A former top in-house lawyer for the Post Office has surmised to an inquiry that chiefs expected her to “manipulate” a review by forensic accountants into a faulty computer system.

Auditors Second Sight released an interim report which identified bugs that raised concerns over the reliability of Horizon data used to prosecute subpostmasters in July 2013.

The Post Office Horizon IT Inquiry heard on Tuesday that senior figures were worried about the organisation’s “national reputation” because of the report, and it also emerged that computer bugs were being described as “exceptions”.

In a note of a meeting about the investigators, then chairwoman Alice Perkins said: “The Second Site interim report and the timing of its publication had been potentially very serious indeed for the Post Office in terms of our national reputation and the effect it could have on our funding negotiations with Government.”

The inquiry heard there were concerns among board members that they could be held personally liable, though the organisation’s head of corporate finance reassured them this was ‘’highly unlikely’’.

Susan Crichton, the Post Office’s general counsel before resigning in 2013, giving evidence, suggested Ms Perkins may have expected her to “manage or manipulate” Second Site’s investigations.

Ms Crichton told the inquiry that she believed former chief executive Paula Vennells had not understood her reasons for leaving.

She said: “I don’t think she understood my point about [the Second Site interim report] has to be an independent review, we can’t manage it or manipulate it in the way that possibly Alice was expecting me to do.

“This is all supposition on my part.”

In September 2013, Ms Vennells wrote in a note that Ms Crichton was “possibly more loyal to her professional conduct requirements and put her integrity as a lawyer above the interests of the business”.

Earlier, the inquiry heard that Post Office chiefs did not want to use the word “bugs” when referring to the faulty Horizon system, in order to make the issues sound “non-emotive”.

An email from July 2013 showed that Ms Vennells had asked her “computer literate” husband for an alternative word to describe a computer bug, to which he suggested either “exception” or “anomaly”.

Counsel to the inquiry Julian Blake said the language is “absolutely Orwellian” and asked Ms Crichton whether this was an example of “smoke and mirrors”.

The former in-house lawyer said: “It certainly reads in that way, yes.”

After being shown an email where she said it “wasn’t a good idea to mention bugs”, Ms Crichton agreed with Mr Blake’s assertion that changing the language was also at the “forefront” of her mind.

The inquiry also heard that in June 2012, Ms Crichton had concerns about reinvestigating the case of subpostmistress Seema Misra, who was handed a 15-month prison sentence on her son’s 10th birthday in November 2010 after being accused of stealing £74,000.

Ms Misra, who began running a Post Office in West Byfleet, Surrey, in 2005, but was suspended in 2008, garnered press attention because she was pregnant and had her baby in prison, the inquiry heard.

Ms Crichton said in an email that contacting Ms Misra to say her case was being reviewed would be a “red rag to a bull”, but she admitted at the inquiry that she had been “short-sighted”.

By 2012, she was concerned about the independent review of Horizon happening at the same time as prosecutions taking place, the inquiry heard.

She began her evidence by apologising to subpostmasters and their families for their “suffering”, saying she wished the scandal had been “resolved more quickly” and that she hoped it “never happens again”.

The Post Office has come under fire since the broadcast of ITV drama Mr Bates Vs The Post Office, which put the Horizon scandal under the spotlight.

More than 700 subpostmasters were prosecuted and handed criminal convictions between 1999 and 2015 as Fujitsu’s faulty Horizon system made it appear as though money was missing at their branches.

Hundreds of subpostmasters are awaiting compensation despite the Government announcing that those who have had convictions quashed are eligible for £600,000 payouts.