The NAO report highlighted that the Department of Work and Pensions Office had imposed 400,000 sanctions on people who claim out of work benefits in 2015.
The report states that the sanctions can "reduce support to people, sometimes leading to hardship, hunger and depression".
Although sanctions are not new, the report states that "the fact that sanctions are widespread does not mean they are well designed, fairly administered or effective.
"The need to enforce conditions may mean sanctions cannot be eliminated altogether, and we do not consider what the correct level of sanctions should be".
Rt Rev Christine Hardman confronted ministers over the use of sanctions during question time in the House of Lords on Wednesday.
Bishop Christine said: "Given that the National Audit Office has today said that there is limited evidence that benefit sanctions work but rather that they result in 'hardship, hunger and depression', can the minister update the House as to whether the Government will now commit to a substantial review of the use and implementation of sanctions?"
Pensions Minister Lord Freud replied: "I cannot make that commitment."
Lord Freud argued "the reality is that sanctions work" and added: "There is a lot of external evidence of sanctions having a substantial impact on employment uptake, whether you are looking at the evidence from Switzerland, the Netherlands, Denmark or Germany.
"Our own survey shows that people on both JSA (jobseeker's allowance) and ESA (employment and support allowance) are more likely to accept the rules of the system with the sanction system behind it."
Approximately 3.5 million people in the UK claimed out of work benefits in 2015.