part b there were some good answers, correct and well presented. However, even
where answers were incorrectly calculated those candidates who provided clear and
full workings received appropriate credit, because this was not a test of arithmetic.
The assessment requested in the final part of the question was generally answered
well. Few answers considered more general economic risks in depth. Although this
was beyond the terms of the question, a few answers related the argument to the
scenario and were rewarded.
Question 2 was well answered and scripts showed a good understanding of the
budget setting process and the factors that impact on budgets.
In part (a), by analysing the budget for quarter 1, most candidates identified general
performance issues on and correctly identified shortfalls in income and overspending
on certain budget heads. However, the analysis often lacked precision and some
answers did not provide detail of the numerical value of variances. Better answers
highlighted favourable and adverse variances as a percentage of figures in the
budget. Candidates should use appropriate accounting terminology e.g. variances
when answering examination questions.
Answers relating to risks and challenges in the budget setting process were often
good. Candidates’ offerings could have been enhanced by considering a wider
range of risks and challenges and by linking the discussion to risks revealed by the
budget analysis as a means of illustration.
In part b the potential impact of external factors on the budget was well assessed by
many candidates. A good knowledge of appropriate external factors was shown.
The link between the training department’s budget and the new unit’s business plan
was not as well explained however.
Question 3 about was relatively straightforward and most candidates performed well
in response. After good arguments for and against the use of quantitative
performance measurement as a means of management control in part a, in part b
some answers lacked the necessary depth, breadth and quality e.g. focusing very
narrowly on typical financial accounting performance measures, and largely ignoring
other critical areas of performance, provided by the stronger candidates who covered
the necessary range and breadth needed. On balance, most candidates showed the
expected level of knowledge and understanding.
Question 4 tested the syllabus area of value. It sought knowledge of accounting and
corporate finance and the relationship between the two areas. Approximately half the
candidates attempted this question. Those who performed well understood key
corporate finance concepts and were able to apply these to the company scenario.
Whilst candidates were generally able to explain the concept of business value many
struggled to apply their knowledge to the particular circumstances presented in the
question.
Part b asked candidates to explain how conventional accounting methods could be
inconsistent with value measurement. The relatively poor standard of answers
suggests that this was not a part of the syllabus particularly well understood, similarly
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in part c, the concept of value drivers was not well explained, again indicating a
general lack of knowledge of the syllabus in this area.
Question 5 about benchmarking was popular and mostly well answered with a high
proportion of the candidates who opted for this question achieving at least half
marks. Most candidates were able to identify ways in which benchmarking could
benefit the organisation and applied this to the scenario given. The majority of
candidates were able to identify a number of different types of benchmarking.
Answers that scored more highly included analysis and linkage with strategic
objectives and strategic benchmarking and the significance and availability of reliable
data when comparing with other companies in their sector. Candidates were also
able to identify a number of factors that need to be considered when undertaking the
benchmarking process.
M3 Risk Assurance and Audit Management
Following moderation, 77 candidates sat the paper and achieved an 85.7% pass rate
– this was an increase from the 79% in November 2012 and 9 candidates achieved
Distinctions.
The 85.7% pass rate was due to strong answers to questions 1, 2 and 5.
Question 1 proved challenging for students with a 59% pass rate among 77
candidate attempts. Generally all three parts were well answered. The higher
scoring candidates demonstrated more depth in their answers, which is necessary at
this level of examination. Additional credit was awarded to those candidates who fully
explained the reasons for the statements they expressed.
A significant number of candidates missed the opportunity of scoring marks by
omitting to state that the role of internal audit was to provide independent assurance
to the trust board. A number of scripts made reference to the role of the health care
regulator in their answers but only provided bland or general statements such as
providing assurance on compliance by the trust of national standards. The better
scripts expanded on this point by stating that the role of a regulator is to act in the
public interest.
Overall Question 2 was well answered by the 59 who attempted it with candidates
demonstrating a sound understanding of factors influencing successful and failing
businesses. Many answers used relevant examples of organisations to illustrate
points made in the discussion. High quality answers used a range of topical
organisations as illustration.
Part b was less well answered. Although some good general points were made
about how internal audit can assist organisations, answers were insufficiently
focused on financial services organisations. Answers could have been enhanced by
further references such as the recent CIIA guidance on the role of internal audit to
help prevent a repeat of the banking crisis. There was also little evaluation of
internal audit’s role, for example the need for strengthening of best practice and how
internal auditing standards are interpreted and applied in banks.
Question 3 asked candidates to describe the full value of what an Internal Audit
service can provide. This was well answered by the 76 candidates who identified the
key areas where a co-source partner can assist, and candidates provided many good
examples. Answers invariably included an understanding that Internal Audit must
have a structured methodology applied consistently. Marks were achieved for
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demonstrating that a methodology in place that provides guidance to the auditors
allows them to develop their professional knowledge and expertise. Candidates
scored well when observing that this also lends itself to high quality work, respected
by management and upon which reliance can be placed by external audit.
Question 4 was not a popular question possibly because it was a relatively untested
area of the syllabus and on a specific topic: the broader dimensions of risk
management and its overall framework. Nevertheless, overall the standard of
answers was very high.
Question 5 attracted 57 candidates who achieved a 78% pass rate. Less than 10%
of the scripts were really poor. The question was about the role of internal audit and
the potential conflict of interest when an auditor is asked to investigate an allegation
concerning a management unit where the auditor had previously worked and
exercised some management responsibility designing controls.
M4 Advanced Internal Auditing Case Study
The June 2013 Case Study focused on local government, more specifically a
London-based borough council. The pass rate for the paper was 81.1% compared
with 80.9% in November 2013 and generally on a similar level to previous sittings of
the paper. The rate confirms that the performance of candidates on this paper
continues to be strong. Ten out of 53 candidates failed the exam, and no candidate
scored below 37 marks.
Question 1a focused on the in-house internal audit function of the Borough Council,
requiring candidates to assess the independence and objectivity of its internal audit
organisation and the audit personnel. This was generally poorly answered and many
candidates failed to define or discuss independence and objectivity issues to an
adequate level. Part b then asked for a training package for new entrants to internal
audit, referencing training needs that were evident from the case study. This
provided many stronger answers even though it was allocated only 7 of the 25 marks
available.
Question 2 explored the topical theme of expenditure cuts. Part a asked candidates
to evaluate the risks of cutting adult social care projects from a list provided, and to
suggest an approach to prioritising those to be cut. The key to a successful answer
was to identify the projects and provide a methodology to evaluate risk. Part b
sought an understanding from the candidates of the importance of internal audit as
an assurance provider in times of austerity and uncertainty. This was generally well
answered.
Question 3 related to the internal audit department’s annual plan; candidates
answered it well and the mean mark was significantly higher than that achieved in
the other three questions. Part a sought an analysis why progress was so far behind
plan. The key to scoring well was to focus on internal work practices and staffing,
and the management of relationships with stakeholders. Part b was closely linked,
and required a discussion on the ways the recurrence could be avoided. Again, it
was well answered although some candidates failed adequately to explain the points
they had raised and others provided excessively long answers that failed to
correspond with the marks available.
Question 4a looked for candidates to point out the risks if the annual ‘health-check’
audit of the council’s financial accounting systems were not carried out. On the whole
answers were poor with some candidates failing to show their understanding of risk,
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instead listing control weaknesses, and others set out a proposed scope for the audit
not what was asked for. Part b was to enable candidates to detail expected controls
for data security and data protection at the council, or to assess controls referenced
in the Case Study. Candidates received credit for either approach.
Common issues with all papers
The issues I raise here are common to all papers and have been common to all
sittings of the Advanced Diploma examinations. The major issues such as:

Time apportionment between questions in relation to marks achieved;

Answering the question that was asked rather than that which the candidate
would like to have been asked;

Excessive introductions and other descriptive passages that add nothing to
the marks;

Repetition of the question; and

Absence of answer plans
always occur and always will occur, because each cohort of candidates has a
substantial number of individuals who are new to the professional examination
experience. The tuition providers are, I am sure, aware of this, but in the examination
room it is up to each individual candidate to be aware and to deliver, just as it is up to
competent auditors to be aware not only of the risks in the system, but also of the
pitfalls to be avoided by the auditor during each engagement.
One issue that also comes up often at Advanced Diploma is insufficient attention
paid to the context of the question asked – resulting in generic answers and
generalities. The Advanced Diploma is a prerequisite for the achievement of
Chartered Membership of the Institute. The tests that we set for the Advanced
Diploma are designed to give candidates the opportunity to show that they can audit
anything, and are meant to be challenging – as should be the professional approach
of the auditor. The examination question presents a situation and asks the candidate
what they would do about it.
There is clear blue water between the Diploma and Advanced Diploma levels. The
Diploma is a test of knowledge and understanding; the Advanced Diploma expects
the auditor to have these and is a test of how they apply that knowledge and
understanding. This means that the questions are specific and that the answers
should also be very specific to the scenario that is set. If it helps, the candidate
might imagine being in the position of an engagement supervisor or manager
needing to lead and brief a team.
Tuition Provider Input
We actively seek comments from tuition providers following each examination series,
particularly when they are objectively focused and not speculative. Moderators
consider the comments offered and respond to them, and we use the input to feed
into our setting of future questions. We are very grateful to them particularly as we
appreciate that they submit them before they have had the benefit of assessing their
students’ actual performance after results publication.
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Students and tuition providers may rest assured that the examinations team ensures
that every question set on every examination paper is fully in line with its agreed,
published syllabus for the relevant examination series. They should note especially
that M4, the Case Study has no specific syllabus – there can be mixture, blurring,
and read across just as in real life and in the day job for which the candidates have
been trained and are being examined.
Conclusion
It is a credit to all concerned that the June 2013 series of the IIA Advanced Diploma
in Internal Auditing and Management has produced good results in terms of the
administration of the examination systems, the quality and standard of the question
setting and the marking, review processes, and, I venture to suggest, the reward for
the candidates. Well-prepared candidates have grasped the opportunity to display
their understanding of advanced concepts some of which were fairly challenging, and
their application of this knowledge to management in general, to information
systems, and also to internal audit management. The students, again, produced
some excellent scripts and this is borne out by the examination results.
This series has been particularly notable for the high percentage pass rates achieved
by on the papers. I am content that these marks are justified, as these are based on
numbers sitting each paper, and the average marks for all candidates irrespective of
their final result has in remained sufficiently stable and in line with those of previous
series.
The examinations represent a rigorous challenge to students because we are keen
that those who succeed should be justifiably proud of their success and of their
candidature for chartered membership of a professional institute that is highly
respected for the quality of its members and the valuable contribution they are able
to make to their employers.
Our independent external review process is also an important part of the approach to
standards and quality and provides extremely valuable feedback to the examinations
team, which we take very seriously. Similarly, the comments we receive occasionally
from the students themselves provide a valuable contribution to our constant efforts
for quality and excellence.
Finally, I feel I must commend the efforts of the fine team of examiners and
moderators, all volunteers, which the Institute is fortunate to be able to call upon
sometimes at very short notice. It is they who set the scene for enabling the students
to show what they have learnt, and to do credit not only to themselves but also to
their learning institutions, who in their turn have made great efforts to assist the
students to develop professionally.
I am grateful for and commend the efforts of everyone involved with the examinations
process.
IT Auditing Certificate
Results
The percentage pass rates for each element of the qualification, to the nearest
decimal point, for UK and Ireland IT Auditing Certificate students in the June 2013
examinations are summarised below:
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June 2013
Module
Multiple-Choice Assessment
Candidate Assignment
All candidates
100.0
100.0
Multiple Choice Assessments
This seventh sitting of the IT Auditing Certificate multiple choice examination has
been very successful with the assessment being sat by seven candidates all of
whom passed. This 100% success rate occurred for the first time at the previous
sitting and has been repeated again this time. It shows that candidates’ exam
preparation is improving, and this is very pleasing. Five merits and two passes were
awarded.
It is worth noting that the pass mark for this assessment is 65 with a merit grade
being awarded at 75 and a distinction at 85 and above.
Although all candidates passed, we reviewed all 17 questions where half or fewer of
the candidates achieved the correct answer.
This review resulted in no adjustments to the marks of the questions although one
question is to have consideration given to the distractor as four out of the seven
candidates chose this option.
Candidate assignment assessments
It is pleasing to report that all 7 candidate submissions were successful, all with clear
passes. One candidate achieved Distinction, four achieved Merit and two a Pass.
The review awards marks out of a maximum of 60 made up of:
 Terms of Reference
5 marks
 Procedure
5 marks
 Findings
15 marks
 Conclusions
20 marks
 Recommendations
15 marks
A pass is 30 marks, Merit 36 and Distinction 42 marks.
Because of the low volume, all assignments were moderated. There were no issues
significant enough to require adjustment of overall marks.
The subject matter that the candidates had chosen for their assignments was very
varied and interesting.
IIA IT Auditing Certificate completions
I am delighted to report that this seventh sitting has resulted in seven members
completing the IT Auditing Certificate.
Paul Charlton PG Dip (Audit), CFIIA, CMIIA, QiCA
Senior Chief Examiner
August 2013
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