Assess their phonemic awareness skills. According to RTI Action Network the Texas Primary Reading Inventory (TPRI), STAR Early Literacy and Predictive Assessment of Reading (PAR) can assess phonemic awareness. These assessments can find out if the student can rhyme, isolate initial, medial or final sounds in words or manipulate sounds by changing or removing letter sounds to create a new word.
Ask them to identify letters and sounds. When doing this, ask students to identify the name of the letter and the sound it makes from a mixed up list of letters. If given the letters in alphabetical order, they'll just recite the alphabet. The mixed up list will require them to think. If they can't tell you the correct letter sounds, they won't be able to correctly sound out words.
Require them to retell a story to check for comprehension. Some students who know how to read, may not always comprehend what they have read. This can be recognized early on if students are required to answer questions and retell what they have read. This can also be done if the story was read to them.
Observe students when they're reading. Notice if they're reading left to right and top to bottom. As basic as this seems, some students have trouble understanding which direction they're supposed to be reading. Also notice if they're skipping lines while they read; this could indicate a possible problem with vision or the student may just need to use their finger to move from line to line.
Listen to students when they read. When students are reading, notice their word attack skills. Does the student look at the first few letters of the word and guess what the word is, skip over the word completely or make an attempt to sound out the unknown word? According to an article from the Great Schools website, "a child with weak phonological skills often prefers to guess at unknown words while reading because he is not very good at figuring out the sounds or blending them together." This means they may need more practice blending sounds to read words.