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Via site usage I have run the report that shows me the folder permissions.

The problem with this report is that it doesn't tell me if the folder permissions also applies to the sub folder or not.

The report lists all the folders that have some permission set. It doesn't include folders that have inheritence broken. But looking at the row, there isn't a way to tell if the inheritence for the folder is broken or not. Therefore we cannot make out easily if the user has permission to all subfolders in this folder.

For example - if inheritance is broken, then permissions applied to folder aren't inherited by subfolder. The report doesn't seem to have a way to indicate this against the folder. Is there any way?

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you can use this script SharePointDiary.com which reports all unique permissions from Site to Item Level (you can adjust with commenting the line 151 Get-SPOListItemsPermission $List if you do not want to check all documents or list items.

Because this script reporting just unique permissions, so rest items and libraries which are not in report inherit permissions from parent.

There are few other things which should be considered:

  1. So if you see something there, you should check or remove unique permissions.
  2. Otherwise there is functionality that when you Share content you can check "Share everything in this folder, even items with unique permissions."
  3. You should set proper administrators and disable sharing for members. So there wont e created unique permissions on items when they hit "Share" button even for internal users. Also check default sharing link settings.
  4. There should be created Data Governance for more deep insights about content stored on SharePoint Online

Hope this helps!

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