It discovered the pressure of the tests led to some applicants with mental illnesses attempting to take their own lives, and others being admitted to hospital or harming themselves.
The impact of the tests emerged in a watchdog investigation into the Scottish woman's death.
As part of the inquiry, 70 psychiatrists were asked their views on how the assessments were generally affecting patients.
The Mental Health Welfare Commission's report found 13% of the doctors had at least one patient who had attempted suicide as a result of the assessment process, while 35% had patients admitted to hospital.
Some 96% of psychiatrists said they had at least one patient who was distressed after an assessment, while 85% said it had led to patients needing more frequent appointments, while 65% had patients needing stronger medication. Citizens Advice Scotland (CAS) last night said the MWC report reflected concerns raised by tens of thousands of Scots about the assessment for Employment Support Allowance - the benefit that replaced incapacity benefit.
Keith Dryburgh, CAS policy manager, said: "For years we have been pointing out the serious flaws we see in the Work Capability Assessment system for the Employment Support Allowance (ESA).
"The MWC has highlighted one particularly distressing case, but it would be wrong to imagine such cases are unusual.
"ESA cases are the single biggest issue we see in the Scottish CAB service. These cases include people with both mental and physical health problems who have been judged 'fit for work' when they are very clearly not, which causes them great distress and pushes many of them into poverty."
He added that last year the Scottish services saw 75,967 cases, and 61% of appeals it was involved with were successful. He added: "It's very clear there are very serious flaws in the whole system, and that this is still affecting a large and growing number of people."
The findings of the MWC inquiry, published yesterday, followed the suicide of a woman, referred to as Ms DE, who was under the care of a consultant psychiatrist for depression.
She took a fatal overdose after her benefits were cut from £94.25 incapacity benefit to £67.50 jobseeker's allowance when her application for ESA was rejected. She feared the drop in her income would mean she could not pay her mortgage.
The 39-page report outlined the tragic circumstances, saying it could see no other factor "in her decision to end her life" on Hogmanay 2011, and made 12 recommendations to the Government.
The DWP said correct procedures were followed in Ms DE's case.