Northern Ireland's long running Historical Abuse Inquiry (HIA) is examining whether systemic failings allowed Smyth - a member of the Norbertine order - to perpetrate the abuse over more than four decades between the 1960s and 1990s.
A letter from Smyth's superiors at Holy Trinity Abbey, Kilnacrott in Co Cavan revealed they had been aware of allegations of deviant behaviour but hoped he could be treated.
Abbott Kevin Smith said: "We always hoped that a combination of treatment, Father Smyth's intelligence and the grace of God would enable Father Smyth to overcome his disorder. We did not adequately understand the compulsive nature of his behaviour or the serious damage it could cause."
Three years later, in an interview with the Royal Ulster Constabulary (RUC) in 1997, Abbot Smith said he had not gone to the civil authorities because he did not know paedophilia was a crime.
He said: "I did not realise it was a criminal offence. At that time I did not know what paedophilia was."
The inquiry panel also heard details about a number of victims including a 14-year-old girl who was raped by Smyth in a Dublin hotel in 1973.
Despite complaints being made to the church authorities, the cleric was never reported to police.
Instead he was moved between parishes, dioceses and even countries where he preyed on victims who were as young as eight.
Yesterday the inquiry was told that suspicions about Smyth's behaviour had been raised in the 1940s and that a senior cleric in Rome who advised against ordaining him was over-ruled.
Smyth died from a heart attack in prison in the Republic of Ireland in August 1997.