Greetings everyone,
I'm addressing this issue like you from a user prospective. One would agree when software companies release updates to existing applications and OS platforms you'd think there was extensive testing done prior to a release.
This is not the case. What I think happened here is the big yearly Apple OS release and launch of their new products occurred in and around the time Microsoft released their monthly OS and application software updates.
If you remember, Office 365 is now Microsoft 365. These application packages keep changing hands.
Now aside from all this, the folks contributing to this thread have been very helpful by sharing some discovery about how to access the encrypted password protected MICROSOFT files from your mobile devices after whatever release of software caused this issue for everybody.
When I personally examine the symptoms and attempt to open my password protected MS files I see two different password prompts depending on the method I use to open my saved file in OneDrive Personal Vault …
If I attempt to access my OneDrive Personal Vault file by simply double clicking on it, a password prompt appears and if I attempt to enter my password I get the error everyone is reporting.
However, If I instead click on the 3 "..." to the right of my file that I would normally just double click to open I have a list of prompt choices. Now if I do what a nice person in our community has suggested and click on "Open in Another App", a different type of password prompt appears for me to enter my encrypted micro soft file password. In my case I've saved an Excel file, so a NEW list of available applications appear and I simply have to manually choose "Microsoft Excel" from the list.
Yeah, I get it we have to take a different path to open our files because whatever update that was done seems to not be able to DEFAULT the file association correctly to the proper Microsoft application upon any attempt to open a file the proper way simply DOUBLE CLICKING on it.
So with all that said, I'm betting when I opened my AppStore application on my IPHONE and noticed had 13 applications that needed to be updated last year all the Microsoft applications including OneDrive helped break something using the Mac OS versions of these applications.
I'm also very sure programmers are working on a solution and like anything else that breaks and needs to be fixed correctly ... IT TAKES TIME!
So how about we all step back and use the generous steps provided by these nice people and see if a permanent solution arrives sooner than later.
Think solution!