The Australian Electoral Commission was criticised in an auditor-general report released last year which examined its handling of $5.2 billion in financial disclosure returns over the past four years.

The disclosure scheme was set up in 1983 to inform the public about the financial dealings of political parties, candidates and others involved in the election process.

The audit report described the AEC's work as "partially effective", pointing out that not all required returns had been obtained, there had been limited analysis of the returns that were obtained and evidence showed some returns were incomplete.

It found the AEC does not make effective use of available data sources to identify entities that may have a disclosure obligation that have not submitted a return.

The audit found since 2015 only two prosecutions over breaches had proceeded, with a total of $2000 in penalties applied - both of which took over 600 days to settle.

AEC commissioner Tom Rogers told an audit committee hearing in Canberra on Thursday the auditor-general had misunderstood the laws under which his commission worked and its powers.

Mr Rogers said the commission took a "risk based approach" which balanced transparency of party and candidate financial details with natural justice, and much of it relied on educating parties and candidates on their obligations.

However, he said using law changes which came into effect in January 2019, civil legal action had been taken against five candidates from the 2019 election and one political party over its 2018-19 disclosure return.

Mr Rogers said talks had begun with government agencies on data sharing to improve its checks.

But he noted there were legal restrictions within electoral laws and privacy regulations.

Australian Associated Press