ABSTRACT: The strategy of evaluating students’ achievement using a marking system is a common practice in higher education institutions. The result of a student’s effort is usually communicated in the form of a letter grade or percentage correct on an exam or on the course as a whole. Although a vast majority of instructors use various grading policies and the impact of different grading policies on learning is a basis of considerable debate among academics, the empirical work regarding the impact of different grading policies on students’ performance does not include applications to accounting, a discipline for which student learning is directly tied to success in passing professional examinations. Theoretically, one of the functions of a grading system is to motivate students to work harder and perform better. This study provides insight into the impact of a lenient grading scale versus a strict grading scale on students’ achievement, where the level of “average” mastery in the latter category (the grade of C), is coincident with the minimum passing requirement of the professional accounting examinations. The results of this study support the notion that an attainable strict grading policy can be used as an important pedagogical technique to motivate students to study and may provide insight into grade scale decisions faced by accounting faculty seeking to prepare their students for the rigor of professional exams. Contrary to prior results in the literature, we find that when used in an upper-level undergraduate accounting course the stricter standard has a more profound effect on achievement for students at the lower end of the grade distribution.

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