New Zealand's auditor-general resigns over handling of fraud

New Zealand's Auditor-General has resigned amid questions over how he handled a fraud case while he was head of the nation's transport agency.

Martin Matthews on Thursday said the issues and speculation over the case had made it untenable for him to continue in his role.

His resignation came ahead of a report into how Matthews dealt with manager Joanne Harrison when he was her boss at the Ministry of Transport.

Harrison was jailed in February for stealing about 725,000 New Zealand dollars ($563,000) of taxpayer money.

Matthews said in a statement he wished he'd discovered the fraud earlier and acted swiftly once he became aware of it.

But an earlier report found that four staff whistleblowers had raised concerns about Harrison, who had then treated them poorly.