Overview:
The user is unable to view all documents in Vault even though their permission set has the All Documents Read permission.
Root Cause:
The user has a Read-Only User license type.
Solution:
This is working as designed, as Read-Only users cannot utilize the All Documents Read permission in Vault.
The solution is to assign the affected user a Full User license in order to use this permission.
Related Documentation:
Vault License Documentation: About License Types & Security Profiles