Does ATC Know When Your Altimeter Is Set Incorrectly?

Question: I’m a student pilot with about five hours experience and yesterday the CFI distracted me and, when I looked away, he reset the altimeter so it was a couple of hundred feet off. Of course, I didn’t catch it until after we landed. I know you can get into trouble for flying at the wrong altitude. Does ATC know it when you don’t set the altimeter correctly? I am flying out of a nontowered airport if that makes a difference.

Answer: Air traffic control reads altitude from the aircraft’s transponder. The transponder receives its information from the aircraft’s encoding altimeter, which measures the pressure in reference to 29.92 Hg (inches of mercury), also known as pressure altitude.