I have EXACT same problem.
I recently installed Microsoft Word app on Pixel XL phone running latest Android 8.0.0.
Wanted to have personal/confidential Word doc from my PC on my phone.
(Word doc was one I created on my PC with Word)
Doc file on PC was zipped (by me) (into .zip file) with encryption password.
Attached phone to PC via USB-USBC cable -- copied zipped file to phone to "Download" directory on phone.
Used Android app "RAR" (RARLAB) utility to unzip file (I provided password to unzip) (yes, it worked great).
After unzipping, attempted to open doc file in "Download" directory -- asked me if I wanted to use "Word" app to open file.
I selected Yes, use Word app.
Word opened doc file -- but apparently it first COPIED file to Word app temp storage before opening.
After being somewhat happy I was able to read file OK, found out I could not edit it.
Then found out I could not DELETE it either.
WHAT!??! So I now have my own personal/confidential file now unzipped on my phone which I cannot DELETE???
Are you kidding me??? No -- once again, Microsoft causes me horrendous headaches.
OK, after I reboot phone and bring up Word app again, under "RECENT" files my doc files shows up listed at this location:
">> data >> user >> 0 >> com.microsoft.office.word >> a...-fd5a553d62d1 >> myunencriptedconfidentialfile.doc"
File can be opened in Word app but "READ ONLY".
Moreover, attempt to "DELETE" file brings up this prompt:
Are you sure you want to permanently delete myunencryptedconfidentialfile.doc? No Yes
I select YES. Get reply "Not Allowed. You don't have permission to delete this file." WHAT??!!!
Frankly, I can't believe you've ignored this issue from all the other users posting so far. This is a serious issue as far as I'm concerned.
I now have a very sensitive unencrypted file on my phone which I cannot delete.
I deleted original zipped document which was on my phone user "Download" directory, as well as the original unzipped unencryped document that was also on my "Download" directory. Those are GONE.
But Word App still has copy of the unzipped unencrypted file in what is apparently a Word app temporary folder on the root directory under "com.microsoft.office.word" -- and I can't DELETE it.
My next step will be to completely UNINSTALL WORD app and HOPE that also deletes temporary storage location with my unencrypted file -- but please ADVISE first if that is true. I have NOT "rooted" my phone and do NOT want to.