Foreign Minister Bishop says she understands the 'fist bump' photo with the president of the Philippines was not the Australian Secret Intelligence Service director general Nick Warners' idea.
"I'm confident it was not the director general's idea," she told reporters in Perth on Thursday.
"He was responding to a request from the President of the Philippines," she said.
"You are a guest of the president in his presidential premises."
President Duterte is well known for raising his fist at public events, from campaign rallies during the Philippines election in May 2016 to posing with soldiers fighting IS in the southern Philippines island of Mindanao.
Mr Warner and President Duterte were holding counter-terrorism talks at Malacanang Palace in Manila on Tuesday, when they posed for photographs with their fists in the air.
The gesture drew criticism, with the Australia Director of Human Rights Watch, Elaine Pearson, saying it was "sickening to see (the) head of Australia's spy agency fist-pumping a man who has instigated the killing of thousands".
"You wouldn't pose like this with a mass murderer," she said on Twitter.
Duterte's hardline stance
Since President Duterte came to office 14 months ago, police have reported killing 3,500 people in anti-drug operations.
More than 2,000 other people have been killed in drug-related crimes and thousands more murdered in unexplained circumstances, according to official data.
Australia has been among those who have pressed President Duterte to reconsider his policy.
Ms Bishop said on Thursday she had "raised the issue of human rights and the extrajudical killings" on both occasions she met with Mr Duterte.
She said she had also met with the human rights commissioners in the Philippines "to discuss our concerns and we also work through UN agencies in that regard".
President Duterte and Mr Warner's meeting was held just a week after the federal government moved to formally list IS in East Asia as a terrorist organisation, with the group responsible for numerous terrorist attacks in the Philippines.
Attorney-General George Brandis last week signed a recommendation to add it to the existing list of 23 groups under Australian criminal law.
Ms Bishop said the rise of IS in the southern Philippines is a "significant issue".
The conflict, which involves IS foreign fighters, militants, rebels and criminal networks, "has the potential to be the Southeast Asian headquarters for ISIS", she said.
"We take this conflict very seriously and we’re providing support to the Philippines government to assist the armed forces Philippines to end this conflict and to “to eliminate the ISIS influence in our part of the world."
The government is also working with Indonesia, Malaysia and other countries in the region to combat terrorism.
