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There are two levels of access defined - one is by report and the other is by group.  Group access overrides report-level access.  If at least one group is visible to a user, then the user interface will follow the group-selector method of viewing and selecting reports.  When group-selector is used, the user will be able to see all reports that have been associated with the group, regardless of the access level(s) defined for the individual report(s).