One of Australia's most senior Catholic Bishops has voluntarily stepped down after the Vatican ordered a review into the diocese of Broome, amid an ongoing police investigation into an allegation of sexual misconduct.

Key points: Christopher Saunders has been Bishop of Broome since 1995

Christopher Saunders has been Bishop of Broome since 1995 He has worked for the Catholic Church across WA's north for over 40 years

He has worked for the Catholic Church across WA's north for over 40 years He voluntarily stepped down as the Vatican reviews the Broome Diocese

Bishop of Broome Christopher Saunders, 70, voluntarily stepped down on Monday, pending the review.

Archbishop of Perth Timothy Costelloe said in a statement the Emeritus Bishop of Wollongong, Peter Ingham, had been appointed to oversee the diocese effective from Tuesday.

"Bishop Christopher Saunders … has voluntarily stood aside from the ordinary administration of the diocese for the duration of the visitation," he said.

The move comes as police continue to investigate an allegation of sexual misconduct against Bishop Saunders received 18 months ago.

Church authorities were not drawing a connection between the police investigation and the decision to review the diocese.

A WA Police spokesperson said any allegations of criminal sexual misconduct would be investigated, as per normal procedures.

The spokesperson said WA Police would not comment on allegations made against specific individuals.

The ABC has been unable to contact Bishop Saunders, but he told Seven News that he denied the allegation.

Church veteran spoke out on abuse 'shock'

The Broome diocese is one of Australia's largest with parishes, including a number of former Catholic missions, scattered across 770,000 square kilometres.

Bishop Christopher Saunders at a meeting with Pope Francis in Rome. ( Supplied )

Bishop Saunders's career has been intertwined with the Diocese. He joined the Broome Parish in 1975 after completing theological studies at St Francis Xavier Seminary in Adelaide.

After working as a deacon, he was ordained as a priest the next year, working at La Grange (now Bidyadanga), Lombadina and Kalumburu missions throughout the 1970s and 1980s.

Pope John Paul II with Bishop Christopher Saunders at the Vatican in 1998. ( Supplied )

He returned to Broome in 1989 as diocesan administrator and was appointed bishop in 1995.

Testifying before the Royal Commission into Institutional Responses to Child Sexual Abuse in 2017, Bishop Saunders said the church had failed to respond appropriately to the problems raised by the commission.

He told commissioners data indicating one in 10 priests in the Perth Archdiocese were abusing children had left the organisation in a "state of shock".

"I would agree that there has been a massive failure on behalf of the church to respond appropriately to the issues and the matters and the allegations of sexual abuse throughout Australia," he said.

Bishop Saunders (right) with Bishop of Geraldton Michael Morrissey, Archbishop of Perth Timothy Costelloe and Bishop of Bunbury Gerry Holohan during a trip to Rome. ( Supplied )

"But to see the picture as clearly painted as it is, has been a tremor and a shock to all of us."

The Bishop also nominated greater psychological testing for priests and seminarians as a key method to help stop and expose abusers.

The Perth diocese did not specify how long the internal review of the Broome diocese will take.

Bishop Ingham will lead the overall review, while Monsignor Paul Boyers will oversee the day-to-day administration of the diocese.