Commonwealth Auditor-General Grant Hehir and the Australian National Audit Office have been urged to investigate the alleged misuse of millions of dollars within Australia's largest Indigenous legal organisation, the North Australian Aboriginal Justice Agency, after claims of corruption and fraud among staff.

NAAJA receives close to $20million in Commonwealth funding each year but dozens of serious allegations of criminal conduct among its leadership team are the subject of a federal court case next month.

NAAJA currently receives $83million over five years from the National Legal Assistance Partnership (NLAP), a federal government agency, but federal Opposition legal affairs spokesperson Michaelia Cash has requested Mr Hehir and ANAO consider "an audit of arrangements under the NLAP that may result in the payment of Commonwealth money to NAAJA" in a letter seen by The Australian newspaper.

"The reports raise serious concerns about the potential misuse of Commonwealth money provided under the National Legal Assistance Partnership, and the efficacy of governance arrangements under that agreement," Senator Cash wrote.

She took aim at federal Attorney-General Mark Dreyfus, who indicated the onus was on the Northern Territory government to administer the NLAP funds.

"With respect, if that is the case, that is all the more reason for an audit," Senator Cash wrote.

"If NLAP arrangements are such that the administration of Commonwealth funding is done at arm's length, as the Attorney-General appears to contend, then the governance provisions in the intergovernmental agreement that allow the Commonwealth to appropriately monitor expenditure (and respond to any misuse of Commonwealth funds) are all the more important."

NAAJA conducts the majority of Indigenous legal cases in the territory, where it has 200 workers across the NT.

Senator Cash said any recommendations from a performance audit of NAAJA could signal more robust governance of how Commonwealth funding is spent and tracked was required.

"I ask that you consider a performance audit to assess the adequacy of data collection, performance monitoring and other governance arrangements under the NLAP, and whether adequate safeguards are in place to ensure that Commonwealth money is not being misused," she wrote.

She said any improvements identified through an audit potentially "ought to be implemented more generally in respect of funding to other service providers that is governed by the NLAP".

The ANAO recently found an alarming lack of audit controls at Australia's leading Indigenous funding organisation, the National Indigenous Australians Agency.

The NIAA employs more than 1300 people across Australia and had its budget in 2022-23 increased to $4.5 billion, which funds programs through the Federal Government's Indigenous Advancement Strategy.

The ANAO report said in 2021–22 the NIAA spent $1.03 billion on more than 1000 external providers to deliver IAS activities and services, yet failed to initiate a single fraud investigation, an anomaly among similar-sized federal government agencies.

Indigenous Affairs minister Linda Burney told National Indigenous Times at the time the audit shortfalls at the NIAA were "concerning".

The Australian reported the NT Commission Against Corruption was also investigating the allegations against the NAAJA, many of which have emerged in a Federal Court case filed by an employee who alleges she was fired after discovering the corrupt conduct of two senior members of its leadership team, who have both denied the claims and remain employed.

The matter is scheduled for trial from October 23.

In a statement issued Wednesday, NAAJA said: "In the wake of recent media coverage regarding allegations of improper conduct by NAAJA, the NAAJA Board confirms that it categorically refutes these allegations."

"In November 2022, the NAAJA Board initiated two separate independent investigations," the statement read.

"The first independent investigation was an audit of finance, credit card use and other undisclosed arrangements that were not authorised by the NAAJA Board. This independent investigation was undertaken by BDO Australia. The BDO Australia findings were lodged with NT Police in February 2023.

"NAAJA is continuing to assist NT Police with their investigations. The BDO Australia findings were also lodged with the Australian Federal Police. NAAJA is waiting on advice from the AFP on progress on their investigations into the matters identified in the BDO Australia independent investigation.

"The second independent investigation was an organisational review of corporate governance, maturity and the effectiveness of functional business unit systems and processes within NAAJA.

"This independent investigation was undertaken by KPMG and finalised in January 2023. All recommendations for improvement have been accepted and endorsed by the NAAJA Board. NAAJA has commenced implementing key recommendations of the KPMG independent investigation with a focus on strengthening governance, systems, and operations.

"The NAAJA Board is committed to ensuring that NAAJA continues to deliver quality services to its clients and community. NAAJA calls on NT Police and the AFP to take immediate steps to conclude their respective investigations as a matter of urgency."