"Students may inadvertently mishandle the aircraft when entering a practice autorotation, and instructors must be alert to any eventuality," said CAA safety investigator Steve Walker.
Mr Munro was a qualified fixed-wing pilot. He bought the helicopter in September 2009 and had accumulated 170 helicopter flight hours.
He carried out flights under instruction from August 2010 until the accident.
Training records from these flights included the instructor comments, 'a lot of bad habits', 'needs to work on basics again' and 'first half of lesson a complete mess', said the report.
When the instructor didn't arrive at a prearranged meeting that afternoon, emergency services were called. The helicopter was found the next day submerged in Bluff Harbour.
Both men were found dead at the scene and a post mortem examination revealed they died from unsurvivable injuries resulting from a "high energy impact".
There were no mechanical faults found with the helicopter, and weather did not contribute to the crash, said the report.
Mr Walker said although the cause of the accident could not be conclusively determined, it served as a reminder to instructors.
