An alleged corruption scandal involving up to $25 million at WA's Department of Communities was not picked up in sample checking procedures, WA's auditor-general has confirmed.

Key points: Paul Whyte and Jacob Anthonisz were allegedly involved in an invoicing scam

Paul Whyte and Jacob Anthonisz were allegedly involved in an invoicing scam WA's Auditor-General says the type of fraud alleged is hard to detect

WA's Auditor-General says the type of fraud alleged is hard to detect She says quality audits were carried out but did not detect the alleged corruption

Department of Communities assistant director general Paul Whyte and his friend Jacob Anthonisz have been charged with corruption relating to more than $2.5 million over the alleged false invoices scam.

Police have told a Perth court investigations are continuing and the total amount involved may be up to $25 million.

Auditor-general Caroline Spencer told radio 6PR that what was alleged to have happened was typically hard to detect.

"It is very difficult to detect fraud where there is collusion," she said.

"And especially external collusion. Dishonesty is something that we have to always be on the lookout for because wherever there are people and money involved, there's always the risk of fraud.

Paul Whyte's house in Mosman Park was raided by police during their investigation. ( ABC News: Rick Harvey )

"But we won't know the full facts of this case until it goes through full transparent judicial process, once investigations are finalised."

Thousands of transactions to track

Ms Spencer said a sample of transactions in the department were examined on a yearly basis as part of auditing checks.

"We check that they've been incurred and certified within appropriate delegations and appropriations on a sample, so we test controls," she said.

Ms Spencer said that when signatures of authorised delegates were seen on invoices, that was deemed to be enough to satisfy requirements.

"We don't go back and actually check further to see whether those goods have been received," she said.

She also said there were stocktakes, but they were conducted on a sample basis.

The invoices which featured in the existing charges were not picked up.

"There are thousands of transactions obviously, with $1.3 billion in expenditure going through that department," she said.

'Audit can never be everywhere'

Ms Spencer said she was confident all that could have been done to prevent fraud within the department was done.

"We have conducted quality audits in accordance with the audit standards," she said.

"Audit can never be everywhere, if people want audit to check every transaction and every action of every public sector entity, it will duplicate the costs of public administration.

"I'm not advocating that, that is not in the best interests of public expenditure."

Mr Whyte's friend Jacob Anthonisz has also been charged. ( ABC News: Hugh Sando )

She said there needed to be strong management controls as well as strong auditing processes to provide assurance to the public and government.

Ms Spencer said the Housing Authority within the department, where Mr Whyte worked, was asked in 2016 to do more in relation to the Auditor-General's recommendations to improve processes.

"There has been a tendency for that particular statutory authority to not be the most responsive to both audit and parliamentary requests for information, and that particular Public Accounts Committee report was a stand out in the level of clear frustration expressed," she said.

She said that overall she wanted good management controls, robust internal audit functions and audit committees which followed up on recommendations.

She said segregation of duties and rotation of duties within public agencies was also important.

Ms Spencer said "internal mechanisms", including whistleblowers, identified half of all frauds detected.

Racing prizemoney being withheld

Both Mr Whyte and Mr Anthonisz have interests in a number of racehorses and industry body Racing and Wagering WA today said it was withholding payment of any prizemoney to the pair in light of the charges.

Racing and Wagering WA is withholding payments from Mr Whyte. ( ABC News: Hugh Sando )

It said those horseracing interests included horses currently racing, broodmares and other progeny under the care and control of people who were not connected to the allegations.

Those people were still incurring costs and to minimise the impact on those people the authority said it was making payments to "connections" other than Mr Whyte, Mr Anthonisz or their immediate family members.

It also said it was working with appropriate authorities in relation to "recently reported matters" involving the men.