The manner and circumstances of the $223 million tender brought into question the government's ability to deliver such a sensitive process "fairly and effectively".
The auditor-general's report, released today, comes as the government confirmed it had paid $2 million in compensation to losing bidder, Sky News after aborting the tender process.
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The government abruptly ended the tender process in November and awarded the 10-year contact to the ABC.
The auditor-general estimated it cost Sky News more than $1.4 million to participate in the tender; the ABC $475,000 and the Department of Foreign Affairs and Trade $770,000.
The auditor-general says while the government was entitled to take such a decision, the Australia Network tender process has presented the Australian government in a poor light.
