Distance learning generally separates students from educators, and demands that interventions be put in place to counter the constraints that this distance poses to learners and educators. Furthermore "Increased number of students in Higher Education and the corresponding increase in time spent by staff on assessment has encouraged interest into how technology can assist in this area" (Mogey and Watt 1999, 1). As student assessment is an important challenge faced by Higher Education institutions, this paper investigates the role that Computer Aided Assessment (CAA) can play for both face-to-face and distance learning institutions. The discussions include the definition of CAA, its rationale, potential benefits, limitations, impacts on student learning and strategies for developing effective computer-based or online assessment. Research has indicated that when students are actively engaged by giving them more tests, assignments or examinations, the pass rate increases. CAA is one of the methods that can be used to engage students actively in their learning. It allows marking; immediate feedback, the recording of student scores and the analysis of student performance to be processed by computer and thus alleviate the burden on educators. Computer Aided Assessment is described as any instance in which some aspect of computer technology is deployed as part of the assessment process (Atkinson and Davies 2000). These may include: (1) Interactive exercises and tests completed on a computer; (2) Onscreen marking of students' word-processed writing; (3) Use of revision software; (4) Using of spreadsheet or database to keep a record of student marks; and (5) Use of e-mail to send coursework and to receive marks and feedback etc. There are many benefits linked to CAA, some of which are objectivity and consistency of standards; automatic, immediate, and detailed feedback to all students; time saved when marking and allocating marks (Billings, 2004; McKenna and Bull 2000; Musham 2004). Limitations linked to CAA include the possibility that CAA may not be suitable for assessing skills such as constructive argument, writing, presentation and interpersonal skills. Computers and software sometimes crash and boot students offline during testing, and cheating sometimes occurs (Musham 2004; Greenburg 1998). The above-mentioned issues are discussed with the aim of encouraging higher education institutions to consider the potential benefits of introducing CAA. (Contains 1 table.)