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How to approach Technical Integration exams: The views of the examiners

‘It’s not so much what you know. It’s what you do with what you know.’

This is sound general advice, but it’s particularly relevant if you’re approaching the Advanced Stage Technical Integration (TI) exams. There are marks available for demonstrating knowledge and understanding, but there are rather more marks for using this knowledge by demonstrating relevant skills, in an appropriate manner, in the context of the scenario.

The purpose of this article is to give guidance ‘from the horse’s mouth’ on how to approach your TI exams.

Knowledge and skills

Knowledge of course is essential. This consists of brought forward knowledge from the Professional Stage and additional knowledge from the TI learning materials. The open book policy can be reassuring in terms of knowledge, but it would be a mistake to believe that ‘what I don’t know, I can look up’. Examiners and markers are well aware that there are open books, so you won’t get much credit for bland regurgitation, knowledge dumping or copying information from the learning materials. How you apply your knowledge and use your skills will give you the majority of the marks.

Questions are designed and structured around the four skills categories:

  • assimilation and using information (eg, can the candidate take the information, provide analysis and appreciate its significance);
  • structuring problems and solutions (eg, does the candidate know how to define the problem and develop a range of solutions to fix it);
  • applying judgement (eg, what are the possibilities and options to fix the problem and why is one factor more significant than another, applying a sceptical and critical approach); and
  • drawing conclusions and making recommendations (eg, can the candidate come to a reasoned recommendation, formulate opinions, set out advice, plans, options and reservations based on valid evidence).

Approaching scenarios

Questions will place the candidate into a role within the scenario. Unlike at the Professional Stage exams, the formal requirement will therefore be rather brief and uninformative and may be no more than ‘Respond to the instructions of the partner’. This means you need to search for the real requirement which, in this case, will be the partner’s instructions to you, perhaps as a senior.

The importance of the skill of communication is that you need to respond ‘in role’. If you are a senior replying to a partner, it is not appropriate to explain basic terms – the partner will know these already and would not appreciate being told by a senior. A technical explanation is therefore required. On the other hand, if you are writing to a CEO, who may not be an accountant, then a clear explanation is needed in non-technical language, that nevertheless covers the complexity of the issues.

As an example (in Business Reporting, Question 2, November 2009) candidates writing to Mr Antonello Piath, an Italian car mechanic, included complex calculations in the body of the letter. Candidates ignored the requirement in the question asking them to address technical explanations as a separate exercise to the manager who was more likely to understand the complexities of disapplying incorporation relief than a car mechanic.

It is also important to distinguish the primary and secondary levels of communication. If asked by the partner to draft a response to the CEO then, in essence, the document is ultimately from the partner to the CEO and you are providing the first draft. The primary communication is to the partner but, as a draft, the ultimate recipient is the CEO, so the secondary level is the important one for phrasing the document.

Perhaps the most important issue in a scenario is that you should not believe all that you are told. Where information is provided, this is not by the examiner, as may be the case in Professional Stage. Rather it is by a character within the scenario who may have incentives to bias information, hide information or provide fraudulent descriptions. It is therefore vital, particularly with auditing, that in the context of the scenario you should apply an appropriate degree of professional scepticism. This involves obtaining evidence for what you are told, challenging assertions and obtaining additional information.

As an example, in Pepper Art (Business Reporting, Question 2, July 2010) candidates were asked to review and correct a tax computation. Some candidates failed to enter the role as reviewer and seemed to find it completely incredible that a computation prepared by a client could possibly contain errors, just because it appeared in an exam paper. Candidates were willing to accept the client’s adjustments even if they were at best questionable or at worst just incorrect.

How to fail

So what distinguishes a pass from a fail? Candidates sometimes perceive markers and examiners as inhuman. Somewhat surprisingly, however, they are in fact human beings with opinions. Indeed, markers were recently canvassed for their views on what really ‘annoys’ them when marking a script. We asked them to tell us about the good, bad and ugly aspects of the scripts they have marked.

Responses in the bad and ugly sectors included: poor and illegible handwriting; disorganised and difficult to follow workings; failing to conclude or offering multiple recommendations which conflict; seeing an ethical problem when one doesn’t exist; making up data to suit the candidate’s approach, rather than adopting an approach to use the information available in the question; offering a shopping list of auditing procedures instead of tailoring to the scenario; answering requirements out of order for no apparent reason; and being unclear where the answer to one part of the question ends and another begins.

In many of the above cases markers emphasised that candidates may have the necessary knowledge. However, they had not used that knowledge in an appropriate manner to address the requirement or, at best, it was not easy for the marker to see what approach was being taken.

A further common error is that not every important issue in the question will be immediately obvious. There may be some embedded issues which are not shown in neon lights when the exam paper is opened. These can be important as they can contain ‘gateway’ marks such that, once the issue is spotted, then easy marks are available for basic discussion. However, if the issue is not spotted then these marks are lost. In Ed Holdings for example (Business Reporting, Question 3, July 2010) gateway points were in the clearance given by the Ruritanian subsidiary auditors. The conclusion from the auditors was a ‘clean opinion’ and that there were ‘no uncorrected adjustments’. The weaker candidates accepted this opinion at face value ignoring the fact that the Ruritanian auditors had used Ruritanian auditing standards and local accounting policies in certain instances. They missed the embedded point that the overseas subsidiary was significant to the group results and had some interesting financial reporting issues (pension scheme). Accepting at face value the ‘clean opinion’ missed the gateway to many substantial points and marks. Again, a sceptical and questioning approach would have helped identify the underlying issue.

Ethics

Some aspect of ethics will appear in every paper.

Ethical skills will demand more than the straightforward implementation of ethical rules. Specifically, they will normally require you to use ethical judgement in complex scenarios where the appropriate ethical issue and the response to that issue may be unclear. Ethical judgement and ethical safeguards must be reasonable. For example, many candidates appear to believe that they should ‘play safe’ and recommend resignation as the first response to every ethical dilemma. This is not exercising ethical judgement.

Often, in answering ethics elements, candidates automatically assume that there is an ethical problem. In Sunnidaze (Business Reporting, Question 3, November 2010), there is no duty to report the client’s view of the forecasts under consideration to any party outside of the entity unless there is a possibility of misconduct by a member of ICAEW. Candidates were quite happy to report Maisie, the financial controller, to ICAEW without first determining her membership status. Also, views expressed in the scenario by clients or members of the client’s staff are often taken at face value without any questioning of the validity of the source or the motives of the person disclosing the information (ie, professional scepticism).

Candidates’ answers to ethics elements in questions nearly always include generic comments such as ‘ring ICAEW’s helpline’. This may be a useful action to take but candidates frequently do not discuss what they are going to ask when ICAEW answers the telephone and how they might react to the advice given. A better approach would be to discuss the anticipated response by outlining the potential options available. Another common generic response is ‘report to MLRO’. Again potentially this may be valid, but what are you going to report?

Financial Analysis

The brought forward materials in respect of financial analysis include: data analysis from Business Strategy and financial statement analysis from Financial Reporting. These skills may be interrelated and applied in more complex scenarios at TI. The context may for example be: valuation, interpretation, industry analysis or analytical procedures. Financial analysis can appear in either paper, but is more common in Business Change in the context of valuation and strategy. Perhaps the key weakness of candidates is calculating and explaining what has happened without any depth beyond that (for example ‘gross profit has increased by 10%’). One model to help broaden the perspective is WHAT, HOW, WHY, WHEN analysis.

WHAT – looks at WHAT has happened overall.

HOW – attempts to analyse the available data in more detail to obtain a better understanding of HOW the WHAT element occurred.

WHY – looks for the underlying causes of the HOW element, which may be part of the story or the strategy provided in the question.

WHEN – in assessing the impact of changes in strategy over time or in making comparisons it is important to know WHEN changes occurred.

Note: This analysis includes both numerical and descriptive elements.

Summary

This article has looked at the ‘approach’ rather than the ‘content’. Content is very important, but frequently the discriminator between pass and fail candidates is not the knowledge they have before the exam, but how they use it in the exam.

This article originally appeared in the July 2011 edition of VITAL.