The Independent Police Conduct Authority says the decision of a male shift supervisor to cut the undergarment straps of a woman being held in custody was an error in judgement.
Its report into the September 2020 incident at Whanganui Police Station, however, found the search, subsequent arrest and charging of the woman was justified.
The woman was searched by a female officer in accordance with policy and then once in a cell - due to concerns for her mental health - the woman was asked to put on a tear-proof gown.
The woman failed to comply and was assisted by police.
She had not removed all her clothing first, instead placing the tear-proof gown over the top of what she was already wearing.
A male shift supervisor identified only as "Officer D" used a cutting tool to remove the straps of her undergarments so her clothing could be removed from underneath the gown.
A complaint was laid about her treatment , including the way she was searched, the removal of her clothing, and the decision to charge her.
"The Authority found that the officer did not breach policy when he cut the straps. However, his actions lacked sound judgement and were inappropriate," an IPCA statement said.
The woman was later charged with committing an indecent act with intent to insult due to comments she made to one of the male officers and her alleged actions while in custody.
Police later withdrew the charges.
The IPCA found the charging officer relied on information provided to him and made an error of judgement by not reviewing all the documentation before it went to court.
Authority chair Judge Colin Doherty said, however, that he believed there was sufficient evidence for the officer to lay the charge based on the woman's comments to an officer and her actions captured on CCTV footage.
The IPCA recommended the policy governing searches of people should be amended to ensure 'gowning' may only be carried out by a person of the same gender identity as the detainee, unless in extreme or urgent situations.
Whanganui Area Commander Inspector Nigel Allan said police were confronted with challenging people and situations on a daily basis.
"When issues arise, it's important we review our actions and, if necessary, make changes to ensure our staff are best placed to provide the service New Zealanders expect and deserve."
He would not comment further as an investigation into this incident was ongoing.