Margaret Hodge, who chairs the committee, has accused the DWP of making "poor decisions" at "considerable cost" to the taxpayer.
The report found that the department's decisions were overturned in nearly 40 per cent of appeals, and that Citizens' Advice had recorded a more than 80 per cent rise in the number of people asking for support on appeals in the last year alone.
Atos 'works hard' to get accurate decision on benefits
We work hard to provide the DWP with as much detailed information as we can to contribute to them making an accurate decision on benefits. We continually review all processes to ensure assessments are of the highest standards and that if improvements are needed we can make them quickly.
Our doctors, nurses and physiotherapists are fully trained and registered with their relevant professional body. They have all received training in the assessment of people with mental health conditions and there are now mental function champions in place across our centres to offer specialist advice.
DWP: Report 'fails to recognise' recent improvements
Employment Minister Mark Hoban has responded to claims that the DWP is causing "misery and hardship" to claimants.
He said that the report failed to recognise the improvements made to the Work Capability Assessment since the coalition Government came to power in 2010.
We're implementing all of Professor Harrington's recommendations, and the percentage of people getting long term unconditional support has more than doubled in the last two years.
Professor Harrington is clear that the changes we are making to the WCA risk being undermined by those who refuse to acknowledge improvements in the process.
Rather than scaremongering and driving down the reputation of the WCA, critics might like to acknowledge the fact that independent reviews have found no fundamental reforms are needed to the current process because of changes we're making.
– Mark Hoban, Employment Minister
He added that the Government is "determined" to help people who are found fit to work, and that those who are not able to work will continue to get "comprehensive support".
This poor decision-making is damaging public confidence and generating a lot of criticism of the department's contractor for medical assessments, Atos Healthcare - but most of the problems lie firmly within the DWP.
The department is too often just accepting what Atos tells it.
It seems reluctant to challenge the contractor. It has failed to withhold payment for poor performance and rarely checked that it is being correctly charged.
– Margaret Hodge, Chair of The Public Accounts Committee