All the compass test will tell you is that there is a magnetic field that will cause the needle to swing toward the wheel. Take the current from the brakes, and the magnetic field goes away, and the needle will go back to indicating magnetic Earth north. Make sure the trailer is oriented so that needle will swing away from magnetic north.
If you have one that does not swing the needle, the magnet is not connected or the magnet is bad. The breakaway switch will apply the full battery voltage to all the brakes. Start by looking for a broken or loose wire.
As for the controller setting, it is specific to your truck and trailer and will often need to be changed as the trailer brakes get some wear.
Ken