IPCA says police were justified in shooting at Rhys Warren but should not have been inside the house in the first place.
Armed police should never have entered the home of a suspected gunman and their lives were put a risk by "highly flawed" tactical decision making, according to a critical review of police actions which led to the 22-hour siege in Kawerau.
Four members of the Armed Offenders Squad were injured in a gunfight with Rhys Warren inside his family's home in March 2016.
The AOS returned fire with 46 rounds inside the home - the most ever according to available police records - and the injured officers were "lucky to be alive".
By comparison, police fired four shots at David Gray during the Aramoana massacre.
The 22-hour siege ended peacefully and Warren was later sentenced to preventive detention - essentially behind bars indefinitely - after being convicted of six charges, including two of attempted murder.
Police say they take the public and officers' safety seriously and have made changes at a national level to the way they respond to such incidents in future.
Nearly two and a half years after the siege, the Independent Police Conduct Authority has ruled the AOS officers were justified in shooting at Warren, and through walls, because of the imminent threat of death and evacuating wounded colleagues.
However, most of the IPCA report focuses on the decision-making which led to Warren firing at the police officers in the first place.
The IPCA found the AOS officers should never have entered the Warren family's house, and that there was poor general understanding amongst officers at all levels about how control and command should have operated.
The lack of proper oversight was a strong contributing factor to the flawed tactical decisions, according to the IPCA.
"The previous decisions which led the AOS officers to be in this position were highly flawed. Better decision-making is likely to have prevented these officers from having to make the decision to use their firearms in the first place," said IPCA chairman Judge Colin Doherty.
"Just as importantly, it would have prevented the officers from being in a position of considerable risk.
"This incident illustrates the need for Police at all levels to have a thorough understanding of control and command, how command structures alter as incidents escalate in seriousness, and the responsibilities attached to key roles within those structures."
Sending in trained dogs to find the shooting suspect, or firing tear gas to flush them out, were other options to sending a team in to clear the house.
But dogs could not be used as the AOS had broken the house windows with "Close Target Reconnaissance" - a tactic solely reserved for the better trained Special Tactics Group.
The IPCA said the AOS should have considered sending in police dogs before executing CTR, should not have used the CTR tactic, and should have considered that breaking glass would mean the dogs could not go in.
As a result of the siege, protective boots are required to be available for AOS dogs.
Tear gas was also legally justified, said the IPCA, despite the AOS commander thinking it was not in the circumstances.
The IPCA also criticised the "aggressive cordon tactic" which exposed the officers to a high level of risk.
The decision to enter the house was "ill-considered and wrong", said the IPCA, and described the step-by-step assessment of tactics was "rushed and lacked due consideration".
"Some tactics adopted were unsafe."
Police Assistant Commissioner Districts Bill Searle said police accept the findings and have made a number of changes at district and national levels in response to the incident.
"Ultimately, incidents such as Operation Pencarrow are often complex and dynamic," Searle said.
"Circumstances can and do change very quickly and decisions have to be made based on the information available to officers at the time.
"The safety of our staff and members of the public is a strategic and operational priority for Police. The fact four officers were injured in this incident is of great concern to us," Searle said.
"The lessons learnt from our own review and the IPCA report into Operation Pencarrow have been carefully considered to ensure we operate in the safest and most effective way to protect both our staff and the community.
"Despite the issues raised by the IPCA, we note that the person responsible for shooting our staff was Rhys Warren who has been sentenced in court to preventive detention."
The AOS were hunting for someone who shot at a police plane looking for cannabis plots.
In giving evidence at Warren's trial last year, senior police officers said no one had answered the landline phone at 158 Onepu Springs Rd, or reacted to the loudhailer, or to rocks thrown on the roof of the house.
After the windows of the house were broken and no one seen inside, the AOS was authorised to clear the address.
Dressed in black, masked and armed with M4 semi-automatic rifles, Constables Regan Mauheni and Damian White were the first of six AOS members clearing the property at 158 Onepu Springs Rd.
As White's rifle poked around the hallway corner, Rhys Warren fired his grandfather's Enfield hunting rifle.
White remembered a "massive flash" and a "really loud bang".
"It was like in the movies when you see that someone near an explosion loses their hearing and then it slowly comes back. It was exactly like that," White told the jury in Warren's trial in the High Court at Hamilton.
The bullet struck the scope of the rifle, shattering it. Shrapnel hit White, while the same bullet ricocheted into Mauheni, splitting his skull and filling his eyes with blood.
The siege ended peacefully only after the personal intervention of Inspector Warwick Morehu, the only police officer whom Warren trusted.
Audio records of their phone conversations, obtained exclusively by the Herald, Morehu managed to convince Warren the police would not shoot him if he walked out of the house.
Warren: "I know I'm in the shit either way, that's why it's pretty hard."
Morehu: "It's not a good looking picture at the moment, but we don't want it to get worse boy ...
"Don't be scared. Don't be scared boy. These fellas don't want to harm you, they want to get you out safely ...
"Leave everything inside, come outside slowly with your hands up and listen to the voice. They'll look after you boy, they'll look after you."