In this paper, an attempt has been made to synthesize some of the current thinking in the area of criterion-referenced testing as well as to provide the beginning of an integration of theory and method for such testing. Since criterion-referenced testing is viewed from a decision-theoretic point of view, approaches to reliability and validity estimation consistent with this philosophy are suggested. Also, to improve the decision-making accuracy of criterion-referenced tests, a Bayesian procedure for estimating true mastery scores has been proposed. This Bayesian procedure uses information about other members of a student's group (collateral information), but the resulting is still criterion-referenced rather than norm-referenced in that the student is compared to a standard rather than to other students. In theory, the Bayesian procedure increases the "effective length" of the test by improving the reliability, the validity, and more importantly, the decision-making accuracy of the criterion-referenced test scores. (Author)