"We didn't put sufficient emphasis on the spirit of the game in our pursuit of wanting to be the very best we could on the field", he said.
The former ICC and CA chief executive was particularly concerned that Peever had described the South African ball tampering scandal as a hiccup.
Cameron Bancroft, who applied the sandpaper to alter the condition of the ball, was handed nine-month ban by Cricket Australia.
New Australian captain Tim Paine ans deputy Josh Hazlewood were the face of the pact as it was announced.
"The other thing that struck me is the direction that the selectors are now to take into account character when they're picking the Australian cricket team as well as ability".
Waugh said Australia's internal system was such that the players had lost touch with reality, thinking they are larger than the sport.
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He said: "At Cricket Australia our goal is to unite and inspire communities through cricket". They've got a lot of people around the side that protect them and tell them how good they are and how everything's fantastic.
The ball-tampering revelations plunged Australia's team into crisis earlier this year.
Pressure is mounting on David Peever, with former Cricket Australia and International Cricket Council supremo Malcolm Speed on Tuesday calling for the besieged CA chairman to be replaced amid rumblings some states could support a move against him.
The report found that CA is perceived to be "arrogant and controlling", the consensus being that the organisation does not live up to its values, further accusing CA of not handling situations which go against them well by reverting to "bullying tactics or worse, ostracising".
Longstaff has recommended a cricketing ethics commission be established, comprising three persons, nominated by CA but rubber-stamped by the states, the Australian Cricketers Association and Cricket Umpires Australia.
It has also been recommended that CA have voting for the Allan Border Medal take into account player behaviour and character and not just on-field performance, akin to the AFL's Brownlow Medal where suspended players can not claim the award. That would be a remarkable occurrence, but there is discontent in some quarters - particularly about the fact they were not shown a copy of the Ethics Centre report before Peever's re-election. There were multiple instances of disrespect than ran through CA.
"Sanctions were carried out and imposed by the board after a very full and thoughtful process".
The review said: "A culture of disrespect for the opposition, as seen in the common practice of abusive sledging, runs through Australian domestic and global cricket, to a degree not practiced by other nations".