A “one side of the coin” report was commissioned by Post Office management to give assurances about its IT system as subpostmasters accused it of being faulty, the Horizon inquiry has been told.

Post Office Limited’s former head of product and branch accounting, Rod Ismay, denied he was engaged in a “whitewash” when he authored the Ismay Report in 2010, despite admitting “it could look imbalanced”.

The witness admitted to the inquiry it was an opportunity to discover “a decade earlier than we did” the flaws of the Horizon IT system.

Between 2000 and 2014, more than 700 subpostmasters and subpostmistresses (SPMs) were prosecuted based on information from the accounting system, which saw workers wrongly accused of theft, fraud and false accounting.

However, in December 2019, a High Court judge ruled that the system contained a number of “bugs, errors and defects” and there was a “material risk” that shortfalls in Post Office branch accounts were in fact caused by it.

Since then many SPMs have had criminal convictions overturned.

On Thursday, Mr Ismay told the inquiry that Dave Smith, the then-Managing Director of Branch Accounting at Post Office Limited, had given him a task of only finding the assurances with the accounting system.

In the 2010 report, Mr Ismay wrote: “We remain satisfied that this money was missing due to theft in the branch – we do not believe the account balances against which the audits were conducted were corrupt.”

Counsel to the inquiry, Jason Beer KC, asked the witness why there were no terms of reference for the Ismay report.

The witness responded: “That seems odd in hindsight, I realise, but no I think I felt at the time that the question was quite clear – ‘please can you list what the reasons for assurance are’ – and to an extent I’m not sure that needs a terms of reference.”

Mr Beer continued: “So you weren’t given free rein to write what you wished, you were directed only to include reasons that gave reassurance?”

“Yes,” Mr Ismay replied. “I appreciate that looking at this document – it could look imbalanced.”

“But that was the task that you were given,” Mr Beer interjected.

The witness replied: “The task that I was given was what are the reasons for assurance. I wasn’t given a task of ‘what are the allegations and can you investigate them’.”

“You were only asked to present one side of the coin?” Mr Beer asked.

“Yes,” Mr Ismay said.

Inquiry chairman Sir Wyn Williams then interjected by saying: “I don’t wish to be cruel but some people would describe that as a whitewash. Do you think that’s what you were engaged in?”

Mr Ismay replied: “No, I think allegations had been made but somebody like Dave coming into the organisation – he was finding his feet in the organisation.”

Sir Wyn then asked: “But just telling him one side of the story was hardly educating him was it?”

“Well that was what he asked for,” Mr Ismay responded.

“So that’s why I was a bit blunt,” said the chairman. “Was he asking in effect for information which would allow him to bat away criticisms of Horizon?”

The witness replied: “I think he was asking for information in order that he could get a balanced view.”

In the 2010 report, Mr Ismay described his paper as an “objective internal review of Post Office Limited’s processes and controls around branch accounting.”

“If you were asked to present one side of the coin in what sense was that report objective?” Mr Beer asked.

Mr Ismay said it was an “objective assessment of the areas where there were positives”.

Mr Beer continued: “Do you understand objective to mean based on real facts, not influenced by personal beliefs or feelings or not constrained by a pre-determined set of criteria.”

“Yes,” the witness replied.

“This report was none of those things was it?” Mr Beer continued.

Mr Ismay said it was an “objective assessment of the other arguments”.

Asked whether he believed it was a “crass mistake” to prepare a report on the “robustness and reliability” of the Horizon system and not its “bugs, errors and defects”, Mr Ismay said: “I think, given where we are, that probably should have been considered, yes.”

Mr Beer continued: “It was an opportunity missed to discover a decade earlier than we did the flaws of this system and the consequences for your subpostmasters, wasn’t it?”

“Yes it was, yes,” the witness replied.