diff --git a/internal/tools/verifyreadmes/main.go b/internal/tools/verifyreadmes/main.go
index ff0d4f4bc88..72071e2a91e 100644
--- a/internal/tools/verifyreadmes/main.go
+++ b/internal/tools/verifyreadmes/main.go
@@ -40,12 +40,11 @@ func verifyReadme(path string, info os.FileInfo, err error) error {
 		}
 	}
 
-
 	// Check that a README.md exists in the same directory as the go.mod file.
 	readme := filepath.Join(filepath.Dir(path), readmeFilename)
 	_, err = os.Stat(readme)
 	if os.IsNotExist(err) {
-		err = fmt.Errorf("couldn't find %s for %q", readmeFilename, filepath.Dir(path))
+		return fmt.Errorf("couldn't find %s for %q", readmeFilename, filepath.Dir(path))
 	}
 
 	return err
@@ -65,13 +64,18 @@ func main() {
 	fmt.Println("Verifying READMEs in", root)
 
 	var errs []string
-	filepath.Walk(root, func(path string, info fs.FileInfo, err error) error {
+	walkErr := filepath.Walk(root, func(path string, info fs.FileInfo, err error) error {
 		if err := verifyReadme(path, info, err); err != nil {
 			errs = append(errs, err.Error())
 		}
 		return nil // continue walking
 	})
 
+	if walkErr != nil {
+		fmt.Println("Error walking directory: ", walkErr)
+		os.Exit(1)
+	}
+
 	if len(errs) > 0 {
 		fmt.Println("Some readme files couldn't be found.")
 		fmt.Println(strings.Join(errs, "\n"))
diff --git a/internal/tools/verifyreadmes/main_test.go b/internal/tools/verifyreadmes/main_test.go
new file mode 100644
index 00000000000..cbd9346aba1
--- /dev/null
+++ b/internal/tools/verifyreadmes/main_test.go
@@ -0,0 +1,98 @@
+// Copyright The OpenTelemetry Authors
+// SPDX-License-Identifier: Apache-2.0
+
+// Package verifyreadmes is used to verify that all go modules in the repository
+// have a README.md file.
+package main
+
+import (
+	"os"
+	"path/filepath"
+	"testing"
+)
+
+func TestVerifyReadme(t *testing.T) {
+	// Create a temporary directory for testing
+	tmpDir, err := os.MkdirTemp("", "test-readme")
+	if err != nil {
+		t.Fatal(err)
+	}
+	defer os.RemoveAll(tmpDir)
+
+	testCases := []struct {
+		name  string
+		setup func(t *testing.T, dir string) (string, os.FileInfo)
+		want  bool
+	}{
+		{
+			name: "README exists",
+			setup: func(t *testing.T, dir string) (string, os.FileInfo) {
+				path := filepath.Join(dir, "with-readme")
+				if err := os.Mkdir(path, 0755); err != nil {
+					t.Fatal(err)
+				}
+				goModPath := filepath.Join(path, "go.mod")
+				if _, err := os.Create(goModPath); err != nil {
+					t.Fatal(err)
+				}
+				if _, err := os.Create(filepath.Join(path, "README.md")); err != nil {
+					t.Fatal(err)
+				}
+				info, err := os.Stat(goModPath)
+				if err != nil {
+					t.Fatal(err)
+				}
+				return goModPath, info
+			},
+			want: false,
+		},
+		{
+			name: "Excluded directory",
+			setup: func(t *testing.T, dir string) (string, os.FileInfo) {
+				path := filepath.Join(dir, "internal", "excluded")
+				if err := os.MkdirAll(path, 0755); err != nil {
+					t.Fatal(err)
+				}
+				goModPath := filepath.Join(path, "go.mod")
+				if _, err := os.Create(goModPath); err != nil {
+					t.Fatal(err)
+				}
+				info, err := os.Stat(goModPath)
+				if err != nil {
+					t.Fatal(err)
+				}
+				return goModPath, info
+			},
+			want: false,
+		},
+		{
+			name: "No go.mod",
+			setup: func(t *testing.T, dir string) (string, os.FileInfo) {
+				path := filepath.Join(dir, "no-go-mod")
+				if err := os.Mkdir(path, 0755); err != nil {
+					t.Fatal(err)
+				}
+				readmePath := filepath.Join(path, "README.md")
+				if _, err := os.Create(readmePath); err != nil {
+					t.Fatal(err)
+				}
+				info, err := os.Stat(readmePath)
+				if err != nil {
+					t.Fatal(err)
+				}
+				return readmePath, info
+			},
+			want: false,
+		},
+	}
+
+	for _, tc := range testCases {
+		t.Run(tc.name, func(t *testing.T) {
+			path, info := tc.setup(t, tmpDir)
+			got := verifyReadme(path, info, nil)
+			if (err != nil) != tc.want {
+				t.Errorf("Expected error: %v, got: %v", tc.want, got)
+			}
+		})
+	}
+}