Exams and Tests

What is the purpose of exams and tests? Supposedly to see if we know some information, have a skill or ability, or grasp of academic, educational, medical, scientific, artistic, mechanical, practical, or professional realm. The question is whether exams or tests adequately do that.
In my case, how do i tell if students are satisfactory in English oral skills? The best way is to have conversations with them. But how to do that with 150 students in a classroom setting?

This is the free public university English Department. Understaffed, insufficient room, overworked instructors, and overcrowded classes. No wonder morale is down. The campus was built in 1989 to house 4000 students. Today it holds 17,000!