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Scrum.org offers two Professional Scrum Master certifications, PSM 1 and PSM 2 (also PSM 3 which I'm not concerned with here). Both appear to have the same syllabus, and test knowledge of the same course (Professional Scrum Master). Both list their difficulty of questions as 'Intermediate'.

Is there actually a difference in the subject matter tested, or is level 2 simply a more in depth test of the knowledge?

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    This will be controversial but I would also add that you are paying for someone to audit your Scrum practices and then judge them according to the Scrum Guide. I would think long and hard before investing money in that line of certification; it's completely subjective and allows no room for context. Happy to be challenged by a member of Scrum.Org but I watched a ScrumMaster who had an excellent track record at IBM, Nokia and then as a consultant fail the PSM II three times because they didn't like his answers. A situation made more farcical by the PSM III. eyeroll – Venture2099 Jan 24 '17 at 11:26
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Okay switching this to an answer.

As you mentioned PSM I and PSM II have the same subject matter and syllabus, and with the recent change to PSM II it does not have essay questions any longer.

The difference in the questions is PSM I has fairly straightforward questions with textbook answers, ie if you read through the material you should be able to pick the right answers out of the multiple choice.

PSM II is meant to have harder, more situational questions showing you understand the application of Scrum in a real life setting, rather than just knowing the principles. From the material I read when taking PSM I ( I have not taken PSM II) they expected someone to have been a Scrum Master for a while (or take their course I suppose) to do well on PSM II.

A similar answer was given on the last post of the thread here: https://www.scrum.org/Forums/aft/243

I would recommend taking the practice test to check what those questions are like, they should be very representative of what you can expect on the actual test.

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There is no significant difference in the subject matter tested, both assess your competence regarding scrum principles and methodology.

The difference is in knowledge vs understanding & practice:

PSM I focuses on your knowledge of the material, the test itself mainly consists of multiple-choice Q&A to test what you know about scrum.

PSM II on the other hand, focuses more on the practice and real-world situations: The test itself has multiple essay questions, how you would respond in such and such situations. PSM II is also considered a more advanced level exam and it is harder to take.

EDIT:

As Majaii's answers states, the essay questions were removed from PSM II (now there are some in PSM III). Nevertheless, the statement that PSM II focuses more on the practice of the principles of SCRUM is still true.

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    It's worth also calling out that the PSM II exam is simply the old Professional Scrum Practitioner exam. The old PSM II exam is now re-purposed as the PSM III as detailed here. blog.scrum.org/introducing-new-psm-assessment-family – Venture2099 Jan 24 '17 at 11:31
  • Yes, the PSM 3 has essay questions, not the PSM 2. I'm asking about the new PSM 2, so this answer isn't what I'm looking for. – DJClayworth Jan 24 '17 at 12:27
  • @DJClayworth You are correct, the new one does not have essay questions. The subject matter is the same as PSM I, the difference between the two is that PSM I has more textbook type answers, and PSM II has more situational answers meant to be harder to answer unless you have actually practiced Scrum. I would recommend taking the practice test to get an idea of the types of questions. – Majaii Jan 24 '17 at 15:08
  • @Majaii If you made that an answer I'd vote it up. – DJClayworth Jan 24 '17 at 16:10

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