Does an increase in testing always improve the project?

No an increase in testing does not always mean improvement of the product, company, or project. In real test scenarios only 20% of test plans are critical from a business angle. Running those critical test plans will assure that the testing is properly done. The following graph explains the impact of under testing and over testing. If you under test a system the number of defects will increase, but if you over test a system your cost of testing will increase. Even if your defects come down your cost of testing has gone up.