According to a report in the Sydney Morning Herald, officials confessed to exceeding the ceiling on player payments by A$600,000 ($327,000/EUR335,000) in 2001 and A$400,000 ($218m/EUR223,000) this season.
The scandal has already resulted in club chief executive Bob Hagan resigning.
Said Hagan: "I am ultimately accountable for all that happens in the club and clearly someone must take responsibility for one of the darkest periods in the history of the club."
Football manager Garry Hughes will serve as the club's interim chief executive.
"The Bulldogs have revealed a quite deliberate, elaborate system of payments to players, devised to avoid detection by our salary-cap team," NRL chief executive David Gallop is reported as saying.
"On the one hand, it is rewarding that the Bulldogs have come forward with an open attitude, but clearly there has been conduct designed to gain an unfair advantage over the other teams in the competition.
"Rather than a breach by way of interpretation of types of payments, there has been a deliberate disregard of the rules by persons at the club which has resulted in substantial payments above the A$3.25million ($1.77m/EUR1.82m) cap."
Gallop said he could not rule out the possibility of the competition leaders being expelled from next month's finals series. At the very least, the club faces a A$1m fine and the deduction of premiership points.
NRL salary-cap auditor Ian Schubert was due to begin the audit process today and submit a report within seven days.
Any penalty is expected to be imposed prior to the semi-finals.
Earlier, Gallop, Schubert and NRL chairman John Chalk had met with Canterbury CEO Bob Hagan and Bulldogs chairman Barry Nelson for 90 minutes at league headquarters, where they were informed of the situation.
