The Accounts Commission said there was currently a lack of information about how well pupils perform in comprehensive schools until they start studying for formal qualifications such as Highers in the later years of secondary school.
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The report went on to praise councils such as Fife and West Lothian that have adopted standardised testing of pupils throughout primary and secondary.
Overall, the Accounts Commission found educational attainment was improving but that Scotland still lags behind other top-performing countries, as previous studies have shown.
There was also a significant gap between the highest-performing pupils and lowest, who often come from deprived backgrounds.
The report said spending on education fell five per cent between 2010/11 and 2012/13 to £3.8 billion - largely because councils are employing fewer staff - which it said could impact on workload.
However, the findings on standardised testing provoked the biggest immediate backlash.
Opponents argue the practice rewards school staff who "teach to the test" and ignore wider learning and that the data can be used to make direct comparisons between schools that may be educating pupils from very different social backgrounds.
Teachers also argue that pupils develop at different paces, meaning standardised assessments at set stages of their education are meaningless.
Despite this, the Accounts Commission report concluded: "At a council level, there is no consistent approach to tracking and monitoring the progress of pupils from P1 to S3.
"The type of testing used and the extent to which pupils are tested varies across the country ... some councils test pupils in P1, P3, P5, P7 and S2 while others test less frequently than this."
The report says councils and the Scottish Government should develop "performance measures" that provide an overall picture of education attainment and achievement across Scotland.
Larry Flanagan, general secretary of the Educational Institute of Scotland teaching union, said past experience had shown that target-setting and "excessive benchmarking" of schools was "profoundly unhelpful".
He said: "In Scotland, we have thankfully avoided the league-table and target-driven approach to education that has caused so much damage elsewhere and we continue to absolutely reject the notion that it is in any way conducive to enhancing pupils' learning experience.
"The Accounts Commission seem more concerned with measuring things than with the process of learning and teaching, and their comments echo the distorting agenda of the 1990s which led to the excessive bureaucracy that we are now trying to eliminate with the new curriculum."
On the issue of deprivation, the report found schools with the best record on closing the gap had focused on areas such as developing staff leadership skills, improving teacher quality, increasing parental engagement and better tracking and monitoring of each pupil's performance.
Douglas Sinclair, chairman of the Accounts Commission, said: "Councils need to fully understand what interventions are the most effective and tailor resources to meet their local needs."
The report also found that average spend per pupil varied considerably, with the lowest in Clackmannanshire at £4433 a year compared to £10,821 spent in Shetland.
The Accounts Commission found the highest achieving group of pupils was Asian-Chinese, with an average tariff score of 244.
The national average tariff for S4 pupils in Scotland is 187.