If your Word document contains a password in the “Password to modify box”, and you insert the document into another Word document as a linked object, you may be able to make changes to the original document without typing the password.
Quoth Microsoft: “If your Microsoft Word document contains a password in the “Password to modify box”, and you insert the document into another Word document as a linked object, you may be able to make changes to the original document without typing the password. When you edit the linked document and then save it, you do not receive a warning that the linked document contains a password to modify, and you are not prompted for the password.”
Microsoft’s workaround? Make sure there’s a Password to Open.
Trustworthy computing.